Protectionism Goes Local in Towns, States Battling Virus

(Bloomberg) --

The Covid-19 pandemic has already precipitated nationalist calls to repatriate supply lines for everything from masks and surgical gowns to ventilators. But we may be about to see protectionism going local.

In the U.S., the competition for new gear in the face of a surge of cases has state and municipal governments scrambling to obtain all of those things and officials complaining that the federal government is making things worse. The barriers to internal travel are also going up.

President Donald Trump, who has clashed with state governors, backed away from a plan to impose a federal quarantine on the states of New York, and parts of New Jersey and Connecticut over the weekend. But some states are already taking things into their own hands.

Florida reportedly set up roadblocks on Interstate 95 to turn away New Yorkers at the state border. Rhode Island threatened to do the same before backing away and deciding simply to hunt down New Yorkers on its beaches for failing to self-isolate when they entered the state.

It’s not just a state-level phenomenon. The New York Post last week reported that year-round residents in the Hamptons have revolted against a new influx of part-time refugees from New York City. The same push against the privileged apparently is being seen in Europe, according to the New York Times.

For its part, the European Union is trying to lean against internal trade curbs. In return for restricting the export of personal protective equipment outside the EU in mid-March, the bloc’s member nations were asked to ease restrictions on the sale of such gear inside the 27-nation economy.

There are good public health reasons for localism. No one wants to see the virus spread from urban centers to rural areas with few hospital beds and far more tenuous food-supply chains, as one local politician from Oregon pointed out last week in the Washington Post.

But there may be economic consequences for all of this. What if we experience a further fracturing of supply lines as the pandemic grows? What if it’s not just international commerce that shuts down, but intra-national trade as well?

There have been moments when G-7 and G-20 leaders have come together in recent weeks to proclaim the need for a common front to take on Covid-19. Everywhere, world leaders are appealing for national unity. A G-20 call with trade ministers Monday is a good place to start.

There are signs also that for all the nationalism now in the air, governments are cooperating. A shipment of medical equipment from China landed in New York over the weekend. The federal government in the U.S. is shipping ventilators and protective equipment to state and local governments.

But it’s not unreasonable these days to imagine a day when a need for ventilators in Michigan or Indiana provokes a push by local politicians to compel carmakers like Ford and GM — now venturing into the business of making the machines — to prioritize local communities. Or a local government in Bavaria or Baden-Württemberg from pressuring BMW or VW from doing the same.

There is no doubt that globalization and international supply chains are under assault during this pandemic. Fear is a real thing. But before long, federalism and nationalism could be as well. All politics are local, the saying goes. Pandemics may by definition be anything but local. That doesn’t mean, though, the urges of politicians and their constituents won’t be.

Charting the Trade Turmoil

Urgent demand for medical equipment to fight the coronavirus has sent the cost of chartered aircraft skyrocketing, turning a usually humdrum process into a competitive auction.

Today’s Must Reads

Chain links | The pandemic is playing out in ways that few companies could have prepared for. But despite the shocks, the system should continue to function even under heavy strain, according to researchers of supply-chain logistics. Maine problem | Republican Senator Susan Collins called on Treasury Secretary Steven Mnuchin to temporarily defer tariffs for U.S. companies that are suffering economic hardship. Food security | The Philippines identified additional measures to ensure sufficient food supply amid a month-long lockdown of the country’s main island. Meanwhile, empty shipping containers are piling up in Manila. Machine orders | The Pentagon’s logistics agency has modified an existing contract and will spend $84.4 million to buy 8,000 ventilators from four vendors, with first delivery of 1,400 by early May. Inside look | Newly revealed details show that General Motors has been continuously engaged in the effort to build emergency ventilators. It’ll take about a month to ramp up. Grain hoarding | Russia, the world’s biggest wheat exporter, proposed limiting grain shipments to protect its own food security in the face of the spreading pandemic.

Bloomberg Analysis

Work week | Bloomberg Economics says China’s back-to-work rate edged up to around 90%. Supply shortages | Disinfectants and sanitizers that help fight the virus may be absent from store shelves for weeks. Use the AHOY function to track global commodities trade flows. See BNEF for BloombergNEF’s analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities. Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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