The Chinese should have never been making drugs for Americans.
As the novel coronavirus has swept the earth, nations have been left scrambling to find, and even hoard, the medical tools needed to fight the deadly disease.
For a period of days last week, India looked set to ban the export of hydroxychloroquine, an unproven but promising treatment for COVID-19. Protective equipment producers 3M and Honeywell have alleged that the Chinese government has prohibited them from exporting their products. Much of Europe has closed its nominally open border to the flow of masks and other vital medical equipment, while the EU’s lack of support for Italy has the country’s prime minister warning the crisis could mean the union’s failure.
Such defensiveness is a common feature of pandemics—during the 1976 swine flu scare, the United States refused to share vaccines, even with its close ally Canada. Nonetheless, this every-nation-for-itself moment has taken many by surprise, including American leaders now struggling to source vital resources. To Sen. Marco Rubio (R., Fla.), this surprise is an ideological failure—a belief that free trade and cosmopolitanism had so whittled away the nation-state that individual countries would not pursue their self-interest in a time of crisis.
Since Donald Trump swept into the White House, the wisdom of international interdependency has been under fire in Washington. The coronavirus crisis has prompted increasing scrutiny of America’s dependence on China in particular. But for Rubio, the issue is bigger than just China: As he told the Washington Free Beacon in an interview, it cuts to the very heart of how we understand political economy.
“I think the fundamental question is, are there certain things that a country should be able to do for itself, especially in a time of conflict or emergency?” Rubio said. “And the answer is yes.”
Thus far in the coronavirus crisis, leaders abroad and at home have focused on how much of the world’s medical supply chain runs through China. Sen. Tom Cotton (R., Ark.) has offered a bill to limit the purchase of Chinese-made drug ingredients; the Japanese government earmarked ¥243.5 billion (about $2.2 billion) of its bailout package to help businesses leave the PRC.
Rubio, however, is thinking bigger. As early as the end of February, he detailed a proposal to require drug-makers to label the source of their ingredients, mandate that federal purchasers buy American-made drugs, and offer tax breaks to companies that produce pharmaceuticals in the United States. Parts of that proposal made it into a bill Rubio introduced in mid-March, cosponsored by Democratic heavies, including Sens. Elizabeth Warren (Mass.) and Tim Kaine (Va.).
For Rubio, the goal of the bill is more than just taking leverage away from the Chinese Communist Party. It is about starting to unravel what he sees as one of the major misconceptions of the post-Cold War era—the idea that globalization will erode away the particular interests of nations.
“I think one of the great flaws of the last 20, 30 years is the belief that we have reached the point where countries could be heavily interdependent on one another for things critical to their international security and that somehow that would never be impacted,” Rubio said. “That in essence, nation-states would not come into play in a time of conflict or in a time of emergency.”
This thinking, he argued, underscored the opening of America’s trade relationship with China in 2000. At the time, Rubio said, “It was assumed that capitalism was going to change China, as opposed to China changing capitalism”—in fact, he argued, the opposite has happened.
China’s accession to the World Trade Organization ignited what economists have labeled the “China Shock,” a mass offshoring of U.S. manufacturing to the nation where wages were lower and environmental regulation lighter. Pharmaceuticals were no exception: The World Bank estimated in 2009 that wages in China were 8 percent of U.S. wages for pharmaceutical manufacturers.
Today, while much medical innovation still happens in the United States and Europe, China is responsible for the production of many of the generic drugs Americans consume, as well as an estimated 40 percent of the world’s “active pharmaceutical ingredients” for finished drugs. Among pharma imports, China is responsible for 95 percent of ibuprofen, 70 percent of acetaminophen, and 40 to 45 percent of penicillin. It also makes an estimated 40 percent of imported medical devices. To Rubio, this dependency spells danger.
“When the region in China that’s most responsible for pharmaceuticals shuts down because of a pandemic, you’re going to have a supply chain disruption because of pharmaceuticals,” he said. “What about, God forbid, there’s some contingency where China wants to invade Taiwan and we stand up and defend them, and so they say, ‘Okay, we’ll cut you off’? All of a sudden, they’ve got tremendous leverage on us.”
While China is central to Rubio’s thinking, he sees the same risks throughout the world—dependency on untrustworthy countries for goods vital to national security could leave the United States struggling during a crisis, either military or infectious in nature.
This line of thinking, a push toward autarky for strategically essential resources, is part of a larger reemphasizing of Rubio’s post-2016 rhetoric, which has grown increasingly inspired by Catholic social teaching’s vision of what he has labeled “common good capitalism.” Critics of Rubio have, in turn, accused him of sympathy for socialism—a criticism at which he blanches.
“There is no one that can lecture me about socialism. I live in a community of people that fled socialism,” Rubio said. “I believe that free enterprise and capitalism is the greatest economic model in the world, and it’s the one we should follow. But capitalism will always reach the most efficient allocation of resources and capital. Sometimes the most efficient allocation is not in our national interest.”
This is why, Rubio said, government has a role to play, exercising “industrial policy” to change “cost curves” so that some pharmaceutical manufacturing returns to the United States. Tax incentives, purchasing priorities, and more careful trade dependence only on “free-world” nations are all part of his long-term goal of reducing the risk that comes with free trade.
Such proposals may be hard for some of Rubio’s Republican colleagues—always skeptical of government management of the economy—to swallow. As such, free trade with China marks another point of simmering dispute in the Republican Party which, in the wake of the coronavirus crisis, is likely to boil over.