Question

What downside of specialization and trade does the U.S.'s difficulty in obtaining face masks and ventilators illustrate? Explain.

Answer 1

In 1744, Benjamin Franklin wrote "No nation was ever ruined by trade, even seemingly the most disadvantageous".  Further as per theories of International trade, Foreign trade  

• reduces differences in productivities,technologies and resource endowments among countries through specialization.
• is mutually beneficial and there are gains to trade. Production and Consumption both increase as a result.

However in the light of recent pandemic situation, US administration has expressed difficulty in procuring face masks and ventilators. Further shipments of such vital healthcare to neighbouring countries such as Canada has been restricted.The possible reasons behind such downside of specialization are -

• Specialization creates dependency and reduces self sufficiency. If all resources are directed towards producing most efficient output, then it creates dependency on other countries for producing other output.
• Decades of offshoring production, distribution networks to other countries in search for reduced cost of production has resulted in not keeping adequate buffer stock at home in case of emergencies.
• In short term there is capital and labor immobility due to which production cannot be shifted immediately to essential goods and services.
• Does not factor in production under uncertainty or risk. If for any reason production gets affected or damaged then there must be alternatives or second-best solutions available.

Note: This is not an exhaustive list.