Chinese whispers: COVID-19, global supply chains in essential goods, and public policy

Simon J Evenett

doi:10.1057/s42214-020-00075-5

Abstract

If taken at their word, senior policymakers in the major economic powers have drawn adverse conclusions concerning the performance of cross-border supply chains during the first 6 months of the COVID-19 pandemic. That such supply chains often implicate China, the origin of the pandemic, has also led to claims that trading partners have become too dependent on Chinese supplies. This in turn has led to policy interventions designed to reconfigure supply chains, which if adopted broadly could revise the terms upon which international business operates. A critical evaluation of this policymaker assessment is presented, based on near-time monitoring of medical and food trade disruption induced by government policy, on fine-grained trade data on the pre-pandemic international sourcing patterns of medical goods and medicines by France, Germany, the United Kingdom, and the United States, on statements from U.S. government health experts before and during the pandemic on the frequency and sources of medicine shortages, and on the U.S. Food and Drug Administration’s latest evidence on the causes of medicine shortages in 2020. Such evidence vitiates the adverse conclusions mentioned above, but raises important questions about the factors that determine policy towards international business during a time of intensifying geopolitical rivalry.

Highlights

On January 30, 2020, the Director-General of the World Health Organization declared that the novel Coronavirus outbreak was a ‘‘public health emergency of international concern,’’, which was the organization’s highest level of alert and longhand for a global pandemic
The shortages of personal protective equipment (PPE) that came to light in the first 6 months of 2020 have led many policymakers to conclude – if their public statements are anything to go by – that existing cross-border supply chains are no longer fit for purpose in Chinese whispers essential goods sectors
Many manufacturers reported discontinuing the production of drugs before a shortage for commercial reasons. These results suggest a broken marketplace, where scarcity of drugs in shortage or at risk for shortage does not result in the price increases predicted by basic economic principles

Summary

Introduction

On January 30, 2020, the Director-General of the World Health Organization declared that the novel Coronavirus outbreak was a ‘‘public health emergency of international concern,’’, which was the organization’s highest level of alert and longhand for a global pandemic. The shortages of personal protective equipment (PPE) that came to light in the first 6 months of 2020 have led many policymakers to conclude – if their public statements are anything to go by – that existing cross-border supply chains are no longer fit for purpose in Chinese whispers essential goods sectors. Governments of major economies have contemplated repatriating supply chains through a variety of incentives or by restricting access to public sector contracts to local producers. Of government, corporate executives and their advisers have begun to reconsider the configuration of their international supply chains, couching these initiatives in terms of ‘‘building resilience,’’ ‘‘diversification,’’ etc. Of government, corporate executives and their advisers have begun to reconsider the configuration of their international supply chains, couching these initiatives in terms of ‘‘building resilience,’’ ‘‘diversification,’’ etc. (McKinsey Global Institute, 2020; Mirodout, 2020)

Objectives

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Conclusion