The Pandemic Does Not Demand Government Micromanagement of Global Supply Chains

The USITC calculated that in 2020, the United States used many times the number of N95 masks, medical gowns, surgical masks, and other essential goods that were used in 2019.

Maintaining that much excess capacity in times of normal demand is extremely costly, and running at that level in non‐​pandemic times would produce a global glut-ironically, similar to the ones the U.S. government complains about when China subsidizes "Global excess capacity" and certain to cause new trade tensions.

In March 2020, when they were suddenly considered essential for fighting the coronavirus, the U.S. government invoked the Defense Production Act to force domestic manufacturers to make them.

By the summer medical professionals determined that ventilators were not as critical as once thought, but producers continued to churn them out under government orders, leading to reports of the goods "Piling up" in a strategic reserve or being donated to "Countries that don't need or can't use them." According to the USITC's December 2020 report, other DPA‐​funded medical goods production will only come online after mid‐​2021, when the pandemic may have subsided.

Given these interventions, as well as the numerous U.S. companies that independently expanded operations or entered the medical goods market in response to the pandemic, it is an open question as to whether additional government action is needed to boost domestic production of essential medical goods.

Companies such as Mark Cuban's new generic drug company, are in the process of adding domestic capacity without government subsidies.

Finally, there a serious risk that future government interventions will have political, rather than economic, motivations-similar to the ones that reportedly drove the Trump administration's doomed subsidies to Eastman Kodak.
 

https://www.cato.org/pandemics-policy/pandemic-does-not-demand-government-micromanagement-global-supply-chains