We’re Too Dependent on China for Too Many Critical Goods. Especially Medicine.

During the Cold War, the Western alliance came together to create COCOM, the Coordinating Committee for Multilateral Export Controls, an export regime aimed at barring the sale of sensitive military and dual-use technologies to the Soviet bloc. The time has come to build its analog, an alliance committed limiting key strategic imports and exports to and from the People’s Republic of China. The coronavirus that originated in Wuhan, China, is at once a reason and an opportunity to begin a multilateral dialogue aimed at creating a partial trading bloc.

Over the last couple of years, the Washington consensus view on China has shifted 180 degrees. The nation whose transformation lifted hundreds of millions out of poverty and spurred serious calls for examination of a “China model”—authoritarian government married to managed capitalism—is now perceived by most political leaders as a strategic competitor at best, a dangerous enemy at worst. Setting aside the well-documented military challenge, since the Wuhan outbreak, the economic and health threats have come sharply into view.

Consider that Chinese firms are said to supply more than 90 percent of U.S. antibiotics, 70 percent of acetaminophen (that’s Tylenol), and almost half of the anti-coagulant heparin. “Are said to” because we struggle even to gather information on this because of the opacity of the Chinese market and state-dominated record keeping. Some studies suggest up to 80 percent of the basic ingredients in U.S. drugs come from the PRC. China is also the second largest exporter of biologics and the prime source of medical devices per the FDA. In some cases, it appears that India is a prime source of a key import – generics, for example – but that masks the fact that India sources up to 75 percent of its own pharma ingredients from China.

This makes no sense, economically or logically. Most individuals wouldn’t tolerate dependence on a single drug store for a critical, life-saving medication. Why would a nation? Much less dramatic but still potentially important is our dependence on China for some rare earth elements, used in mobile phones among other things. We have an indirect dependence even in technology, where our top firms waste no opportunity to say how much they need to sell to China in order to remain innovative. (This is a new plaint. Seismic innovation in the 1990s didn’t demand sales to the PRC.)

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Comments (17)
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  • We had a chance to wean our country off of China, as well as build up an alliance against its adversarial behavior. It was called the Trans-Pacific Partnership (TPP). It had its flaws, but it could have been perfected under a GOP administration. Instead, our narcissistic adolescent president whined about how “unfair” it was, and how it would be a “disaster”.

  • The market might dictate buying more from US sources if more people understood the true facts:
    many cheap products from China/India are produced by workers under unacceptable and inhumane conditions. Further, the environmental costs to clean water and air are discounted. If these companies were required to pay for cleanup, or at least recycle their short-lived products, the price might be very different. Lastly, the melamine contaminated pet food disaster a decade ago ought to give all of us pause still.

  • Ending American Reliance on China

    Yesterday, Congressman Gallagher and Senator Cotton introduced the Protecting our Pharmaceutical Supply Chain from China Act. The bill takes three significant steps toward decoupling our medical supply chain from China by:

    Preventing the federal government from purchasing pharmaceutical products from China

    Providing economic incentives for manufacturing drugs and medical equipment in the U.S.

    Creating a ‘country of origin’ label on all imported drugs.

    If passed, the bill would not go into effect until 2022 so that we do not weaken America’s ability to combat the current coronavirus pandemic or halt our current supply chains. However, it is a solution to a long-term threat that will live on past this virus.

    Simply Put: The Coronavirus and the Chinese Communist Party’s response has proven that the United States cannot rely on a hostile China to handle the health of American citizens.

  • nobody wants to do the hard, dirty work here anymore. i work for a large supplement manufacturer, we have a dozen decent paying positions open all the time. most people stay a few weeks, then go back to whatever they did before, part-time in retail and gov't assistance for the rest. it's more paperwork and thinking than physical. and nobody wants to do either, it seems.

  • I first saw this problem to its fullest extent 2-3 years ago. It was for me embarrassing that I had not focused on this before. Because, It is not only China that is to blame; it is that we in the West wanted cheap products and income, provided by China. So, now in the crisis, are we willing to make sure that our local sites can produce the relevent medicines, vaccines etc for us? And from home on this issue: Norway fails 100%. I hope that US will succeed 100%

  • Anyone want to live next to a chemical plant? I work in this industry and live in the United States. For America to have its own pharmaceutical supply chain means having as many chemical plants in the United States as we did in the 1960s or the 1980s - do we really really want that?

  • Totally agree, but... how is this accomplished in a free market system? National security is a legitimate reason to impose some top-down economic controls, but I don't see any simple way to force private corporations to diversify their supply chains if the market doesn't dictate it.

    1. They will do it organically, Mr. Korossy, as part of their strengthening of the business continuity plans, and because China is getting more expensive. It would also help if the government lowered trade barriers with countries with low costs of production. The US also has to assist these countries in creating stable institutions so the flow of capital into those countries grows. This is where President Bush's democracy agenda comes into play, but we need good spokespeople as the demagogues will call it "nation-building abroad", as they have been doing since 2003, at least.

  • This is exactly right. It's one thing to outsource our shoes to China, quite another critical health supplies. Congress needs to get serious about reviewing this and keeping some of these key industries at home or in friendly countries. Daniella and Derek, I'm really curious if either of you have details that confirm or deny the seriousness of the claim that Chinese officials threatened to "cut us off" from key medical supplies during this crisis, as Tucker Carlson is running with every night and folks like Marco Rubio and Josh Hawley are now running with as well?

  • I don't see how we can reduce our need for imported goods without radically changing our mindset about consumption. Many people just can't afford well-made domestic goods. Other people who maybe could usually aren't willing to save and invest in longer-lasting and more well-made goods because the cheap version is "good enough." Without shifting over to valuing quality items which may cost more how are we going to bring back manufacturing to the United States and maintain good American blue collar wages for the people who are employed there?

    1. This is maybe a little off-topic from the points you guys bring up about critical infrastructure I admit

      1. This is an excellent point, Nina, and the main cause of the "ills" the populists and demagogues keep bringing up.

      2. Give the drug companies 5 more years of patent protection on their drugs but force them to manufacture critical drugs and vaccines domestically....

      3. I think you are 100% on target. The reason we buy goods from China and other countries is that they are cheaper and we value that over anything else.

        I would, however, argue the quality point. Things that come from overseas are cheaper and in many cases, the quality is just fine. I am wearing a t-shirt right now that is from Nicaragua. I have worn it at least once a week for at least three years. I wash it every time I wear it. I don't know that an American made shirt would be any better.

        I read an article years ago that we should always be building at least one nuclear submarine, even if we don't technically need one for the fleet. The point was that we always need the shipyard and people ready to spin up multiple submarines if needed. The only truly effective way to do that was to keep the production lines going. That may be a bit extreme but it makes the point. There may be things that we need to keep producing in the US, or with very trusted allies, even if we are paying more than we could because it's the safe thing to do.

        This isn't going to happen unless we as a nation prioritize it and get our leaders to push it.

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