U.S., EU Are Far Apart on Reshoring Making of Medical Gear

(Bloomberg) --

Top trade officials in the U.S. and European Union seem poles apart on whether nations should move production home or not as the coronavirus causes supply shortages on both sides of the Atlantic.

Sabine Weyand, the European Commission’s director-general for trade, says that moving supply chains home is inefficient.

“Self-sufficiency is not an option for any country. It’s not an option even for any continent,” she said last week during a webinar hosted by the Washington International Trade Association.

To make her point, Weyand gave the example of ventilators, the breathing-assistance machines in short supply across the world and desperately needed in the fight against the outbreak. Depending on the model, they can contain as many as 900 pieces sourced from all over the world. To make supply chains resilient, it’s best to involve as many countries as possible and diversify, she argued.

For now, this puts the EU in stark contrast with President Donald Trump’s administration and its policy goals. Trump this month invoked the Defense Production Act to direct manufacturing of medical equipment and is mulling an executive order that would seek to re-shore the making of U.S. medical supplies. This push has support from a bipartisan group of lawmakers that’s already talking about legislation to be considered immediately after the crisis.

Peter Navarro, whom Trump picked to coordinate domestic supply policy, went on the CBS News program “60 Minutes’’ on Easter Sunday night and blamed America’s dependency on globalization for its shortages: “If we made it here, we wouldn't be faced with this. That was, that was the original sin.”

Still, there might be a meeting of the minds further down the road, Weyand indicated. That could come when it’s time to take a look at and potentially roll back the subsidies major economies handed out to stem the health and economic crisis — especially if they concern China.

Weyand hopes for “a coordinated effort to get out of the necessary subsidization” — especially among like-minded economies like the EU, U.S. and Japan — because China will come out of its lockdown first and will otherwise be able to subsidize and support a lot of production.

“Just like before the crisis, there is a joint interest of market economies to make sure that we do not kill the market that we will need in order to get out of the crisis,” she said.

Such hopes for cooperation should spark lively debates at this week’s spring meetings of the International Monetary Fund and World Bank, which are being held, of course, via video conference. 

Charting the Trade Turmoil

Romania became the first country to cut off grain exports during the pandemic, a dramatic move that could fan worries about the global food supply. The government passed a decree banning the sale of grain to countries outside the EU during a state of emergency, which is expected to last until at least mid-May.

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