Breaking China’s Medical Supply Monopoly. Rebuilding Ours.
The United States entered the year buoyed by the best economy in our lifetime, with more Americans earning a paycheck than ever before, historically low unemployment, rising incomes, and flourishing GDP. The country was feeling good — great, even.
With the economy on such solid footing, individuals and businesses alike had the confidence to expand their interests and investments in projects and developments not just for today, but for tomorrow’s success. In the beginning of the year, Congress was celebrating the passage of a historic trade deal with Canada and Mexico, the United States was standing up for democracy in Hong Kong, and House Republicans were rolling out an exciting plan to revive industrial America while lowering global emissions.
Not many were aware that simultaneously circulating in the background for weeks was a highly transmissible respiratory disease eager to infect millions of unsuspecting humans.
I.
But we now know that a handful of people were aware of this threat. This information was deliberately hidden from the public at the most critical time by the Communist Party of China — a government obsessed with control and not at all interested in international rules of law.
As we fight the virus, we are also fighting to get the truth from China. Given the answer is in the hands of a government whose power rests on secrecy and survives on coverups and censorship, the world might never know.
Here is an abbreviated version of what we do know, thanks to research from the House Committee on Foreign Affairs:
- The earliest known case of what is now COVID-19 was a patient who felt symptoms on December 10, 2019.
- By December 27, Chinese health authorities were told by Zhang Jixian, a doctor from Hubei Provincial Hospital of Integrated Chinese and Western Medicine, that a new strand of coronavirus was causing an illness in roughly 180 people.
- Chinese doctors began to realize around this time that the virus could spread from human-to-human contact, something Chinese officials would publicly deny for weeks.
- In the following days, the Chinese government not only ordered institutions to stop publishing information related to the illness, but also “ordered labs to transfer any samples they had to designated testing institutions, or to destroy them.”
- Less than a month later, a man in his 30s who had traveled from Wuhan would be diagnosed with novel coronavirus in Washington state, one day after Chinese President Xi Jinping warned the global community of a likely pandemic.
- That warning came six days after he and Chinese government officials had already privately determined that threat. By then, thousands of people had already been infected and were continuing to travel around the world.
Throughout this time, the voices of those who issued early warnings were habitually silenced. To this day, China continues to alter its data and underreport the extent to which its country is suffering, creating a shroud of doubt about the true state of China’s crisis. This is all not to mention the confusion over the origin of the disease itself (something Chinese officials have also lied about).
U.S. intelligence officials are now investigating the possibility that an accident at a Chinese biological laboratory in Wuhan might have released the virus to the world, and as was recently reported, the safety of these labs have been in question for years.
II.
Now, new policies instituted this month in China are causing a massive backlog of personal protective equipment (PPE) ready to be shipped to the U.S. This critical gear is sitting in warehouses across China, according to a Wall Street Journal report, and a Shanghai official signaled to conglomerate 3M “that lifting restrictions on distribution of the company’s masks would require instructions from Beijing.”
The Chinese government might excuse these actions for quality control, but what was its reasoning a few months ago, before the rest of the world even heard about this disease?
While the Chinese government was going out of its way to downplay the coronavirus threat, it was simultaneously nationalizing the manufacturing facilities of multinationals that produce PPE in China in a clear effort to ensure they had sufficient access to PPE for themselves. Various Chinese entities around the world aggressively sourced PPE to send back to China as well, causing shortages in and at the expense of other countries.
Executives from 3M and fellow conglomerate Honeywell told U.S. officials that in January, the Chinese government prohibited exports of critical PPE such as N95 respirators, masks, gloves, and other equipment, according to a report from the New York Post.
“China paid the manufacturers their standard wholesale rates, but prohibited the vital items from being sold to anyone else,” according to the report. Official data shows China was also importing as much PPE into the country as possible at this time.
It is clear that what was happening inside China did not match the story it was telling the rest of the world, and perhaps this intent to deceive and conceal is related to the Chinese government’s decision to consistently ignore offers of support from the Centers for Disease Control and Prevention (CDC) and the World Health Organization (WHO) for more than a month over the January to February period.
China’s failure to communicate to the world the seriousness of the disease was enough to enrage Americans. But its ability to limit our fight against the disease and sow panic along the way demands we reimagine this relationship going forward.
III.
As former White House national security adviser H.R. McMaster writes in his forthcoming book, we have to look no further than the tactics China has always employed to strengthen its world standing.
One example is the Belt and Road Initiative, which “has created a common pattern of economic clientelism. Beijing first offers countries loans from Chinese banks for large-scale infrastructure projects. Once the countries are in debt, the party forces their leaders to align with China’s foreign-policy agenda and the goal of displacing the influence of the United States and its key partners. Although Chinese leaders often depict these deals as win-win, most of them have just one real winner,” McMaster writes.
Similar tactics have and will undoubtedly be used as China works to emerge from this pandemic as the sole winner.
American CEOs with a multinational presence have conferred with me that in its bid to be the global supplier of its 5G network, China is holding PPE hostage unless recipient countries agree to use Huawei as its 5G network provider.
This script isn’t new; China did the same thing to Germany with auto parts, and spared no nuance.
“If Germany were to make a decision that led to Huawei’s exclusion from the German market, there will be consequences,” Wu Ken, China’s ambassador to Germany said late last year, according to a New York Times report. “The Chinese government will not stand idly by.”
This is a dangerous place to be. Secretary of State Mike Pompeo has similarly warned that the current crisis is reason to rethink doing business with Huawei. What will stop China from replicating these transactions with life-saving medications and their ingredients?
Watching officials of the Communist Party of China both mistakenly cause, then attempt to solve, a global health crisis reveals and reinforces two critically important reflection points for the United States of America: China must be held accountable for causing the avoidable deaths of hundreds of thousands of innocent people, and the U.S. must act now to structurally regain control of necessary supply chains, like the medical supply chain, to reduce dependence on other countries, especially bad actors.
Congress is currently focusing its efforts on immediate relief for American families and businesses. But we will soon need to act on a plan to break China’s medical supply chain monopoly.
IV.
Chinese pharmaceutical companies have supplied more than 90 percent of U.S. antibiotics, vitamin C, ibuprofen and hydrocortisone, plus 70 percent of acetaminophen, and 40 to 45 percent of the widely-used blood thinner heparin. This is not just an economic concern. The COVID-19 episode reinforces that it is also a public health concern.
We must prioritize our PPE stockpile and critical supplies, such as pharmaceuticals, medical supplies, food, and critical minerals, and grow domestic and diverse sourcing so we are less vulnerable when the status quo supply chains fail — like they did within China. The United States should never be so dependent on another country that their economic collapse, closed factories, broken supply chains, and corrupt leadership brings us to our knees with them.
Unfortunately, this is not the birth of a new policy. Experts have been warning for years amidst China’s increasingly ambitious reach for global power that U.S. dependence on China for medicine does and would have catastrophic implications.
President Trump has also been advocating for increased distance between the American and Chinese economy in general for years, and China’s reckless actions are likely to expedite that break-up.
In the face of the crisis, Congress has acted to take care of our country and citizens facing health and economic despair. But we must not limit our sights to staying afloat and returning to the status quo. When we say “we cannot let something like this happen again” or that “we will come out of it stronger,” it means we have to act for tomorrow, not just today.
This pandemic has been referred to as a black swan event — something we couldn’t account for or see coming. But that may be the wrong way to view it. Pandemics have happened before, and they will happen again, as will other high-impact, low-probability events that will require us to be prepared in advance.
So we cannot assume a dangerous pathogen won’t enter our country again or that the current coronavirus won’t reemerge after we deal with this current crisis.
This is what makes China’s negligence and medical supply monopoly a national crisis that Congress must address.
Here are two goals we must achieve:
- Modernizing the strategic national stockpile
- Bringing pharmaceutical manufacturing back to the U.S.
And here are some steps we can take to achieve them.
Modernizing the Strategic National Stockpile
President Trump has said that the shelves were barren in the strategic national stockpile when he came into office and correctly equated it to going into war with empty rifles. In the race to provide critical PPE, there has been a national call to arms for the private sector to scale up production. America is lucky to have committed and patriotic manufacturers ready to answer that call. It’s been our Dunkirk moment. But to get the economy moving again, manufacturers need to get back to making the products they were designed to make. And in the future, the government needs to methodically restock the stockpile and reimagine the management of its inventory.
Current policy bars transfer of supplies out of the stockpile. Meaning if items expire, they go to waste. And worse, they often stay on the shelves. Only the government wouldn’t do something that most anyone who has worked in retail inherently understands: rotate stock. We must give the strategic national stockpile authority to sell items to other federal agencies — who can use them in a timely and needed fashion — and then use the proceeds to replenish. This will keep the shelves full with updated equipment that can be used in a national crisis.
Making sure we don’t keep expired items on the shelves is just the start. The other side of that equation requires streamlined and effective procurement. But in the face of an epidemic, a full stockpile may only buy us time — it isn’t guaranteed to cover everything we may need for however long we may need it. In the face of depleting supplies, the government must have a readily available plan to activate advanced manufacturing capacity for commercially available products. Rather than put out a patriotic RFP, our contingency should allow the government and our private sector to work out and identify ways to seamlessly shift production to critical medical equipment to meet the needs of our people in an emergency.
Our country’s industrial capacity, which organically adapted to fill in the supply chain and production gaps, was on display during this crisis — and thank God. I believe it’s time we prepare for that same capacity in our future planning and coordination.
Bringing Pharmaceutical Manufacturing Back to the U.S.
American manufacturing productivity has increased over the past few years. But our efforts to onshore American jobs and intellectual property must now have a focused attention on medicine and what it takes to make it. Learning the perils of China’s medical supply monopoly, Japan has devoted over $2 billion in an economic stimulus package to move Japanese manufacturers out of China.
For our efforts, we should expand expensing to cover more types of investment for all industries domestically — including pharmaceutical manufacturing, along with tax incentives for companies interested in manufacturing biopharmaceutical products in the U.S. so they can do so.
While mature firms are essential to ramping up manufacturing, it is undoubtedly true that new, innovative companies will be on the cutting edge of responding to this crisis and the next. That means we need to protect and build on the greatest American financial asset: our capital formation system. We must ensure that we maintain a dynamic market system that allows capital to be raised, allocated, and deployed quickly and cheaply. We can do so by increasing the flexibility for crowdfunding and micro-offerings and regulatory simplification for bank lending.
Once committed to coming back, the government needs to implement a bold deregulatory agenda that makes it faster and cheaper to build manufacturing plants.
Currently, it takes 5 to 7 years to build a plant. That’s not even close to acceptable. Our national goal should be to bring that to less than 18 months by streamlining permitting and cutting red tape.
It is time to heed the wisdom of entrepreneur Marc Andressen, and build!
By building, we must go further than assembling. Crafting American products requires American inputs. For medicine, that means taking hold of the supply and production of the strategic ingredients used in production.
China’s medical supply monopoly is driven by the cheap inputs it produces and gets from other countries. It’s a supply chain that tolerates — and even encourages — labor and environmental abuses that exacerbate an unfair global economic advantage. This is unacceptable.
Like we’ve seen with our energy renaissance, America must focus on production of the strategic ingredients for medicine, through domestic sourcing and through trade and foreign policy decisions with friendly nations that treat all parties fairly, unlike the Belt and Road Initiative.
And like the strategic petroleum reserve, we should consider a supply surplus so America is no longer solely dependent on China’s medical supply monopoly for our needs.
Americans are right to feel confused, worried, and overwhelmed by what we have experienced the last several months. We know we cannot get back the mothers, fathers, grandparents, sons, or daughters whom we have lost, but we must work together toward a sense of national purpose to try to fill this hole in our hearts and in the fabric of our nation.
As a member of Congress, I am especially sensitive to the cracks this crisis, as most crises do, has revealed in our readiness and response. In the weeks ahead, there will be several legislative proposals aimed at filling the gaps, and I speak for many in the United States Congress when I say that we will never again leave our nation’s medical fate in the hands of another.
