There is an argument gaining traction that every country will now need to be self-sufficient in things like manufacturing masks. A line pushed, for example, by Thierry Breton, an EU commissioner, this morning.

But this is a bad idea. A thread .

Is there a mask/gown/protective equipment shortage at the moment: absolutely

Would having such masks/gowns help combat the pandemic: without a doubt

Will we need lots more masks in future: I imagine so

Does it follow that we need to make them in France or Europe: not at all

It is vastly more expensive to make masks in Europe. Manufacturing of such things has been done in Asia for a reason: we import stuff like t-shirts, shoes and masks (not to mention iPhones) because it is cheap. It cannot be done at the same price using EU/French labour.

Importing cheap stuff helps everyone - especially poorer people - consume stuff they need. Yes, some will happily pay $50 for a t-shirt. But if you have 3 kids & live on benefits, a $1 t-shirt made in Vietnam is good news. Good news, too, for Vietnamese but that's another thread.

So you're proposing to make masks in Europe is, roughly, a proposal to make masks more expensive.

Or, more likely, for taxpayers to subside them at a time when public finances will be stretched by our current economic response to covid-19.

(forget the immediate term - which is indeed problematic, we are all scrambling for masks. The idea that we should manufacture masks in Europe is something we are looking at for well after the peak of the pandemic. Beyond emergency manufacturing, ramping up capacity takes time.)

Mask consumption globally will be quite a bit higher, but I assume could comfortably be met by Asian suppliers. China has gone from making 10m masks a day to 115m. In weeks! Safe to assume other textile manufacturers like Bangladesh, Ethiopia or Vietnam will spot the opportunity.

Let us assume, however, that ramping up mask production in existing textile/mask manufacturing areas will be much cheaper than in Europe. I doubt anyone could quibble with that.

But what if all supply chains break down? Won't countries keep masks for "themselves"? Are we not mad to rely on Asia for something so critical?

No.

First, this is not likely to happen
Second, you can protect yourself from supply shocks with cheap measures, like stockpiling

Why is it not likely to happen? First, as the situation normalises (it is not normal now) mask supply and demand will come back in balance. The cheapest manufacturers will still be in Asia, and they will still be keen to sell us stuff, whether masks or iPhones.

You're not beholden to a single supplier (China isn't a monolith, different firms exist) and masks are simple enough that lots of other countries with textile sectors can and will flock to the opportunity. Especially if China turns flakey (which they haven't)

But also, you can protect yourself from supply shocks. Like we have done for things like oil or uranium. You build stockpiles, a strategic reserve.

This isn't so outlandish: France used to have over 1 billion masks in reserve a decade ago.

Stockpiles are cheap. You keep a supply of masks in storage (these can be sold and replenished to ensure your stock doesn't age). Say 5bn masks, which costs, roughly $1bn?

You might want, say, three months' worth of mask consumption assuming zero imports.

The cost of this strategy is way below the $1bn sticker price, because most of the masks get used in the end. Just a little later. So the cost is the interest on $1bn, which is virtually nothing. Oh and storage, which is also cheap.

Once you have a stockpile, you are insulated from supply problems. Instead of making masks in EU, you import cheap masks from Asia as normal. If there is supply pressure, you release part of your reserve. That gives you months to come up with new supply - including perhaps in EU.

The key thing is you don't start making expensive masks until you have to. And right now you really don't have to (again, I am looking at 2025, now April 2020). Especially not for masks, of all things, that every manufacturer capable of making is thinking of making.

The cost of stockpiling is basically nothing. The cost of demagogically saying "we must produce masks in Europe!" is actually quite high. We go back to making low-value-added materials. There is a reason these jobs disappeared in Europe.

Which is precisely that they were low-value-added, thus low-pay jobs. They do exist a bit, but by and large government shouldn't pride itself on creating jobs that economic progress phased out 40 years ago.

Politicians are obsessed with factory jobs. Sometimes they have a point - factories can be catalysts of R&D, in aerospace and carmaking and so on. But in mask-making? No.

Saying "oh but making masks would be a way of creating jobs in Europe" is true but it doesn't address questions of whether such jobs are good. Digging a huge hole and filling it in also creates jobs, it's still not a good idea.

Also, building factories to make masks in EU would be viable only if production was state-owned, private but backed by a state promise to buy EU-made masks (at higher-than-Asian prices), or made competitive by tariffs on Asian imports. Either way, consumers/taxpayers pay

Remember, you are talking about *self-sufficiency* in masks! Not just one or two factories churning them out (which would be a supply risk, if production was concentrated). But replacing 100% of all our needs, which are hard to predict.

If China has too much mask capacity, it can redirect resources to make other similar things with its labour pool. What does France do? We are not, should not and will not start making t-shirts again. That simply makes no sense. So you're left with idle mask factories.

The decision to build own-capacity isn't always so clear. It can often be met through stockpiles, but maybe not always. Some goods are perishable or hard to substitute. Things like antibiotics maybe should be made locally.

In truth: spotting such supply issues in advance is hard

But on masks it's fairly obvious. Governments saying "we want masks made in Europe" equates to solving a problem badly, in an expensive and complicated way, when a far cheaper and simpler solution exists. The end.