Minnesota’s Border Battles: COVID-19 edition
Last year, I wrote a report titled ‘Minnesota’s Border Battles‘ in which I compared the economic outcomes in Minnesota counties bordering other states with the outcomes in the border counties…
Recently, I wrote about the shortage of N95 face masks:
In early March, the Department of Health and Human Services said that America’s stockpile of N95 masks – so-called because they filter out 95% of airborne particles – was only about 1% of the three billion masks we would need during a pandemic. And so, in the richest country on earth, we have the Centers for Disease Control and Prevention (CDC) advising healthcare workers without masks to wear scarves and bandanas instead.
We need lots more masks and we need them quickly.
President Trump also perceives this problem. Part of his solution has been to simply order Minnesota based 3M to produce more, using the authority of the Defense Production Act (DPA). As WCCO reported last Friday:
President Donald Trump blasted the Minnesota-based company 3M in a tweet Thursday evening, after invoking the Defense Production Act to force the company to produce face masks. N95 face masks are critical for health care workers on the front lines of the coronavirus pandemic, and there have been issues with mask shortages.
“We hit 3M hard today after seeing what they were doing with their Masks. “P Act” all the way. Big surprise to many in government as to what they were doing – will have a big price to pay!” Trump wrote, referring to the Defense Production Act.
Trump announced during the White House coronavirus task force briefing on Thursday that he had signed an order for 3M to produce face masks.
“Hopefully they’ll be able to do what they are supposed to do,” Trump said, without offering details.
White House trade adviser Peter Navarro also said during the briefing that there had been “issues” with 3M not providing enough masks to American buyers.
“We’ve had some issues making sure that all of the production that 3M does around the world, enough of it is coming back here to the right places,” Navarro said.
Lets step back a moment and ask ourselves ‘What is the problem here?’ The answer is ‘We don’t have enough N95 masks’. That leads to another question: ‘Why don’t we have enough?’ As I argued in my previous post, a major source of obstacles to the increased production of N95 masks is the federal government itself.
At Marginal Revolution, economist
Here’s a catalog of all the ways various forces conspire against this effort at EVERY level:
– Employers threaten to fire doctors & nurses if they speak frankly about shortages so it’s hard to determine the most at-need hospitals & if everyone in the chain is doing their job
– CDC and WHO messaging about “no need for masks” provide cover for hospitals, limiting reputational damage and protects them from class-action lawsuits for not providing adequate PPE to their staff (which should be their job)
– US PPE compliance is messy and confusing (different agencies setting different rules) which limits supply
– All 50 states, Federal agencies, hospitals, NGOs, and businesses bid against each other, pushing prices up
– US authorities punishes anyone for “price gouging” so importers and suppliers are reluctant to order PPEs from vendors for fear of being penalized
– As a result, US importers and suppliers of N95 masks get outbid by foreign competitors so the US loses out
– Because there are no export controls, local supplies of N95 masks get purchased by foreign buyers and are exported
– FDA fails to authorize KN95 masks thus choking off total mask supply as KN95s are cheaper & available in larger quantities than N95s (they have similar specs)
– As a result, US Importers are hesitant to order KN95s (mostly produced overseas) because they’re worried they’ll get held up at customs or that hospitals would refuse to accept them even as free donations as they fear legal liability if healthcare worker gets ill using them
– Healthcare workers don’t get the protection they need but they can’t complain to the press
– Rinse, wash, repeat
– (Chinese state propaganda uses this as proof that the US is just as bad as the CCP for silencing whistleblowers)
3M is planning to produce more than a billion masks by the end of the year, but that is only one-third of the masks we need. Remember, the problem is a shortage of N95 masks, the answer is more of them, and the way to achieve that is to stop the FDA and CDC preventing people from making them.
In a response, 3M said that it was happy to prioritize orders from the Federal Emergency Management Agency (FEMA) as the invocation of the DPA demands. But they went further:
In the course of our collaboration with the Administration this past weekend, the Administration requested that 3M increase the amount of respirators we currently import from our overseas operations into the U.S. We appreciate the assistance of the Administration to do exactly that. For example, earlier this week, we secured approval from China to export to the U.S. 10 million N95 respirators manufactured by 3M in China.
The Administration also requested that 3M cease exporting respirators that we currently manufacture in the United States to the Canadian and Latin American markets. 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.
Indeed, it is hard to see what else the Trump Administration thinks might happen. If the US government hoards all of 3M’s US produced masks for the US, why would the Chinese government not do exactly the same for masks produced by 3M there?
Free trade makes us better off, we wouldn’t trade freely if it didn’t. It follows that interfering with it makes us worse off. Rarely do we see that lesson demonstrated so clearly.
Bashing a major multi-national like 3M might make for good Twitter, but it is very dangerous public policy. Thankfully, “The 3M saga ends very happily” President Trump announced yesterday. But, in the fight against the Coronavirus, it is more important that usual to think clearly: What is the problem? What is the solution? What are the obstacles to that? How can we get rid of them? Anything else, however satisfying emotionally, is a distraction.
John Phelan is an economist at the Center of the American Experiment.