Calls for resilience have led to a push toward more domestic production in the U.S. or within the European Union of PPE, semiconductors, pharmaceuticals, anything that might be exposed to future disruption. These parallel China’s “dual circulation” strategy, in which it stays open for the world to buy its exports, while fostering a domestic market that isn’t dependent on foreign-sourced critical materials like semiconductors, whose supply might be interrupted.
But there is a limit to how much companies can reshore swaths of manufacturing. When labor costs aren’t a dominant factor in a product’s costs, domestic assembly costs have rarely been an issue. Thus there still is strong domestic manufacturing for high value-added products such as medical devices, jet engines or Tesla vehicles. They may use foreign-sourced parts such as castings or precision-machined parts, but production of those can be relatively easily relocated.
Shipping bottlenecks and rocketing transportation costs made clear just how limited domestic manufacturing is. Economic trade theory would argue that as shipping costs skyrocketed, demand for such products would fall. It doesn’t make sense to source things from far away if the shipping cost is too high a percentage of their value. But even though transport costs jumped fivefold or more, often there were no domestic alternatives, so it didn’t matter what it cost to ship them.
I believe the signs suggest that it will be, even though as governments race to push investment into sectors like semiconductors, I doubt that subsidies will really foster competitive, sustainable local manufacturing.
pandemic 😂😂😂😂😂
It is a question of who is paying the bill. If the companies are able to passthrough the cost of their failure to the consumers or are bailed out by the government the incentives to become more resilient will vanish.
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More proof america was designed to consumption malfunction an economy 4 middlemen
build more at home
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