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Protectionism and Recovery: American Trade Post-Pandemic

The COVID-19 pandemic will bring immeasurable change to the international status quo. It is clear that traditional expectations of economic growth, trade, and public health will need to drastically adapt to prevent another crisis. One of the greatest vulnerabilities exposed by the virus is the fragile infrastructure of supply chains.


Reduced Trade and Global Supply Chains

Due to the pandemic, global trade volumes have come screeching to a halt. Projections show an 18.5% short-term reduction in global trade volumes with the greatest impacts in North America and Asia.[1] These reduced trade numbers, while harmful to the global economy, may also highlight some of the shortcomings of an increasingly globalized economy.


The case of personal protective equipment (PPE) in the United States demonstrates the potentially catastrophic externalities of global supply chains. As international demand for PPE surged during the onset of the pandemic, many domestic supply chains could not adapt to the new state of the economy. The United States did not have the production capacity to meet increased demand and had not replenished stocks since the 2009 swine flu pandemic.[2] Furthermore, a significant portion of the PPE supply chain remained off-shore, rendering those goods inaccessible in periods of limited travel and restricted trade.[3] By the emergence of the outbreak, the United States had only amassed 12 million of the 3.5 billion masks necessary to properly counter the pandemic.[4] International suppliers were forced to buy or appropriate stocks already bound for other purchasers leading to cases of “modern piracy.”[5]


These situations bring to question the holistic efficacy of global supply chains. Without domestic production infrastructure for critical goods, states are more vulnerable to supply shock where scarcity in resources or lack of trade can lead to economy-wide effects. However, beyond these crisis situations, more citizens are scrutinizing the effects of global trade on domestic markets.

Made in My Country, 2020

The rise of populism and nationalism has been expanding internationally, with a strong influence over politics in states such as India, Hungary, and the United States. These movements call for several policy changes, but reshoring production and restoring manufacturing and information technology jobs lost to outsourcing are a key pillar of their demands.


While these sentiments have been trademarks of the far-right, a broader appeal has developed amidst economic uncertainty. Presidential candidate Joe Biden recently announced a “Buy American” campaign to invest more than $700 billion USD in U.S. manufacturing, technology, and research and development.[6] Biden’s demands, while from a fundamentally different worldview, mirror the sentiments of President Trump’s “America First” policies which are focused on protecting domestic producers. Both of these efforts are indicative of a larger trend toward economic protectionism.


Since the 2008 financial crisis, several international actors have expressed their disdain for increased globalization.[7] Among the world’s top 60 economies, more than 7,000 protectionist measures had accumulated from 2008 to 2017, generating more than $400 billion USD in tariffs.[8] While the United States and the European Union were responsible for many of these new measures, states such as India, Argentina, and Russia were not far behind with more than 200 new measures each.[9]

A Rise in Protectionism Across the Political Spectrum

It is more than likely that the short-term will bear more protectionist measures in the international community. While the focus may remain on medical equipment and PPE through the COVID-19 pandemic, the scope of these efforts will likely expand in the future. Biden’s policies on trade are focused on domestic investment, with a key pillar in retooling and revitalizing American manufacturing.[10] President Trump’s positions on trade have been very protectionist in practice, with the Chinese trade war as the epitome of this worldview.


Looking forward, it is important to understand what types of industries are likely to face more protectionist measures for the United States. This list can be generated by examining the rhetoric of presidential campaigns, industries that face the greatest risk from globalization, and the effects of trade on domestic labor markets.

Critical supply chains like PPE and medical equipment will likely reshore some production to avoid future public health crises, but this thinking will likely expand to emergency management at large. Fracking operations may see greater protections to ensure base gasoline production. Non-perishable food manufacturers may see some support, as perishable supply chains were decimated throughout the course of the pandemic.[11]


More supply chains will likely suffer short-term inefficiency to invest in long-term security. It is not clear which industries will benefit from protectionism in the future; however, these policies will require an administration dedicated to protecting American production and labor at the cost of economic efficiency and profit maximization.

 

Work Cited:

[1] “The Global Economic Outlook During the COVID-19 Pandemic: A Changed World.” The World Bank. Accessed July 27, 2020. https://www.worldbank.org/en/news/feature/2020/06/08/the-global-economic-outlook-during-the-covid-19-pandemic-a-changed-world.

[2] Rep. Global Economic Effects of COVID-19. Congressional Research Service, July 24, 2020. https://fas.org/sgp/crs/row/R46270.pdf.

[3] Ibid.

[4] Khazan, Olga. “Why We're Running Out of Masks.” The Atlantic, April 10, 2020. https://www.theatlantic.com/health/archive/2020/04/why-were-running-out-of-masks-in-the-coronavirus-crisis/609757/.

[5] Khazan, Olga. “Why We're Running Out of Masks.” The Atlantic, April 10, 2020. https://www.theatlantic.com/health/archive/2020/04/why-were-running-out-of-masks-in-the-coronavirus-crisis/609757/.

[6] “Joe Biden Proposes a $700 Billion-plus ‘Buy American’ Campaign.” CNBC, July 9, 2020. https://www.cnbc.com/2020/07/09/biden-proposes-a-700-billion-plus-buy-american-campaign.html.

[7] Saval, Nikil. “Globalisation: the Rise and Fall of an Idea That Swept the World,” July 14, 2017. https://www.theguardian.com/world/2017/jul/14/globalisation-the-rise-and-fall-of-an-idea-that-swept-the-world.

[8]Jones, Marc. “World Has Racked up 7,000 Protectionist Measures since Crisis: Study.” Reuters, November 14, 2017. https://www.reuters.com/article/us-global-economy-protectionism/world-has-racked-up-7000-protectionist-measures-since-crisis-study-idUSKBN1DF005.

[9] Ibid.

[10] “THE BIDEN PLAN TO ENSURE THE FUTURE IS ‘MADE IN ALL OF AMERICA’ BY ALL OF AMERICA'S WORKERS.” Joe Biden for President, July 27, 2020. https://joebiden.com/madeinamerica/.

[11] Hirsch, Melissa. “Why American Farmers Are Throwing out Tons of Mil.” Vox, June 18, 2020. https://www.vox.com/2020/6/18/21295834/why-american-farmers-are-throwing-out-milk-coronavirus .


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