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Shall we look at what this policy means in practice for a moment? (Thread) https://twitter.com/alanbeattie/status/1263737751633104896
There are reasons why China has become the manufacturing hub in the world: it is cheaper to do things there. Take pharma: getting production back to Europe faces a triple challenge...
1) significant investment costs, 2) high cost of production (labour, environmental standards etc.) and 3) low level of prices in the generic sector.
How much are we talking about: A consultancy calculated that for 100 tons of the active ingredient of Cephalosporin (an antibiotic) for the German market we are talking 55 millions.
Now that’s a lot of money. It needs to be invested - which means changing pharma procurement and production support by the state. Here’s the study of the consultancy. https://www.progenerika.de/wp-content/uploads/2017/02/Antibiotikastudie_lang_Updated.pdf
Similarly you can get product chains back. But again: there’s a reason why the production happens elsewhere. And it’s the same issue: production cost because of labour, environment, standards is a big driver. But then simply saying ”so we pay” is not enough...
Companies select their inputs thoroughly: do they comply with our standards? What tools do we have to adapt? What is the service? Can they be delivered just in time? What guarantees are there?
For a car manufacturer to “diversify supply” is first of all a slogan. If it‘s a critical part - are the parts of all sources utterly identical or do they need to change a bit? Can supply be guaranteed over the whole life cycle of the car?
All of this requieres long-term commitment, thorough thinking, much investment - and it is hellishly complex. Quite apart from drifting into the type of state intervention that has long been rejected.
In short: 1) some reshoring is vital, but 2) this is complex 3) this is a long-term, costly project 4) it won’t happen on the scale some people say unless we become a state-run system and 5) we need a good game-plan
