Month: July 2020

“For Trump, Navarro, and the other neo-nationalists increasingly setting policy for the post-2016 Republican Party, America’s modern problems mostly stem from goods and people coming across the country’s borders. If a problem can’t be blamed on immigration, it probably will get blamed on trade. Sometimes both. And the neo-nationalists weren’t about to let the coronavirus crisis go to waste.

“If we learn anything from this crisis,” Navarro said in April, “it should be: Never again should we have to depend on the rest of the world for essential medicines and countermeasures.”

This framing sounds like simple electoral politics. The Republican Party hopes to use the pandemic as an opportunity to double down on Trump’s “get tough on China” message that helped deliver key Rust Belt states in 2016.

But it’s more than that. Protectionism is now infecting the GOP to a degree that may be difficult to excise when the Trump era ends. Leading Republican lawmakers such as Sens. Josh Hawley (R–Mo.) and Marco Rubio (R–Fla.), who have been cheerleading Trump’s misguided tariff policy for years, are already positioning the coronavirus as an excuse to use federal power to reshape global trade. Even some formerly anti-Trump conservatives have been swayed into backing a nationalist vision of an America that must stand up to China or be swallowed by it. The COVID-19 outbreak has served only to confirm their fears.”

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“The right’s increasingly vocal trade skeptics have taken advantage of a crisis to advocate a national industrial policy designed not only to decouple the United States from the global trading network but to put America on dangerous Cold War–like footing with one of its biggest trade partners. In doing so, they’re pushing ideas that will leave America less prepared for the next pandemic—and have already left us less able to handle this one.”

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“Data from the World Trade Organization (WTO) show that over the past three years—both before and during Trump’s trade war with China—American consumers and businesses imported an average of $13.5 billion per year in medical supplies from China. That’s good enough to put China in fourth place, behind Switzerland ($15.5 billion annually, on average), Germany ($19.6 billion), and Ireland ($27.9 billion). America imported less than half the value of medical supplies from China in 2019 as it imported from Ireland, yet you probably didn’t hear many politicians and media personalities grandstanding about an overreliance on Irish manufacturing.

Meanwhile, an April report from the St. Louis Federal Reserve found that 70 percent of essential medical supplies consumed in the United States in 2018—including gloves, hand sanitizer, masks, and other key coronavirus-fighting stuff—were produced in the United States.”

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“In February, the Food and Drug Administration (FDA) touched off a brief panic with a statement warning that the coronavirus outbreak in China could disrupt supply chains and lead to a shortage of drugs in America. The neo-nationalists pounced. In a February letter to the FDA, Hawley called America’s supposed dependence on Chinese-made drugs “inexcusable.” Part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the $2.3 trillion aid bill passed by Congress and signed by Trump in March, calls for the Department of Health and Human Services to develop “strategies to…encourage domestic manufacturing” of pharmaceuticals. By May, the Trump administration had approved a $350 million grant for a little-known Virginia company that promised to make drugs in the United States. “This is a great day for America,” Navarro proclaimed at a press conference.

In the rush to throw taxpayer money at the problem, the White House didn’t wait to see if a problem actually existed. On June 2, an FDA official testified that the agency had found no evidence of shortages of drugs caused by foreign governments restricting exports.

The truth is that America’s global supply lines for pharmaceutical drugs are actually quite diverse and resilient. There are roughly 2,000 manufacturing facilities around the world authorized by the FDA to produce active pharmaceutical ingredients for American consumers; only 230 of those are in China. Some 510 are in the United States, and 1,048 are in the rest of the world. The supply chains for the 370 drugs on the World Health Organization’s list of “essential medicines,” which includes “anesthetic, antibacterial, antidepressant, antiviral, cardiovascular, anti-diabetic, and gastrointestinal agents,” are similarly global: 21 percent of production facilities are in the United States, with 15 percent located in China and 64 percent located somewhere else.”

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“As president, Trump has charted a go-it-alone strategy that emphasizes brute power over diplomatic finesse and that sees trade as a means by which other countries take advantage of the United States. Shortly after taking office in 2017, he yanked the United States out of the Trans-Pacific Partnership (TPP), a 12-nation trade agreement that was widely seen as the best way to put pressure on China to change some of its unacceptable behaviors. Instead of that multilateral effort, Trump sought a one-on-one confrontation that attempted to use tariffs to bully China into changing its ways. But his trade war has so far produced only meager results.

A “phase one” agreement signed in December 2019 did nothing to offset the huge costs to both economies of the tariffs the two countries have raised against one another. And the one big “win” secured by Trump—a promise that China would buy more American agricultural goods—seems unlikely to materialize in the face of a global recession.

That lone policy victory has been offset by numerous tangible losses. Since 2018, Trump has imposed tariffs on steel, aluminum, solar panels, and washing machines. Other tariffs have been aimed at roughly $300 billion in annual imports from China—covering everything from industrial equipment to children’s toys. All together, those tariffs have sucked an estimated $80 billion out of the U.S. economy, according to an estimate from the Tax Foundation, a nonpartisan tax policy think tank.

The tariffs have also imposed a human toll, one that became more obvious during the coronavirus outbreak.

“Any disruption to this critical supply chain erodes the health care industry’s ability to deliver the quality and cost management outcomes that are key policy objectives of the country,” Matt Rowan, president of the Health Industry Distributors Association, told the Office of the U.S. Trade Representative at a hearing back in August 2018.

At the time, the administration was weighing whether to include products like hand sanitizer, thermometers, oxygen concentrators, surgical gloves, and other types of medical-grade protective gear in the list of Chinese-made items to be subjected to new tariffs. Rowan emphasized that such supplies were “essential to protecting health care providers and their patients” and would remain “a critical component of our nation’s response to public health emergencies.”

The most instantly noticeable effect of Trump’s tariffs was to increase the price of goods imported from China, including medical equipment. Importers would have no choice but to “almost immediately” pass along those price increases to “hospitals, surgery centers, long-term care facilities, individual consumers, and government programs who purchase our products,” Lara Simmons, the president of Medline Industries, one of the largest medical supply companies in the United States, said during a June 2019 hearing on the tariffs.

But the Trump administration went ahead with the tariffs anyway. Imports of medical equipment from China fell after the tariffs were imposed, and imports from other parts of the world did not increase enough to make up the difference. It’s likely that hospitals and other health care providers were drawing down on existing inventories and hoping the trade war would end before they had to restock, says PIIE’s Bown, who has analyzed changing supply chain patterns in the last few years.

Trump finally lifted tariffs on medical equipment after the pandemic struck. Unfortunately, the administration did nothing to remove tariffs on chemicals used to manufacture disinfectants and antiseptics—items that will be in even higher demand as the economy reopens.

“The tariff is making it more difficult for companies to supply our nation’s essential workers with antiseptics and sanitizing products they need to protect themselves and others from COVID-19,” says Chris Jahn, president and CEO of the American Chemistry Council.

As the COVID-19 body count rose, Trump blamed China for making things worse by lying about the seriousness of the situation in December and January. The Communist regime in Beijing does deserve scorn for misleading the world about the pandemic’s true nature during the early days of the outbreak. But Trump is far too eager to deflect blame from how his own policies weakened America’s preparedness for the disease—and from how they might have made things much worse.”

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“When the coronavirus outbreak hit, 3M sprang into action: The company doubled its global production to 100 million N95 masks per month, with 35 million of those made in America. In early April, the company’s CEO, Mike Roman, announced additional investments in mask-making capacity that will allow the company to produce 50 million N95s in the U.S. by June. For that remarkable mobilization of private capital and workforce productivity in the face of a deadly pandemic, 3M earned scorn from the economic nationalists in the White House.

When Trump signed the executive order implementing the Defense Production Act on April 3, he issued a blistering statement accusing “unscrupulous brokers, distributors, and other intermediaries” of operating like “wartime profiteers” simply for selling goods to buyers in other countries. “This conduct denies our country and our people the materials they need to win the war against the virus,” Trump said. Though the formal statement did not mention 3M specifically, Trump was less diplomatic on Twitter. “We hit 3M hard today,” he wrote in a follow-up tweet, as if the company’s Minnesota headquarters were a newly discovered terrorist training ground. “[They] will have a big price to pay!”

What was 3M’s alleged crime against America? Daring to sell face masks to distributors in Canada.

Set aside the belligerence of the president’s remarks, and there is an intuitive appeal to what he’s arguing: America is facing a pandemic, the thinking goes, and we can’t afford to let go of necessary supplies—not even to a close ally like Canada. It’s every nation for itself. Shouldn’t Americans have those masks instead?

But 3M didn’t stand for the president’s shaming. In a statement, the company noted that in order to meet Americans’ needs it was importing more masks than ever from its production facilities in China. “Ceasing all export of respirators produced in the United States would likely cause other countries to retaliate and do the same, as some have already done,” 3M said. “If that were to occur, the net number of respirators being made available to the United States would actually decrease.”

The knockout blow was 3M’s revelation that its American mask production facilities rely on a special wood pulp imported from—yes—Canada. It was an incident that perfectly captured the myopia of Trump’s anti-trade agenda.”

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“in 2019, the U.S. imported more than $6 billion worth of PPE from around the world. If everyone followed the logic of “every country for itself,” America would end up with a net loss of equipment totaling nearly $5 billion. This year, the gap would probably be even larger, as production everywhere has increased in response to the pandemic.”

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“As a practical matter, it is obvious that the United States would be less capable of responding to the immediate COVID-19 crisis if it stopped trading with the rest of the world. “Re-shoring to America does not imply supply chain resilience,” Bown says. “In a pandemic, excessive reliance on anyone (including yourself) is bad.””

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“The Swiss medical supply outfit Hamilton Medical, for example, ramped up production by 50 percent in response to the outbreak in Europe. But then the company hit a snag. A key component of its ventilators came from Romania, a member of the European Union. Because the E.U. had imposed export restrictions on medical equipment and component parts, Hamilton Medical’s suppliers could no longer ship their wares to Switzerland, which is not an E.U. member.”

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“”We shouldn’t have supply chains. We should have them all in the United States,” Trump said in that same May 14 interview, spelling it out for all to hear. This has never been solely about strategically countering a competitor’s rise or trying to shift supply chains away from a potentially hostile communist country. It’s about autarky, or at least about detaching America from the global trading systems that have helped lift much of the world out of poverty.

That’s not a recipe for prosperity at home. It makes no more sense than suggesting that Ohio would prosper if it decided tomorrow to stop trading with the other 49 states.”

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“As the virus abates, the world will probably reconsider the approach it has taken toward China. If there are individual items for which America is heavily dependent on that country—particular medicines, perhaps—then manufacturers should look to further diversify supply chains. The federal government could encourage that behavior by lowering tariffs for imports from countries that compete with China to produce medical gear and pharmaceuticals. Pursuing nativist “buy American” policies or other forms of protectionism is neither the only solution nor the best one.

But the benefits of free trade and global economic integration created by decades of peaceful cooperation between nations should not be reconsidered. Taxing imports weakened America in advance of the pandemic. Raising barriers to trade made it more difficult to combat COVID-19 once the crisis hit. Nationalism will leave the world sicker and poorer.

Despite all that evidence to the contrary, Hawley, Trump, Navarro, and others seek to use the coronavirus as a cudgel to smash the system of global trade. They would replace it with an alternative that leaves America less free, less prosperous, and less capable of handling the next crisis.”