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Using Vaccine Diplomacy to Address Supply Chain Woes

Image depicts an empty grocery store shelf (via Financial Post)

In this year of crises, the plight of the Ever Given was, without doubt, the most absurd. While attempting to cross the Suez Canal during high winds, the massive container ship was forced to travel at an unsafe speed and subsequently run aground. Naturally, the internet had a field day, focusing on the inspiring story of the lone excavator attempting to dislodge the massive barge. The real story, however, was that these events exposed the fragility of the global supply chain and the immense costs of any disruptions in a way not unlike the mask, ventilator, and toilet paper shortages of early 2020. The blockage disrupted $10 billion worth of cargo a day and affected companies delivering goods ranging from oil to produce. Nevertheless, the ship was eventually dislodged, and the incident was relegated to the archives of the internet and legal battles between the various parties affected.

The fragility of the supply chain remains a pertinent issue. Last May, a combination of COVID-19 and climate change issues simultaneously spiked demand and reduced supply, causing lumber prices to rise 60 percent in a month and 374 percent from the previous year. An ongoing semiconductor shortage will cost automobile manufacturers $210 billion in sales this year alone. Shipping costs from China to the eastern US are up 500 percent from last year, and California ports, handling 40 percent of imports, face major backlogs. 

During this time, the US has also faced seemingly inexplicable domestic labor shortages. These issues have collectively translated into delays and shortages across the consumer ecosystem. The Consumer Price Index, which tracks the price of common goods to determine the rate of inflation, rose 5.4 percent over the past year. 

Republicans have attributed this rise to stimulus packages passed by the Biden administration. However, supply shortages—and the shockingly high prices they precipitate—likely played an equally significant role. That said, there is validity to Republicans’ claims. Since the onset of the pandemic, the federal government has passed stimulus packages of unprecedented magnitude, a great deal of which has gone directly to American consumers. This infusion of cash combined with pandemic-induced savings has resulted in a nearly $4 trillion increase in savings for Americans. People have responded with spending. Shipping traffic is up 50 percent from pre-pandemic levels, driving some of the price increases. Companies and mainstream news outlets are already warning of delays and higher costs for the Black Friday and Christmas shopping seasons. It’s likely that the massive increase in disposable income is an essential reason why.

This observation does little to address the actual problem of supply chain shortages. Suppressing demand is the antithesis of promoting economic growth, and no politician would be foolish enough to wreck the economy on their watch. Biden and Democrats in Congress are taking the opposite tack. They are currently attempting to pass a $1 trillion dollar bipartisan infrastructure bill and a $3.5 trillion reconciliation bill in quick succession. While the second package may not reach the finish line, it is a matter of when, not if, for the $1 trillion bill. Promoting domestic manufacturing capabilities, as Biden has attempted to do by strengthening the Buy American Act, has been decried by economists and only applies to federal government procurement. The effects of climate change, such as wildfires affecting lumber supplies, may necessitate increased domestic resilience in the future, but such improvements do little to address the situation at hand.

The best option for addressing the supply chain weaknesses is strategic humanitarianism. In August, President Biden promised that the US would be the world’s “arsenal of vaccines” with “no favoritism and no strings attached.” This approach, while noble, is strategically unsound. Despite US dominance in vaccine quality and manufacturing, the administration still chose to hoard doses until every American had access. While there was no official export ban, the result was the same. There is nothing inherently wrong with this position—the US government has an obligation to its citizens above all others—but it is contradictory to suggest that strategic interest should not also play a role in the international deployment of American vaccines. 

In recent decades, companies across the globe have outsourced critical elements of their supply chain to China and other Southeast Asian countries where labor costs are far lower. The case of Vietnam is instructive on the devastating effects of Covid-19 on the labor market—and the issues that similar nations will face in minimizing the disruptiveness of the pandemic. As of early October, Vietnam has only procured enough doses to vaccinate 20 percent of its population. Vietnam chose to rely on the Cuban vaccine, which Cuba claims matches the effectiveness of Pfizer and Moderna’s shots. The vaccine’s manufacturer, BioCubaFarma, claims it can produce 100 million doses per year. Even disregarding Cuban domestic vaccine needs and those of other nations competing for doses, Vietnam’s 100 million population requires 300 million doses to reach full vaccination. Meanwhile, the nation is just emerging from a draconian lockdown after the Delta variant caused the country to endure its first surge of the pandemic. 

The situation is similar in Thailand and Malaysia, where successful containment measures have not prevented Delta surges and lockdowns. With factories a notorious breeding ground for the virus, it is no surprise that these rising cases have dramatically impacted manufacturing. Recently, Ford was forced to temporarily close a German factory because Covid-19 prevented Malaysian factories from meeting semiconductor demand. In fact, PMI, an index measuring manufacturing, fell near-universally amongst Asian countries, as many had opted for similar containment strategies that Delta finally undermined.

In recent months, President Biden has suffered a significant decline in approval rating—from a peak of 55 percent in March to a low of 43% recently—as his signature policies have stagnated in Congress and crises mount under his watch. Prioritizing countries essential to the supply chain for vaccine exports is an easy and strategic solution. One Trump policy that Biden has continued is diplomatic hostility towards China. As China increasingly aims to dictate the course of global events, the US reasserting its role as global leader has become an essential element of Biden’s foreign policy. A strategic deployment of vaccines, bolstering supply chains and forging partnerships with developing nations in close geographic proximity to China, is the ideal expression of that policy. Notably, China’s vaccine has proven far less effective than the American iterations but has been exported at significantly greater scale. In nations like Vietnam, public distrust of the Chinese vaccine has played a role in difficulties administering doses to the population. The United States should continue its ambitions to vaccinate the world’s poorer nations, but it should also see this opportunity for what it is: a chance to improve the US’s global standing while ensuring Christmas presents arrive before January.