9 - Fears of and Measures to Assure Supply Security

Summary

The purpose of this chapter is to explore the ramifications of the issue of imported supply security and to scrutinize the alternative measures that have been used for overcoming the difficulties that an unreliable import supply of raw materials could cause. Domestic supply is conventionally assumed to remain secure and stable. The focus is on supply disruptions that are unanticipated, occur suddenly and prevail only in the short-to-medium term. Monopolistic producer action, embargoes, wars, strike, and natural disasters are cases in point. The disruptions under consideration involve sizable cuts in the quantity supplied, resulting in violently rising prices, or physical shortages if the price is controlled. We consider the circumstances under which supply disruptions become especially serious and the nature of the difficulties likely to emerge. The menu of policies to overcome the problems is discussed in turn, and finally the main findings are summarized.