On Wednesday, September 23, CGD Senior Fellow Prashant Yadav appeared before the United States International Trade Commission (USITC) at a virtual hearing examining “COVID-19 Related Goods: The U.S. Industry, Market, Trade, and Supply Chain Challenges.” His testimony focused on trade and supply chain issues for COVID-19 related medical products and he offered recommendations for building more resilient supply chains.
From the testimony:
Medical supply chains are organized around specialization of tasks and geographical clustering. During the initial formation stages of these production networks the choice of location may have been driven by input costs, tax incentives, or environmental laws (e.g. in the case of pharmaceutical active ingredients). However, overtime these geographical agglomeration advantages have become more pronounced due to technological spillovers. Such specialization in clusters leads to a high degree of trade in medical supplies between countries. Trade flows with many other trading partners are essential to satisfy finished product demand in the US, to obtain components and intermediate products for finished production needs, and for US exports.
In summary, building a more resilient supply chain for medical products and COVID-19 related goods needs greater geographical diversification of the supply base, including fast response domestic manufacturing for the most critical items. It also requires an environment conducive to trade with countries specialized in medical product manufacturing.
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