Alarmed at China’s stranglehold over supplies of masks, gowns, test kits and other front-line weapons for battling the coronavirus, countries around the world have started to set up their own factories to cope with this pandemic and outbreaks of the future, writes The New York Times (July 6, 2020). But when the outbreak subsides, those factories may struggle to survive. American companies have been reluctant to make big investments in fabric manufacturing because they worry that mask demand will be temporary.
China, however, has laid the groundwork to dominate the market for protective and medical supplies for years to come. Its market grip is a testament to its drive to dominate important cogs in the global industrial machine.
Before the pandemic, China already exported more respirators, surgical masks, medical goggles and protective garments than the rest of the world combined. Beijing’s coronavirus response has only added to that dominance. It increased mask production nearly 12-fold in February alone. That is 5 times what China could make before the outbreak, and 15 times the output of U.S. companies even after they ramped up production this spring. The Chinese government played a major role in this year’s medical-equipment build-out with cheap land, subsidies, and a demand that that its own hospitals buy locally.
The U.S. has begun a push for the federal government to buy American-made pharmaceuticals and medical supplies. Likewise, France pledged to produce homegrown masks and respirators by the end of this year. But Chinese pharm companies supply 40-45% of heparin (a blood clot medicine), 70% of acetaminophen, and over 90% of antibiotics, vitamin C, ibuprofen and hydrocortisone to the U.S. About 80% of the active ingredients used in U.S. drugs also come from other countries.
Thus, it begs asking: Is it time for America to take control of its pharmaceutical and medical production?
Classroom discussion questions:
- This article suggests risks in outsourcing. Relate this to the pandemic.
- How does the theory of comparative advantage stand up in this situation? (See Ch. 2 of your Heizer/Render/Munson text).