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Home / Opinion / Columns /  Lessons for the world from America's 2020 rush to make N-95 masks

The lessons from US attempts last year to quickly create manufacturing capacity for N-95 masks and hospital gowns at the height of the pandemic are akin to a fable. It may not have quite the appeal of, say, the story of the hare and the tortoise, but in microcosm this tale offers all we need to know about the complexity of building supply chains in the 21st century. A Harvard Business Review article this summer outlined how it had taken several months for a Massachusetts-based company, Shawmuts, to put up production capacity for N-95 masks because everything, from the polypropylene fabric used to the industrial machines needed to make the fabric and assemble a mask with nose clamps, etc, had to be imported from Germany and China. In the case of hospital gowns, however, much of the expertise was in the US. The ‘coalition’ eventually included companies seemingly as different as a high-fashion firm in New York, a maker of climbing suits in Oregon and even a mattress company, as a race ensued to speed up sewing capacity. “Shawmut’s gown operation went from a standing start to an output rate of 350,000 gowns per month in just over 90 days. Shawmut and its coalition partners supported the production of 11 million urgently needed isolation gowns," noted the article. Despite initial orders from America’s national defence logistics agency, Shawmut’s production of gowns stopped this February when orders dried up as other producers overseas caught up and demand abated. Shawmut had to lay off some of its workforce.

Supply chains, once the preserve of business-school case studies, are the subject of headlines today. In Los Angeles, at the beginning of this month almost half a million shipping containers were waiting to unload their goods at the port there, which has been suffering a shortage of workers, resulting in ports operating at about two-thirds of their capacity. US President Joe Biden had to step in and announce a plan to enable Californian ports to work 24X7.

In China, Beijing’s edicts to provinces asking them to shift to clean fuel sources led to a sudden drop in coal supplies and left factories in southern China, the epicentre of global supply chains, at the risk of extended power cuts.

Perhaps there is a stronger contender for Time magazine’s person/phenomenon of the year in 2021 than supply chains, but it is hard to think of one.

Through this era of stress tests, two things have become clear. The first is that companies are hugely dependent on China in managing supply chains and thus choose to wish global geopolitical problems away. The second is that from Washington to New Delhi, grand plans for building “resilient" supply chains and favouring domestic production are mostly made amid ignorance of how dense and complex supply chains are. Equally, Apple’s chief Tim Cook may regard inventory as an “evil", but ultra-lean inventory may be a thing of the past. Apple’s dependence on the assembly of its products in China, where its suppliers employ 3 million people, was questioned in 2015. Some of its managers pushed for moving some production to Vietnam, but were overruled by senior management, according to The Wall Street Journal.

Earlier this month, US Trade Representative Katherine Tai made a strongly-worded speech at a Washington think-tank. She appeared to regret the accession of China to the World Trade Organization, as many do today, on the belief that Beijing had gamed the system. Tai observed that even before the Clinton administration paved the way for it in 2001, “from the late 1970s to mid-1980s, US exports to China increased approximately four-fold, while imports grew 14 times in less than 1 0 years." Entire industries in the US have got wiped out. Tai pledged to work with allies “to facilitate a race to the top for market economies and democracies."

So far, so stirring. But there is little evidence that business is willing to meaningfully move production elsewhere, or that consumers would pay the higher prices that would result. For all the spiked-club brutality of the Chinese ambush of Indian soldiers at the border last year, which cost more than a dozen lives of Indian soldiers, few Indian companies or consumers have changed their purchasing behaviour. India remains dependent on China for about two-thirds of its imports of active pharmaceutical ingredients. Last week, foreign secretary Harsh Vardhan Shringla said that in the first nine months of this year, bilateral trade between the two countries had increased by 49%. India’s bilateral trade deficit over that period was a staggering $47 billion.

Similarly, in the US, the Biden administration recently allowed companies to apply for exemptions to import from China, while US companies are lobbying for the lifting of tariffs on Chinese products. China’s supply chains have a chokehold on our collective buying behaviour. Taiwan’s foreign minister has been welcomed with open arms on a tour of the Czech Republic. The island republic played a lead role in helping build China’s industrial capacity over the past four decades. Politicians in Taipei who I spoke to for an article (bit.ly/2Zo5o8G) in Mint this March said they believed India should push ahead with a free trade agreement (FTA) with Taiwan and enable it to make India a major link in global supply chains. Such an FTA would run the risk of angering China. Beijing is intemperate but has demonstrated both the speed of the hare and patience for the long game of the tortoise.

Rahul Jacob is a Mint columnist and a former Financial Times foreign correspondent.

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