Lots of people online seems to think the US will start bringing back critical item production from China after the Wuhan pandemic is over. I find it unlikely that companies will return significant pharmaceutical manufacturing to the US. And I’m using pharmaceuticals as an example.
The driver for decoupling at the moment is that the realization that masks, gowns, and most meds or med components are produced in China. China stopped exports of some things like N95 masks, and threatened stopping exports of meds if we didn’t stop ‘blaming’ them for the virus. India just stopped the export of hydro chloroquine from their country.
So yes, decoupling would be the wise, smart and obvious thing to do. Bring that manufacturing back! But it’s easy to prophesy decoupling, it’s another to actually execute...
First, companies are out there to make money for their owners. If they don’t, the owners/investors move their money somewhere else. Suppose a company wants to bring back a pill production line to the US. Costs for the pill will go up since the labor costs will be higher. Plus they will have to invest in the product line in the US and will want to recoup those costs. Now they are competing with the other Chinese manufactured pill that is still sold at the old price. Which pill does the hospital or pharmacy buy?
To bring back production, you are either going to have to make it illegal to buy non-US or you need to impose tariffs. Both require, in most cases, laws being passed by the US Congress. Have you seen any democratic cooperation with republican initiatives in the last few years? Remember, this is after the pandemic is over. My guess is ‘when hell freezes over.’
However, companies also don’t want their supply chains compromised in bad situations. So they may move production from China to another low labor cost country, e.g. Taiwan, Vietnam or Mexico. They might even split production and leave half in China. Maybe they think that will assuage their corporate consciences in case of another pandemic.
But we just saw India stop the export of hydro chloroquine. Countries are going to do what’s best for them. If they need the product, it is not going to be exported—back to the US.
There’s another aspect to the problem. Manufacturing anything requires ‘raw’ materials. I don’t necessarily mean mined rock. But you usually need piles of stuff that you feed into the machine process to get the output product. If China is the one that mines or makes that stuff, even a US factory is limited to the pile of stuff on hand in an emergency.
Somehow the US or US companies need to produce that stuff in the US. Now the manufacturer could fund US production of that stuff, but that’s a bigger investment. Again, US incentives created by law are going to be needed. And again, do you think that is going to be a priority for democrat politicians?
I’m not saying Congress won’t take up this kind of law. But I don’t think it is likely. I also don’t think pharmaceutical manufacturing will return to the US without those laws.
In my opinion, decoupling is another good idea that will be forgotten the moment the media moves on from this emergency.