Duncan: Fear, Anxiety, and Supply Chains

The coronavirus has Americans, including Virginians, scared. They should be frightened. But thrumming in the background just below our fear of this new and deadly disease is an additional layer of anxiety caused by shortages of vital supplies we used to take for granted a month ago. Just at a time when we are being urged to social distance and stay at home, many of us are having trouble finding groceries.

Older, more vulnerable people who want to opt for delivery services are finding it impossible to set up delivery dates. The lucky ones manage to snag a date a month away at best. And then they can’t be assured they will get things they need. People going to stores are regularly confronted with empty shelves, especially for staples like bread, eggs, milk, toilet paper, and disinfectants. Because of that, people take what they can find and are forced to go out shopping more times in the week than they want, shop at multiple stores on a trip, and expose themselves more than they wish to the risk of Covid-19. Even when we want to shelter in place, we are forced out to forage for essentials.

At first I chalked this up to a surge of panic buying. People were stocking up in anticipation of shortages, and for the very valid reason that they wanted a two to three week (maybe a month) supply of groceries precisely because they wanted to limit their trips to stores. Up to a point, the reasons seemed valid.

And I expected that once people had their supply, they’d hunker down and stores would be restocked. That hasn’t happened.

I haven’t seen toilet paper in a store in three weeks. It shows up periodically, very early in the morning, a few days a week, and promptly disappears. The panic buying and hoarding continue. The same for disinfectants.

I’ve managed to buy plenty of food, including fresh meats and vegetables. My husband and I have found bread, if not always exactly the brand we wanted. And we’ve gotten milk and after a couple of times not finding it, even eggs.

But not toilet paper, which I’ve snagged online a couple of times. Disinfectant wipes, however, have been impossible to find, whether in stores or online. Even Walmart, Target, and CVS have not been delivering it and only occasionally have it in the stores near me.

At some point I began to wonder what was really going on. After three to four weeks of sustained shortages, I asked what was really wrong with our supply chain? Has it truly broken?

The answer is complicated. And I will start with the good news.

For toilet paper, actually no. It, and other paper goods like dinner napkins, paper towels, and tissues are actually made in the U.S. The shortages do seem to be caused by unrelenting buying and hoarding. The companies would like you and me to stop doing that.

At the same time, they are reluctant to ramp up supplies because they are afraid that once the virus subsides and things go back to normal – hopefully, by summer – they will be facing an oversupply of their products. The logic goes that all those hoarders will have a basement full of unused paper products and stores won’t even be able to give it away.

That could be true later on. But people respond to immediate cues. As long as they continue to see empty shelves and experience difficulties now, they won’t change their hoarding behavior anyway. So, if those companies want us to stop, as they say they do, they probably do need to temporarily step up production. Once people are no longer experiencing shortages, they will stop hoarding and not until then.

But for other vital goods, the solution is not so simple. Too many of our favorite products actually are produced overseas, where we compete on an international market with every other country facing the same crisis as us, including the same panic and hoarding.

We really can’t get Lysol wipes because they aren’t available, or they are only available in very limited quantities. The problem is almost all the chemicals used in disinfectant are made overseas, and most of the governments in countries where they are made have limited their export.

According to the Consumer Brands Association, in a letter they released to Secretary of State Mike Pompeo, and the U.S. Trade Representative:

“ARLINGTON, Va. — The Consumer Brands Association today called on U.S. Secretary of State Mike Pompeo and U.S. Trade Representative (USTR) Robert Lighthizer to work on behalf of American consumers by combating global export restrictions on the materials needed to treat and prevent coronavirus. Additionally, the association asked for further protections against international hoarding of materials required to make products that maintain the health and well-being of American consumers.

“ ‘We are facing an unprecedented global crisis and cooperation must trump isolation,’ said Bryan Zumwalt, executive vice president of public affairs for Consumer Brands. ‘Trade relationships are critical to slowing this pandemic, yet multiple countries are responding by restricting exports of chemicals, ingredients and final products — action that will only exacerbate the risk of product shortages at a time they are needed most.’

“Countries including India, Germany, France, the Czech Republic, Turkey and Russia have all enacted export restrictions on various chemicals, base ingredients and protective medical products in response to the coronavirus, disrupting the global supply chain and exacerbating shortages of already high-demand products.”

And those are the shortages in production for simple household goods that you and I can’t get. The situation gets far more dire.

Anybody reading a newspaper or watching news knows our hospitals and medical personnel are facing an unprecedented shortage of protective personal equipment (PPE), including face masks, gloves, and hospital gowns. And ventilators. All of that equipment is made overseas.

One reason given for the shortages is that the U.S. has to compete on a global market. Free markets and the global competition doing what they are supposed to, right?

To an extent, that’s true. As the Washington Post reported:

“Several reports in recent days have documented a Wild West-style online marketplace for bulk medical supplies dominated by intermediaries and hoarders who are selling N95 respirator masks and other gear at huge markups. Forbes reported that U.S. vendors have sold 280 million masks — mostly into the export market — and that U.S. states and local governments were outbid in the frenzy. The Washington Post and Reuters have reported this week on the stockpile’s dwindling supplies.

“There are few signs the Trump administration is making efforts to stop the export shipments or seize the supplies for use in U.S. hospitals, despite statements from Attorney General William P. Barr last week that U.S. wholesalers hoarding masks and other supplies would get “a knock on your door.”

Ah, but if only simple greed and an open market were the issues, it might be solvable. But two other things have collided to worsen the situation. First, the U.S. has actually been exporting and selling our supply to countries overseas. And the main producer of those now scarce goods, China, began limiting supplies when the coronavirus first struck them.

According to the New York Times:

“SHANGHAI — As hospitals and governments hunt desperately for respirators and surgical masks to protect doctors and nurses from the coronavirus pandemic, they face a difficult reality: The world depends on China to make them, and the country is only beginning to share.

“China made half the world’s masks before the coronavirus emerged there, and it has expanded production nearly 12-fold since then. But it has claimed mask factory output for itself. Purchases and donations also brought China a big chunk of the world’s supply from elsewhere.

“Now, worries about mask supplies are rising. As the virus’s global spread escalates, governments around the world are restricting exports of protective gear, which experts say could worsen the pandemic.”

And this, from the same Times article:

“Peter Navarro, an adviser to President Trump on manufacturing and trade, contended on Fox Business last month that China had essentially taken over factories that make masks on behalf of American companies. Beijing, he said, had opted to “nationalize effectively 3M, our company.” One reason is that over the last two decades China has become the primary manufacturer for the world’s masks and respirators. When the virus swept through China in late 2019 and early 2020, the country’s increased need for masks dealt a double whammy to the global supply. The US is particularly reliant on China for masks and other medical gear. According to the Department of Health and Human Services, 95 percent of surgical masks and 70 percent of respirators used in the US are made overseas, and China is one of the biggest producers.”

Basically, Americans are generous people. But we have been giving away the store to countries that are not only not reciprocating in our time of great need, but have been pulling up their moats when it comes to the supply chain. Maybe it’s human nature, and even prudent, to put your own people first.

But that’s faint comfort to the nurses, doctors, EMTs, and other healthcare professionals on the frontlines without protective equipment. It’s no comfort at all to families who will lose loved ones because every state and the federal government is facing a severe shortage of ventilators. And it is a cruel lack of comfort to ordinary Americans searching frantically for a container of disinfectant at a store to keep their family safe at home.

Our supply chain is broken. One cause is that we make so little at home. While it is noble and inspiring that an army of volunteers has begun sewing homemade face masks for hospitals, it is appalling that a country as rich and powerful as ours has been reduced to this. Even more concerning though is the vulnerability it is showing the world.

Any country is only as secure as its supply chain. Once our enemies know – and they are watching – how fragile that is, we become weaker still on an international stage. Three things in our current policy have weakened us: isolation from our allies, tariffs that have made raw materials more expensive, and lack of manufacturing capacity.

We need to trade with the world for certain. But we need to bring production back home too. We need to make things here or all the laws giving presidents emergency powers to order factories to produce necessities won’t matter. Without domestic manufacturing, presidential authority becomes a moot point.

After this crisis, our country is going to need a serious discussion of our weaknesses, not the least of which is how to incentivize our multinational companies to come home. It can’t be done by fiat in a free country. But the government can create an industrial policy that makes domestic manufacturing more attractive. That can include tax breaks for opening new factories and tax penalties for those who make excessive profits from overseas production. There is a mix of tools that can be used. But America must never be caught so short again by a national emergency.

Karen Duncan used to blog at Anonymous Is A Woman from 2005 until 2010. She also wrote occasional guest posts for Bearing Drift in 2007, where she played friendly Devil’s Advocate from the Democratic side of the aisle. She thinks Bearing Drift was way ahead of its time in trying to bridge the gap and end the tribalism in American politics. Karen is a long time Northern Virginian who currently keeps busy working from home, sheltering in place, and has restarted a blog under her own name, no longer wishing to remain anonymous.