The grave risks
and dangers in the process of worldwide out-sourcing and so-called globalization of the past 30 years or
so are becoming starkly clear as the ongoing health emergency across China
threatens vital world supply chains from China to the rest of the world. While
much attention is focused on the risks to smartphone components or auto
manufacture via supplies of key parts from China or to the breakdown of oil
deliveries in the last weeks, there is a danger that will soon become
alarmingly clear in terms of global health care system.
If the
forced shutdown of China manufacture continues for many weeks longer, the world, could begin to
experience shortages or lack of vital medicines and medical supplies. The reason is
that over the past two decades much of the production of medicines and medical
supplies such as surgical masks have been outsourced to China or simply made in
China by Chinese companies at far cheaper prices, forcing Western companies out
of business.
Sole
source China
According
to research and US Congressional hearings, something like 80% of present medicines
consumed in the United States are produced in China. This includes
Chinese companies and foreign drug companies that have outsourced their drug
manufacture in joint ventures with Chinese partners. According to Rosemary
Gibson of the Hastings Center bioethics research institute, who authored a book
in 2018 on the theme, the dependency is more than alarming.
Gibson cites medical
newsletters giving the estimate that today some 80% of all pharmaceutical
active ingredients in the USA are made in China.
“It’s not just the ingredients. It’s also the chemical precursors,
the chemical building blocks used to make the active ingredients. We
are dependent on China for the chemical building blocks to make a whole
category of antibiotics… known as cephalosporins. They are used in the United States thousands of times every day
for people with very serious infections.”
The
made in China drugs today include most antibiotics, birth control pills, blood
pressure medicines such as valsartan, blood thinners such as heparin, and
various cancer drugs. It includes such common medicines as penicillin, ascorbic
acid (Vitamin C), and aspirin. The list also includes medications to treat HIV,
Alzheimer’s disease, bipolar disorder, schizophrenia, cancer, depression,
epilepsy, among others. A recent Department of Commerce study found that 97 percent of all antibiotics in the United States
came from China.
Few
of these drugs are labeled “made in China” as drug companies in the USA are not
required to reveal their sourcing. Rosemary Gibson states that the dependency on China for
medicines and other health products is so great that, “…if China shut the door
tomorrow, within a couple of months, hospitals in the United States would cease
to function.” That may not be so far off.
At
the time the outsourcing of US and European drug manufacture to China began no
one could imagine the present health catastrophe growing out of Wuhan in a
matter of days. The massive China quarantine since late January has shut some
75-80% of all Chinese factories and created an unprecedented domestic China
demand for every kind of medical product since the WHO declaration of medical
emergency around the coronavirus or COVID-19 events at the end of January. It
is unclear how badly deliveries of vital pharmaceuticals including essential
antibiotics from China to the USA or Europe or other countries will be affected
though anecdotal reports of hospitals beginning to experience delivery problems
are surfacing. Even the idea to turn to India, another major global pharmaceutical
supplier, only finds that most Indian manufacturers are dependent on China for
their active drug ingredients.
Clinton
and Outsourcing
The
emergence of China in recent years as the global giant in terms of
pharmaceutical drugs and products is embedded in the Made in China-2025
national plan as one of the ten priority areas for China to gain world
leadership. It
has not been simply a random chance development. This in turn, as
the present COVID-19 crisis makes starkly clear, is a huge vulnerability for
the rest of the world.
How
did such a one-sided situation develop? We have to go back to the role of
the Clinton Presidency in what was then dubbed globalization, the Davos model
of outsourcing any and everything from advanced industrial countries like the
USA or Germany to especially China after 2000.
In May 2000 in one of the most far-reaching
actions of his Presidency, Bill Clinton, with the strong
backing of US multinational companies, succeeded, over the strong objections
and warnings of many trade unions, to get Congressional passage of a permanent
“most-favored nation” trade status for China and US support for China entry
into the World Trade Organization. That gave the green
light to corporate America for a flood of overseas investment in cheaper China
manufacture known as “out-sourcing.” Major US drug makers were among them.
Within two years of the passage of the US free trade agreement with China the
US shut its last penicillin fermentation plant in New York State as a result of
severe Chinese low-price competition.
In 2008, the Chinese government
designated pharmaceutical production as a “high-value-added industry” and
bolstered the industry through subsidies and export tax rebates to encourage
pharmaceutical companies to export their products. By 2019 China had become by
far the world’s largest source for active pharmaceutical ingredients (APIs).
The Achilles Heel of this
globalization and sole dependency for vital medicines on one country now
becomes alarmingly clear as the future of China as a reliable supplier of needed drugs and other
medical supplies has suddenly become a matter of grave concern to the entire
world.