Disease shows need to diversify markets

Theodore Dalrymples writes on the longer term economic impact of coronavirus Covid-19:

But the epidemic might well have effects far beyond any that its death rate could account for. The world has suddenly woken up to the dangers of allowing China to be the workshop of the world and of relying on it as the ultimate source for supply chains for almost everything, from cars to medicines, from computers to telephones. No doubt normal service will soon resume once the epidemic is over, even if at a lower level, but at the very least supply chains should be diversified politically and perhaps geographically; dependence on a single country is to industry what dependence on monoculture is to agriculture. And just as the heart has its reasons that reason knows not of, so countries may have strategic reasons that economic reasons know not of.

China has been our biggest market for good reasons – it has wanted to buy our products and produce, especially food, and it has been willing to pay well for it.

It has also been a major source of imports of finished goods and components and packaging for goods produced here.

The shutdown caused by attempts to contain Covid-19 has shown that while returns from exports have been higher, and cost of imports often lower, than if we were trading with other countries, there are risks in over reliance on one market.

The economic impact from the spread of the disease has reinforced the need to diversify markets.

The danger is that the epidemic will be used as a justification for beggar-my-neighbour protectionism, and for zero-sum game economics, to the great impoverishment of the world. Judgment, that mysterious faculty that is so difficult to define or quantify, but which undoubtedly exists, will be needed to adjudicate the claims of strategic security and economic efficiency. Even in situations in which there is hard scientific evidence to guide us, such as the present epidemic, judgment is still required. The present highly-charged political atmosphere, in which opponents can hardly bear the sight of one another, or conceded any value to their ideas, is not conducive to its exercise.

As a small nation, producing far more food than we can consume domestically, New Zealand has a lot to gain from free trade and stands to lose a lot if other countries use the disease as an excuse to implement protectionist policies.

One Response to Disease shows need to diversify markets

  1. adamsmith1922 says:

    Reblogged this on The Inquiring Mind.


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