Reaching into the past for a better pandemic supply plan

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Constantine PassarisAn old and obscure economic theory should have shaped the Canadian response to the COVID-19 global pandemic. Sometimes we need to go back to find the right path forward.

The infant industry argument was first proposed by Alexander Hamilton in 1791. He made a case for the United States government to protect fledgling industries against some imports from the United Kingdom.

Implementing that argument as Canada’s response to global pandemics could have saved us a lot of sleepless nights and considerable heartache when COVID-19 reached our shores.

There’s no denying that the worldwide spread of the coronavirus turned out to be a devastating and destructive biological tsunami.

The infant industry argument takes its name from the process of raising a child from birth to adulthood. Just like a child requires the love, nurturing and support of its parents in order to grow through the phases of childhood, adolescence and adulthood, some vital economic sectors require government support and protection in order to grow and mature.

In effect, some industries need more time to work out the kinks and problems in their production process and become efficient in their economic mission. In most cases, those industries are central to the economic profile of the nation and they need to be protected to ensure a domestic supply chain of their products.

In the present context, the infant industry argument is an economic theory about an inconvenient truth regarding globalization and unfettered international trade. It’s also a teaching moment that reveals the importance of economic history as our intellectual anchor and our public policy compass. Referencing our economic history allows us to avoid repeating the mistakes of the past and chart an enlightened course for the future.

Most economists embrace international trade as distinctly beneficial for consumers, business and government. These benefits manifest themselves in the form of lower retail prices for consumer products, employment creation, raising our standard of living and growing our economy.

However, those same economists simultaneously note that there are exceptions to this general rule. Those special cases are sectors of the economy that are vital to national security; areas where we must ensure the uninterrupted supply of certain products and services.

Canada and most provinces and territories were caught completely unprepared when it came to adequate supplies of personal protective equipment (PPE) and the broken links in our supply chains.

PPE is the first line of protection and the medical armour for our doctors and nurses, who rely on them to stay safe while treating highly contagious patients. Across Canada, the pandemic revealed an acute shortage of protective garments, gloves, masks, face shields, respirators and other medical equipment needed to fight this aggressive virus.

Canada learned the hard way that the globalization of production had exposed us to supply chain vulnerabilities. Resorting to the infant industry argument would have been our insurance policy and the antidote to exposing our country’s economy to supply chain uncertainty and unpredictability.

While we should embrace the benefits of international trade, we should also continue to pay premiums for insurance in the form of the infant industry argument. This will prevent us from facing the pitfalls of an inadequate supply of vital products.

Our playbook for dealing effectively with global pandemics should include an element of self-sufficiency in the production of vital medical equipment.

Never again should we expose our country to the vulnerability of being dependent on foreign products that are central to our health and well-being.

Dr. Constantine Passaris is a professor of Economics at the University of New Brunswick.

Constantine is a Troy Media Thought Leader. Why aren’t you?

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