WP2 Rough Draft- Pandemic: Should a single country in the current world create a complete domestic supply chain?
The covid has brought people’s lives huge changes: jobs, lifestyle, traveling. The economy of the world, especially, is largely shocked by the unexpected pandemic. One of the topics being raised among all of the economic topics is the production supply chain. In the current society, due to the development of globalization, the production supply chain of different countries are going global too: resource supplied by certain countries, rough machining in others, assembling in another. During the pandemic, however, the travel ban has largely restricted the transportation of products between different countries, which made plenty of countries whose markets rely on the global supply chain run short of products: from daily grocery to important medical commodities. After experiencing the pandemic when resources are hard to reach since factories are in foreign countries and in an address to the protection of nationalism, some people point out the drawbacks of globalization and raise the idea of national supply chain and production. However, a single country should not consider fully putting the supplemental process in their own country because it’s unnecessary and not practical simply to deal with the situation of a pandemic since the global production system already exists and is cheaper.
From ancient times, trade with other regions or countries is the way people use to obtain resources or products that they don’t have or hard to produce in their own country to maintain the basic higher quality life than simply surviving. As society and technology continually developed, besides helping people to maintain a higher standard of living, trading is putting on different meanings which are increasing the production efficiency. In economics, there is a term called comparative advantage. When a producer produces the product at a lower cost than others, we’d say this producer has a comparative advantage of producing this product. While most producers are producing at their comparative advantage, we reach the most efficient way of production. In the current world, trading and global supply chain is enabling countries to produce in their comparative advantage and then ship to other countries: countries with the lowest technology level but got plenty of resources become the resource supplier, countries with relatively low wages but developing technology become the world’s factories who are in charge of the rough processing or the final assembling, while the developed countries with cutting edge technology produce chips and luxury commodities. The production of a single product will always pass at least more than one country, but with a lower cost and more efficient production. For example, the production of an iPhone will get resources like iron, diamond, and petroleum from the Middle East, and then the body of the iPhone and chips are separately produced in China and America, and is finally sold in the U.S. By using this global supply chain the apply company can produce in a lower cost(since the wage in China is relatively low) In this way, the global supply chain enables business in different countries to produce in higher efficiency and is keeping developing.
However, the came of the sudden pandemic has broken everything. All of the sudden, the plane is no longer flying, the port is no longer working, everyone is forced to be isolated in their home. The pandemic is like a beast arriving at the land, and everything is surrounded by a cloud of fear. The production, especially, is hugely impacted by the pandemic. Take the American medical industry as an example, “ 72 percent of the facilities producing pharmaceutical ingredients for U.S. consumption are located abroad……97 percent for antibiotics”. During the pandemic, due to the decrease of transportation, those resources become inaccessible and made a big shock on the whole American medical industry which is an especially important industry during the pandemic period. Under this situation, people start to raise the concept of “go national” and a more insulated supply chain rather than that around the globe. By saying “The coronavirus crisis may be global, but the responses have so far been national,” people find the problem is finally fallen back to the countries themselves and the global connection between different countries broke when facing the extreme problem. In other words, a complete national supply chain seems to be the only solution for people in every country to fight against the problems.
Let’s take a look at the national supply chain. During a situation like a pandemic, the national supply chain can play an important role in sustaining the living of all people in the nation without experiencing a shortage of life-sustaining resources, especially medicine. But when the real national supply chain is built, some problems need to be solved. The first is the resources. The world resources are unevenly distributed among different countries. The typical example is petroleum. Petroleum is a natural resource that is crucial in the production of some most basic daily products like plastic and gasoline. However, not every country has this resource. If a national supply chain needed to be built, while the country has these resources can build up the manufacturing line successfully, what about other countries, how can they access this resource without trading with others? The other point is the job market. According to the statistics from Fox News, trading, tourism, and production provide a total of 2.6 million jobs. If the countries are eliminating all their foreign production and stopping their trading, how can they deal with people who lose jobs due to their actions? What is more, there is already a relatively complete supply chain in the current world, and the whole production process is set up and spread around the globe. The construction of a supply chain costs lots of human and natural resources, is it still necessary for a country to build up the supply chain totally by itself even if the pandemic will come to an end finally?
Thus, though the current world under corona-virus seems to left a great fear on people’s hearts and the economy started to move toward a more isolated trend: travel ban, domestic production, medical supply by their own country; the world have to recover from the standstill and get back to the development. It’s an undeniable fact that efficiency and profit are the final goals that all businesses and countries pursue on the way to economic development. Just like what is said by Willy C. Shih in Harvard Business Review, “Consumers will continue to want low prices (especially in a recession), and firms won’t be able to charge more just because they manufacture in higher-cost home markets. The competition will ensure that.” In other words, consumers are attracted by cheap products, and there’s a low possibility that producers produce in a high-cost way at the price of losing consumers. In this way, it’s not about producing solely domestically or continuing toward globalization in the post-pandemic society. The pandemic offers businesses and countries a chance to reexamine whether they are operating under the most efficient mode and find out the way that is fit for themselves. The question remains to the business: go back to globalization, go domestic, or transform into a new mode?
The pandemic, in my opinion, offers businesses a chance to reexamine themselves and the whole global supply chain. The pandemic found that when transportation is limited, the supply chain around the globe is disrupted a lot. Domestically, the pandemic affected the national purchasing power and lower the wage level. In this way, workers in the domestic transportation industry like truck drivers and delivery persons have less incentive to do their work which slows down the national supply chain. Globally, due to the spread out of the production of products between different countries, once the transportation is blocked, people will face hardship in the access of this product due to the lack of certain part of production in their nation. Thus, businesses needed to focus on solving this potential vulnerability of the global supply chain, especially facing the pandemic. For the domestic workers, the government should prepare a certain amount of petty cash to offer subsidies to businesses or workers to ensure a continued supply in their own country. Businesses should also cooperate with businesses in the adjacent countries that can form a sustainable supply of certain products among these countries with a relatively lower cost as a backup plan when facing extreme situations like pandemics. In this way, businesses in this cooperation can all maintain a stable supply with a still relatively low price of their products. This bilateral or multilateral cooperation between businesses in different countries is already existed or initiated like the EU and the recent “silk road” in China which made the extension of this practice to the world further easy.
In the post-pandemic period, globalization will continue, inarguably. After the baptism of the pandemic, people will find the potential drawback of the current globalization, especially after the supply chain is broken by unexpected situations. So even though globalization will continue, the way of globalization will become less “globalized”. By focusing on both multilateral and globalized cooperation, businesses and countries can create a more stable and proficient supply chain that can enable the profit of both businesses and consumers in the market even under extreme situations.
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