The tuna you had for lunch might have been caught in the Pacific, processed and canned in Thailand, and flown to a Wal-Mart warehouse in the U.S.
Concerned about monitoring quality, a recent report from the Food and Drug Administration (FDA) tells us that almost 2/3 of the fruits and vegetables we eat, 80% of the key ingredients in our medication, 80% of our seafood, and 1/2 of our medical devices are made abroad.
Also looking at the worldwide supply chain, a report from the International Labour Organization (ILO) focused on the income share that labor receives. For Kenyan fruit exports to the U.K., the producer receives 14% of the income. Meanwhile, the supermarket gets to keep 46%, airfreight and handling, 21%, packaging, 13%, and the importer, 6% (p.11).
The Economic Lesson
As economists, we should ask about cost. David Ricardo (1772-1823) stated the classic defense of free trade when he expressed the principle of comparative advantage. Trade, trade, trade, he said because each nation then can do what it does best and the whole world benefits through lower cost and greater efficiency.
The FDA paper expressed concern that the quest for lower health care cost in the U.S. would lead to further globalization of the pharmaceutical supply chain. One result? More difficulty monitoring quality. On the other hand, more efficient resource use can fuel worldwide economic growth.
An Economic Question: How does efficient resource use fuel economic growth?Read More