Lakehead University economics professor likens domestic medical manufacturing to insurance

Calls to ramp up domestic manufacturing of medical supplies and devices have been loud during the COVID-19 pandemic, but changing production to Canada from overseas, may not be as easy as wished.

While the idea may sound simple from the outset, he said, it's not as easy as re-tooling a factory to build ventilators, or manufacture N95 masks.

Skogstad said he likens the decision to make something domestically to buying insurance.

"One, what's the probability of that event occurring. And two, what's the cost of kind of being unprepared for that event."

Skogstad said when it comes to preparing for a pandemic, there are also costs, like maintaining stockpiles of supplies and equipment, like purchasing the product, storing it, and also ensuring it is fit for use in the future.

"We may face another COVID-19 type of scenario a few years from now or a few decades from now, so let's just stockpile N95 masks, let's stockpile ventilators, let's just stockpile medical equipment."

"That's always a difficult thing to do because one you never know what you're going to need. You know we're gonna need ventilators for the next disease or it's going to be a pandemic or is it going to be a different piece of equipment we need."

He said the argument that manufacturing tends to be a "good job" is simply because, as a society, we have made them so. Other benefits tied to that industry could be expanded to others.

What is really needed to encourage domestic manufacturing, Skogstad said, is a shift in government policy.

"It's one thing for the government to say we're going to have more domestic manufacturing. Well if nothing is done to encourage that it's not going to happen. We have a free market where individual firms make decisions and individual consumers make decisions."

He said the cost of labour in Canada puts it at a disadvantage to make supplies that can compete with other markets.

Even if governments decides to put policies in place to support the creation of products in Canada, if that same thought process is copied globally, Skogstad said there may not be enough demand to keep businesses going.

He said the other solution, to set up a Crown corporation to build a specific item, may not work, without being heavily subsidized.

"If every country starts to set up these domestic manufacturing (plants), then we're all trying to sell, you know, ventilators to one another. The obvious thing that's going to happen is no one is going to buy from anyone else."

"We'll have to have higher taxes to cover those costs, and we might say that's worth doing. We might say yes. Sounds good right? You might say the cost of lives here during this pandemic was very high. We don't want to pay that cost again. So we will bear those costs in all other years. And there's no problem with that. But, that's the decision [the government would be] making."

Skogstad other solutions to encourage companies to make more medical goods in Canada would be tariffs, but the tradeoff is higher prices, which with a publicly funded health care system, would lead to higher taxes.

He said governments may have some incentive to create more medical goods in Canada, but policies implemented in the past to get more items for the defense sector made in this country have not been successful.

"People are dying because we can't produce these goods, and, we value human life. So we don't want people to die. So, we should produce these goods. Yes, that's obviously the gut reaction you get and you go with at these times. But, I mean you can kind of see that it's not a simple answer."