COVID-19 meant devastating shortages of personal protective equipment (PPE), like masks, gowns and gloves. What happened to trade, the unprecedented trade and industrial policy to emerge, as well as lessons learned for future preparedness.
My latest 1/
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My latest 1/
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For policymakers in the United States and Europe, the PPE shortage of early 2020 was stupefying.
Even a year later, in February 2021, newly inaugurated US president Joe Biden reminded Americans of those days... 2/
Even a year later, in February 2021, newly inaugurated US president Joe Biden reminded Americans of those days... 2/
On PPE shortages, there have been Executive Orders to examine what happened, what went wrong, and how to improve policy.
So what happened? 3/
whitehouse.gov/briefing-room/…
So what happened? 3/
whitehouse.gov/briefing-room/…
When COVID-19 struck China first (in Wuhan, Hubei province), China's immediate demand for PPE took a lot off of global markets.
Take hospital masks and protective garments.
International markets at the time worked as expected: China imported more, and exported less... 4/
Take hospital masks and protective garments.
International markets at the time worked as expected: China imported more, and exported less... 4/
COVID-19 was a PERFECT STORM of events for some pieces of PPE.
The pandemic arose in Hubei, the largest exporting PROVINCE, in the largest exporting COUNTRY, of the protective garments to be needed globally by hospital workers.
Including in the EU and the United States... 5/
The pandemic arose in Hubei, the largest exporting PROVINCE, in the largest exporting COUNTRY, of the protective garments to be needed globally by hospital workers.
Including in the EU and the United States... 5/
Now, by April, China's PPE exports resumed and then took off.... 6/
Realistically, from April through the rest of 2020, China's PPE exports to the world were amazing.
In volume terms, China's PPE exports were enormous, likely saving thousands and thousands of American lives
(The massive price increase shows scarcity still a problem... 7/)
In volume terms, China's PPE exports were enormous, likely saving thousands and thousands of American lives
(The massive price increase shows scarcity still a problem... 7/)
March and April were the beginnings of EXTRAORDINARY trade and industrial policy.
Start in March with the European Union. PPE shortages led it to impose export controls... 8/
Start in March with the European Union. PPE shortages led it to impose export controls... 8/
PPE shortages in the United States resulted in the April 2020 invocation of the Defense Production Act (DPA).
Part I: US directs 3M to ship more N-95 respirators to the US from its plants in China (Shanghai)... 9/
Part I: US directs 3M to ship more N-95 respirators to the US from its plants in China (Shanghai)... 9/
PPE shortages in the United States resulted in April 2020 invocation of the Defense Production Act.
Part II: US uses DPA to impose export controls on masks, respirators and gloves. INITIALLY, the limits applied to exports going to Canada and Mexico, before being revised... 10/
Part II: US uses DPA to impose export controls on masks, respirators and gloves. INITIALLY, the limits applied to exports going to Canada and Mexico, before being revised... 10/
PPE shortages led to INDUSTRIAL POLICY.
Department of Defense made $1.2 billion of subsidies over the next year to directly expand domestic PPE production capacity for masks, respirators, gowns, gloves, and key inputs along the US supply chain.
AMAZING! 11/
Department of Defense made $1.2 billion of subsidies over the next year to directly expand domestic PPE production capacity for masks, respirators, gowns, gloves, and key inputs along the US supply chain.
AMAZING! 11/
My takeaways:
In the face of a global pandemic that created a surge in demand for PPE, an optimal policy mix for a major industrial economy should have involved three (3) components... 12/
In the face of a global pandemic that created a surge in demand for PPE, an optimal policy mix for a major industrial economy should have involved three (3) components... 12/
(1) Incentivize domestic industry to quickly add capacity and surge production.
COVID-19: WHAT TOOK SO LONG?
The US did this, but for most products expansion subsidies did not start until second half of 2020.
What supply chain information is needed to do better?
13/
COVID-19: WHAT TOOK SO LONG?
The US did this, but for most products expansion subsidies did not start until second half of 2020.
What supply chain information is needed to do better?
13/
(2) For the period in which surge capacity is not yet available, rely on stockpiled PPE...
TO DO:
a) Determine socially optimal stockpile SIZE
b) Regulators ensure hospitals, distributors, and states—in addition to the federal government—MAINTAIN inventory of that size
14/
TO DO:
a) Determine socially optimal stockpile SIZE
b) Regulators ensure hospitals, distributors, and states—in addition to the federal government—MAINTAIN inventory of that size
14/
(3) For the period in which surge capacity is not yet available, rely on IMPORTS...
TO DO:
US and partners must have a more diversified portfolio of foreign production for PPE.
Trade can be a tool for preparedness only if there is trust between the importer and exporter
15/
TO DO:
US and partners must have a more diversified portfolio of foreign production for PPE.
Trade can be a tool for preparedness only if there is trust between the importer and exporter
15/
How COVID-19 medical supply shortages led to extraordinary trade and industrial policy
Lots of lessons to be learned to help us do better next time.
(Comments welcome) ENDS/
piie.com/publications/w…
Lots of lessons to be learned to help us do better next time.
(Comments welcome) ENDS/
piie.com/publications/w…
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