Are we over-reliant on SE Asia?
This question applies for goods, products, services and outsourced labor. Probably every business student (including myself) has sat through an econ class where the professor makes the classic argument of how free trade and global interdependence is beneficial for all. However, I think COVID-19 shows another side to the story. Maybe on average being reliant on other companies is beneficial. But the variability of the net gain is much higher. Meaning it only takes one domino to fall before a chain of events are released. It's come to a point where we are struggling to even get masks due to the virus since we rely on China for these products. What do you all think about this?
Why do you think Covid-19 specifically has highlighted a flaw in globalism or global supply chains?
How do you think things would progressed differently in this crisis with a greater emphasis on the domestic production of goods?
I think a lot of the effects will only be measurable as the corona virus plays out. Obviously, we still aren't fully sure what the economic loss will be.
However, the spread of the corona virus would have definitely been slower. The fact that many shops were running short of masks and cleaning supplies because China needed those supplies and wouldn't ship it here is telling of itself. That does not include the shortage in other products that is soon to come.
Another angle is that if we had the means of production to produce our own goods, then the US could have implemented an entire foreign travel ban and provided travel employees (airline) with a compensation package for a month or so while the virus took its course abroad. Note this only needs to be implemented for foreign airlines, not domestic. I didn't work through the numbers but the effect of controlling one branch of a sub-industry of the US would have been far cheaper than attempting to implement a shutdown which seems to be where we're headed (CDC urging meetings of 50 or more to be cancelled for next 8 weeks).
However, because our economy can't function (at least partially) without foreign goods, we still need foreign ships coming in to deliver goods which is a means for the virus to come into the country.
These are just some thoughts, although obviously this is far from comprehensive. I hope you have more to add here.
I agree that the full scope of the economic impact is unknown at this point. It isn't every day that the world economy runs into both a supply side and a demand side shock.
Do you have evidence that the spread of Covid-19 would have been slower if there was a greater emphasis on domestic production of goods or that the spread itself was a result of a global supply trade? I'm not arguing that it isn't a logical assumption, but I haven't seen anything yet that provides evidence for the argument. Likewise, is there evidence that a domestic shortage of masks and cleaning supplies is due to Chinese demand at all? Or are domestic shortages simply a result of a "run" on supplies from domestic demand as people hoard goods?
Finally, do you have evidence that we do not currently have the means to produce either medical or cleaning equipment domestically or, if you do, that having said means would have allowed us to implement more strict travel bans earlier on?
I'm not trying to be difficult here and I genuinely think this is a great thread, but we need to make sure our assumptions are fact-based.
A good starting article is here: https://www.nytimes.com/2020/03/11/business/economy/coronavirus-china-t…
And I know you'll appreciate my choice of news source given your background :).
First of all, China isn’t South East Asia...
Yes, but some of Trump's trade policies have actually moved some of the manufacturing jobs from China to SE Asian countries which is why i picked that title. "China" would have been too narrow and "Asia" too broad.
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