In The Defense Production Act I argued that the DPA was neither especially useful or necessary and would probably be misused. In Sicken Thy Neighbor Trade Policy I argued that exports bans were a bad idea. So, of course, Donald Trump has used the DPA to ban 3M from exporting masks to Canada. “We hit 3M hard today” tweeted Trump, as if 3M were a foreign terrorist camp.
Over the last several weeks and months, 3M and its employees have gone above and beyond to manufacture as many N95 respirators as possible for the U.S. market. Yesterday, the Administration formally invoked the Defense Production Act (DPA) to require 3M to prioritize orders from the Federal Emergency Management Agency (FEMA) for our N95 respirators.
…There are, however, significant humanitarian implications of ceasing respirator supplies to healthcare workers in Canada and Latin America, where we are a critical supplier of respirators. In addition, ceasing all export of respirators produced in the United States would likely cause other countries to retaliate and do the same, as some have already done. If that were to occur, the net number of respirators being made available to the United States would actually decrease. That is the opposite of what we and the Administration, on behalf of the American people, both seek.
I am against export bans in general but placing an ethically charged export ban on one of our largest trading partners and allies is especially shortsighted. For example, guess where one of the world’s largest producers of a key input for making surgical masks (FYI, these are different than N95s) is located? Canada.
…the Harmac mill [on Vancouver Island] is the world’s only producer of the particular grade of paper pulp used in the manufacture of surgical masks and gowns…
“K10S is the pulp that we’re producing for these medical supplies. We’re the only one that produces it,” he said. “Different pulp mills run different grades of pulp – almost kind of like recipes.”
K10S pulp is made from western red cedar that produces a soft fibre that makes it suitable for the final products made from it.
“It’s been tweaked over the years to come up with the right formula that allows it to go into the medical supplies,” Sampson said.
…the U.S. customer that produces [the surgical masks[ has doubled its order for the K10S pulp.
More generally, in the aftermath of the crisis, supply lines will tighten. I don’t favor this for the reasons given in my TED talk but it will probably happen. It’s not going to happen universally, however. China is going to be hit especially hard as they rely on the world trade system much more than does the United States. Canada and especially Mexico will gain, however, as supply lines move closer to home. In the post-Covid world, manufacturing will rationalize on North American grounds so we may as well start planning for that future by treating Canada and Mexico like a part of the US family.