Op-Ed by Carol King, UK Correspondent
President Trump is constantly under fire for his tough stance towards China, and hassled that getting tough on China will damage the U.S. economy, however in actuality, the U.S. economy has thrived in the face of global stagnation. It is China whose growth has stalled. Moreover, since Bill Clinton’s erroneous 1993 decision to disconnect U.S. human rights stance from trade, the Chinese Communist Party has used propaganda to hide its authoritarianism and repression of its people.
At the same time, China has abused joint partnerships between U.S. and Chinese firms, and stolen both intellectual property and technological know-how. China has also aggressively protected their companies from competition through subsides and export tax rebates to encourage companies to export their products. This has created an unhealthy reliance on cheap Chinese produced products, which is very detrimental to U.S. interests.
Initial results of the Trump policy of using tariffs and trade deal re-negotiations have demonstrated their effectiveness and set the U.S. economy on a more productive future path. This is made particularly clear when we take a look at the dire consequences of over-reliance on Chinese goods.
One point hammered home since the emergence of Covid-19 in Wuhan, is how America’s health is literally in the hands of Chinese pharmaceutical producers. Indeed, since the 1990’s America has lost manufacturing capability and control of the supply of essential medicines and their key ingredients, posing a high threat to the future health of the American people and economy. Medicines they rely on are being made in China where regulations are lax or not enforced, and documents falsified. A nation’s supply chain is a vital component of national security. Without a secure supply chain how secure is the nation?
The largest influence China has in this domain is making key ingredients used for prescription drugs and over the counter medicines sold in America. This is important because patients overwhelmingly put trust in their doctors and the medicines prescribed. As the CEO of Hovione, a Portugal based pharmaceutical company pointed out, “if China stopped exporting ingredients, within months the world’s pharmacies would be pretty empty.” Surgeries would need to be cancelled, treatments halted or rationed, and infections would likely spread.
In the case of penicillin for example, China is the main supplier of penicillin’s key ingredients. The U.S. does not make its own penicillin anymore. Medicines including penicillin manufactured in India, Canada or Europe are made with active ingredients from China. We can illustrate how China might use this leverage by considering what happened when China stopped shipments of rare earth metals to Japan in 2010 until Japan would release the captain of a Chinese fishing trawler that collided with Japanese coastguards in the East China Sea. While consumers can tolerate a delay in car production due to difficulties in sourcing the required rare earth metals, the supply chain of medicines is time sensitive.
A supply chain is not the sole issue either, as illustrated by cases of people who have died after ingesting tainted products from China. One such case, is the wife and son of Leroy Hubley. They died after an allergic reaction to contaminated Heparin – a blood thinning drug.
In the contaminated Heparin case, the FDA found that Changzhou SPL, a Chinese subsidiary of Scientific Protein Laboratories, was the source of the contaminated Heparin. Further congressional investigations found that the contaminant, over-sulfated chondroitin sulfate, cost $9 a pound compared with $900 a pound for Heparin, and attempts to find the original source of the contamination was stopped by the Chinese authorities.
Dogged investigators revealed that when Heparin is made in China, they boil pigs intestines then process them into the crude Heparin which is then sold to Chinese companies like Changzhou SPL. U.S. companies buy this active ingredient. In 2006, blue-ear disease, a respiratory like virus, decimated China’s pig population, so when the price of pigs escalated, companies looked for a cheaper source of pig intestines. Some got them from poor rural areas of China where there was no quality controls. Others created an inauthentic substitute that ultimately ended up shipping to the U.S. importers. An, Illinois based company, Baxter Healthcare Corporation, who bought Chinese ingredients, were appalled to realize that one of their products was used in a deliberate scheme by a Chinese company “to adulterate a life-saving medication”. U.S. Federal officials found that contaminated Heparin had shipped to 11 countries: Australia, Canada, China, Denmark, France, Italy, Japan, The Netherlands, New Zealand, Germany and the U.S. Although the total number of people harmed globally was never reported, Germany cited several, and the U.S. linked 81. Chinese officials denied its companies were responsible.
In addition, if you question the origin of a U.S. medicine from a global drug giant, the standard reply of their customer service representatives is “we are a global company so have sites all over the world, and source ingredients from all over the world”. Yet American dependence on China for active drug ingredients is so rampant that in FiercePharma, a pharmaceutical industry newsletter, they stated “Western drug makers know oversight of Chinese ingredient manufacturing is insufficient to snuff out substandard producers, but that has not deterred companies from buying them anyway.”
This concentration of the global supply in China makes it vulnerable to interruption, either by accident, by circumstance, or on purpose. If an emergent need for supply of an essential ingredient occurs, the U.S. will need to wait alongside all the other countries relying on China. In the case of a public health crisis, China would likely keep and stockpile medicines for use by its own citizens first, before considering the welfare of other countries. A recent article in the Economic Times of India, posits that a deterioration in India-China relations could trigger China to withhold supplies of vital components in essential medicines.
Currently, U.S. labeling requirements have made it easier to hide the country of origin now that the FDA requires the label include the name and place of the business, so a U.S. company that distributes a drug made in China can state the United States as its principal place of business. Not surprisingly public confidence in Chinese produced medicines is low and not a detail that drug companies are eager to highlight. According to a 2010 Hart Research/POS opinion poll, only 6% of American’s are confident that medicines made in China are safe.
Non-medical products have also demonstrated risks to the health of U.S. citizens. One such product is Chinese drywall. In this scandal, hundreds of U.S. homeowners alleged that contaminated drywall made in Chinese factories and bought by U.S. house builders released toxic levels of chemical pollutants like sulfur. Prior to 2005, drywall imports to the U.S. from China were practically none, but since 2006 more than 550 million pounds were imported and used to build more than 60,000 homes. This drywall was then linked to inexplicable corrosion in air conditioner coils as well as ill-health in the homeowners.
Numerous lawsuits were filed against the Chinese companies, who eventually agreed to settle. The settlement resolved multi-district litigation that included thousands of individual and class action lawsuits filed on behalf of homeowners who said their properties were damaged by the defendants’ drywall products. According to the cases, the gypsum in the drywall reacted with other components of the building material and released noxious sulfuric compounds that damaged occupants’ health and their homes, illustrating another case of the U.S. using inferior and ultimately harmful Chinese products.
A final example concerns Chinese produced pet food laced with melamine which caused renal disease and death in thousands of dogs and cats in the U.S. and around the world. It took a massive recall of more than 150 brands of pet food to halt the illnesses multiplying.
After the recall, Kurt Gallagher, director of communications and export development at the Pet Food Institute, the industry came up with a test to check for melamine. “Now that such a test has been developed, it is possible to defend against melamine in protein products,” he said. A $24 million settlement of 100 class action suits that sprang from the recall in the United States and Canada paid eligible pet owners 100 percent of their documented economic damages, or up to $900 of undocumented damages.
Wetpet Food —in particular, meat chunks in gravy— was at the center of the recall. The melamine was mixed with wheat gluten, which helps form the meaty shapes.
To illustrate the problematic supply chain, we can look at U.S. pet food producer, Menu Foods, who acquired its wheat gluten from ChemNutra Inc. of Las Vegas. ChemNutra had received tainted imports from China and sold the product on to pet food manufacturers. The company and its owners, along with two Chinese companies and their top executives, were indicted by a federal grand jury in 2009 and pleaded guilty for their role.
As a result of the melamine disaster, Menu Foods cut its business with China to a minimum. “We’re down to a few chemicals, like vitamins, that there’s nowhere else but China to buy from” said Rick Shields, Menu Foods executive vice president of technical services. He admitted that the company may end up spending more for ingredients as a result, but the decision of companies such as Menu Foods to dissociate from China was a boon for domestic suppliers such as MGP Ingredients, Inc. According to Steve Pickman, vice president of corporate relations of MGP in Kansas, “since the melamine scare, we have experienced increased demand for wheat gluten produced in the U.S., and, as a result, our production levels have increased.”
President Trump’s hard line on trade with China is triggering the movement to rejig U.S. production and re-route supply chains to be more U.S. centered. As an example, for North American businesses and labor, the most significant benefit of the USMCA is that it continues NAFTA in a manner that provides an alternative to Asian manufacturing of goods for the U.S. market. Simultaneously, the phase one deal with China and the continuation of tariffs means U.S. investment in China has dropped dramatically and investment in Southeast Asia has shifted. Companies are calculating the total cost of production before they make their future moves.
U.S. Presidential candidate, Joe Biden, who says the U.S. has nothing to worry about in terms of Chinese competition, might need to reconsider his evidence before heading into a debate with President Trump. Particularly for essential commodities like medicines, the unprecedented China quarantine since January has shuttered up to 80% of all Chinese factories and created a huge demand within China for all kinds of medical products. It is too early to tell how much the delivery of key pharmaceuticals and essential active drug ingredients will be affected. Still, reports have already begun to indicate delivery problems for hospitals in the U.S., Europe and elsewhere.
For future security, the Trump China policy is right.
Carol King received a first class BA (honors) in History and Politics from Stirling University, along with an exceptional commendation for a study on US public opinion and Foreign Policy. She also completed a year of study at University of London before taking up a Graduate Proctor Fellowship at Princeton University. She further completed a MPhil in American Politics at Dundee University. Aspiring to be a writer/commentator on American politics, she now writes for UncoverDC.
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