Not Just China: U.S. Reliance on Foreign Medical Supplies is Staggering
With the CCP Virus pandemic having exposed scary domestic shortages of critical medical goods ranging from safety masks to ventilators, along with potential shortages of pharmaceuticals, political leaders across the spectrum are finally regretting having allowed so much output of these products to migrate offshore.
China’s role in global supply chains has understandably sparked much of the alarm, since its government has all but threatened to withhold supplies of medicines whenever it wishes. But all told, at least 38 countries (including the 27-member European Union) have curbed exports of anti-pandemic products at some point since the CCP Virus began dominating headlines. So potential foreign chokeholds in the nation’s health care-related supply chains appear global in scope. The federal government’s best data make clear just how widespread the problem has become, and how steadily it’s been growing.
The figures come from the government’s statistics on industry-by-industry manufacturing output and on exports and imports. (The output data can be accessed through databases created by the Census Bureau for its Annual Survey of Manufactures that are located at this link. The trade numbers can be retrieved at an interactive database maintained by the U.S. International Trade Commission that’s located at this link.)
Put together, they reveal how big a share of the American markets for drugs, medical devices, and protective gear is controlled by goods made overseas. The big takeaway is that the nation could be in big enough trouble if supply disruptions were to occur in normal times (say, due to natural disasters in manufacturing centers abroad). During a high-mortality pandemic like the CCP Virus, these levels of foreign dependency are high enough to guarantee significant numbers of needless deaths.
These statistics aren’t problem-free. Principally, because the manufacturing output figures are so granular, and therefore take so long to compile, import penetration rates for these (and other manufactures) can be calculated only through 2016. Yet the more timely import numbers can provide a reasonable indication of whether vulnerabilities are worsening or shrinking. At the same time, the government’s main trade data aren’t nearly as detailed as the production numbers. As a result, it’s not possible to know the percentage of, say, safety masks used in the United States that are produced abroad. But it’s easy to come up with this number for the category in which masks (and other protective gear) are grouped—surgical appliances and supplies.
And in fact, the import penetration trends for these products exemplify the nation’s health care security weaknesses. In 2002—a good baseline, since that’s the first year China was a member of the World Trade Organization—imports overall accounted for 16.7 percent of all surgical appliances and supplies used in the United States (measured by value, not numbers of masks or pairs of gloves). During the first full year of the Great Recession, 2008, this share totaled 28.08 percent.
Notably, these imports from China were a tiny 1.5 percent in 2002, and had actually dropped to 0.49 percent by 2008. By 2016, they accounted for a seemingly modest 6.54 percent of American consumption. But here’s where another weakness in the data emerges: they say nothing about the origin of the materials, parts, and components of the final goods.
Keeping this qualification in mind, overall, 32.41 percent of surgical appliances and supplies were imported from other countries by 2011, according to these figures. In 2016, that number reached 41.81 percent of a $33.71 billion U.S. market. It may well be higher these days, as between then and last year, U.S. overseas purchases jumped by more than 29 percent. (Interestingly, in light of domestic shortages, U.S. exports in appliances and supplies actually rose by more than 13 percent during this period!)
Ventilators, sadly, have been in the news, too; they and related products like oxygen tents and bronchoscopes and inhalators and suction equipment are found in a big goods category called surgical and medical instruments. In 2002, imports from all corners of the world represented 22.04 percent of American consumption. By 2016, this figure stood at 35.91 percent of a $37.5 billion national market, and over the next three years, imports grew nearly 31 percent. (Exports expanded at a relatively slow 11.84 percent.)
Again, the China figures are small beans—the import penetration rate for 2016 was a mere 2.35 percent. But these products often contain lots of electronics parts, and half the world’s printed circuit boards, for example, are made in the People’s Republic. In other words, lots of existing global surge capacity throughout the sector is ultimately controlled by Beijing.
Thanks to the work of researchers like the Hastings Center’s Rosemary Gibson and independent journalist Katherine Eban, heavy and sometimes exclusive U.S. reliance on China for the chemical ingredients of numerous medicines has now become a major federal government concern. Indeed, the Food and Drug Administration is keeping an especially close eye on the availability of no fewer than 20 pharmaceutical products that use Chinese raw materials. (Unfortunately, the FDA won’t say what they are, which calls for some Freedom of Information Act requests, pronto.)
But the import penetration figures make clear that supply disruptions could also originate elsewhere. Between 2002 and 2016, drugs produced overseas more than doubled their share of America’s consumption (which stood at nearly $200 billion three years ago), from 17.23 percent to 38.51 percent. As of 2019, moreover, U.S. drugs imports were 20.34 percent higher than in 2016.
The main foreign suppliers to the American pharmaceuticals market as of last year look encouragingly diversified and encouragingly friendly. For example, Ireland was number one, with 22.15 percent of such shipments, followed by Switzerland with 14.05 percent. But third and fourth, with 8.87 percent and 8.39 percent of imports, were Germany and India, respectively, both of which have limited or embargoed their medical exports this year. And number five, at 7.38 percent, was Italy—whose current CCP Virus devastation could easily bring about export restrictions.
Nor is this pattern restricted to pharmaceuticals. Last year, America’s leading foreign supplier of surgical and medical instruments (the ventilators category) was Mexico, which sold U.S. customers 28.58 percent of the $17.62 billion of total imports. But export-curber Germany was number three, at 9.43 percent, and China was sixth, at 6.93 percent.
For surgical appliances and supplies (the masks and protective gear category), Ireland topped the 2019 foreign supplier list, selling the United States 24.09 percent of its $18.21 billion of total imports. But China was second, at 15.29 percent, and in third place, at 9.68 percent, stood Malaysia, which banned mask exports on March 20.
Purely domestic policy steps, like mandating more stockpiling or new recycling and re-use strategies, undoubtedly can add to national medical products supplies. But even these general import penetration figures, along with the shortage reports that keep pouring in, make clear that enduring national health care security can’t be restored without a major ramping up of domestic output. And since export-heavy economies like China’s and Germany’s will undoubtedly work overtime to keep their American health care customers—including with all manner of predatory economic practices—it’s similarly clear that big, lasting U.S. departures from standard free trade policies will be unavoidable.
Alan Tonelson is the founder of RealityChek, a public policy blog focusing on economics and national security, and the author of The Race to the Bottom.