Saturday, March 28, 2020

Regulation, Not Offshoring, Is Hindering Industry from Ramping up Production

In his latest Bloomberg column, Noah Smith, inspired by Larry Summers, argues that offshoring production led to the current shortage of medical masks and equipment in the face of the coronavirus.

So is Noah right that offshoring is to blame here? No. Every country needs to have a plan for ensuring that it can get medical equipment when it needs it.

The real question is: Why can't we suddenly switch production and churn out millions of masks a day in the face of an unanticipated calamity? The answer to that is not offshoring, but regulation.

Offshoring may be as much a result of regulation as anything else.

Right now the regulatory guidance is the biggest barrier to domestic factories switching production.

To take Simon's point further, it might be that our best plan for a resilient society is to have multiple sources for production in the event of disaster but the regulations stand as a nontariff barrier to us trading for the supply.

The debate over trade and offshoring in the face of the pandemic is misplaced.

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