Author Topic: Decoupling from China  (Read 653 times)

Crafty_Dog

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Decoupling from China
« on: April 28, 2020, 06:05:17 PM »
Relying on Foreign Drugs Is Dangerous
Generics are often made in India, with ingredients from China. Time to diversify the supply chain..
By Scott W. Atlas and H.R. McMaster
April 28, 2020 1:07 pm ET
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Pills move through a sorting machine at a pharmaceutical plant in Andhra Pradesh, India.
PHOTO: SARA HYLTON/BLOOMBERG
Health security is critical to national security. The Covid-19 pandemic is a moment to re-evaluate U.S. dependence on China for pharmaceutical ingredients and to solidify the pharmaceutical supply chain in advance of proliferating threats.

Americans filled the equivalent of 5.8 billion 30-day prescriptions in 2018. That doesn’t count the hundreds of millions of vaccinations administered annually. In 2019 the Food and Drug Administration estimated that 40% of finished medications and 80% of active pharmaceutical ingredients were manufactured overseas, mainly in China and India.

While U.S. pharmaceutical companies may preserve redundancy in their sources for patented drugs, the generic drug business, which accounts for more than 90% of all U.S. prescriptions, prioritizes low cost over supply-chain resiliency. Most generics, including antibiotics, are imported from India—and India imports some 70% of its active ingredients from China. America needs to understand and diversify sources of supply, as well as maintain a strategic reserve of antibiotics and the key drugs for the most prevalent serious diseases.

Beyond scale and complexity, details on drug manufacturing are opaque and complex. The Food and Drug Administration requires country-of-origin markings, but the U.S. Court of Appeals for the Federal Circuit ruled in February that processing ingredients into tablets in the U.S. is enough to constitute “manufacturing.” A drug made into tablets in the U.S. with active ingredients from India may list only the U.S. as “principal place of business” for FDA purposes. Labeling should be straightforward, but not at the sacrifice of security.

Protecting the drug supply also requires guarding against poor-quality and counterfeit medications, a repeated problem of medications from China in particular. Although the FDA conducts 3,500 inspections of generic plants a year, additional measures are necessary. More than half of FDA inspections are conducted on foreign manufacturers, but only a small minority are done unannounced in China and India. The U.S. government should require far greater on-site access and increase the funding and staff to implement that policy. It is also time to stop viewing the reimportation of drugs as a potential solution without serious downsides.

A strategy to diminish supply-chain risk must also take account of China’s dependence on U.S. drugs. The U.S. is the world’s predominant source of pharmaceutical innovation, including new cancer drugs, next-generation biopharmaceuticals and tests that determine which patients will benefit from those drugs. China is highly reliant on foreign sources of more-expensive brand-name drugs, which make up 90% of overall drug revenues, exporting only 1.2% of all medications in total value; the U.S. is among the top five exporters.

China is deeply dependent on U.S. cancer drugs in particular. Of those launched world-wide from 2013 to 2017, 51 of 54 were available within two years in the U.S. Only two were available in China. Cancer survival in China is only half that in the U.S. The Communist Party recognizes this problem. Its Healthy China 2030 Plan exempts most drugs from taxes and omits U.S. cancer drugs from tariffs placed on other medications in 2019.

China has emphasized generating new pharma patents. China now exceeds the U.S. in published applications, even though the U.S. still leads by a wide margin in patents that are ultimately granted. Mutual dependence on uninterrupted access to critical drugs, among both allies and adversaries, is a vital part of risk mitigation. Leaders should make clear that the U.S. will never withhold pharmaceuticals from other nations for coercive or punitive purposes, except when faced with hostile actions, such as acts of war.

Perhaps most important, policies must encourage pharma innovation and production. Reducing vulnerability to health threats such as Covid-19 rests on American discovery and competitiveness. While the U.S. leads the world in health-care innovation, this is no reason to be complacent. Congress should strengthen tax incentives for high-risk investments in early stage medtech and life-science companies, including drug development, and target additional incentives to domestic drug manufacturing.

Developing a new drug typically costs more than $2.5 billion and takes more than a decade. Safety standards shouldn’t be compromised, but lengthy clinical trials can be streamlined. The FDA should continue the impressive work it began in 2016 to expedite drug approvals. During 2017 and 2018, yearly new drug approvals increased by around 70% relative to the eight years under the Obama administration. Finally, legislators must avoid the temptation to impose price regulation and limit patent protections. These measures delay drug launches, reduce access and crush research and development.

A secure drug supply chain couldn’t have made up for the Chinese Communist Party’s decision to conceal the threat of Covid-19. But it is essential for mobilizing resources to mitigate the crisis. And the stakes are high, even in normal times. More than 15 million American seniors, or 1 in 3, take five or more medications daily. As the U.S. population ages, society will become even more dependent on drugs indispensable to treating the biggest killers—heart disease, cancer and stroke. Preventing an interruption of the supply of vital medications that save lives and treat diseases, whether during pandemics or in routine care, is a matter of national security.

Dr. Atlas is a physician. Lt. Gen. McMaster, a retired Army officer, served as White House national security adviser, 2017-18. Both are senior fellows at Stanford University’s Hoover Institution.

Crafty_Dog

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WSJ: An allied plan to depend less on China
« Reply #2 on: April 30, 2020, 08:16:51 PM »
An Allied Plan to Depend Less on China
The U.S., Australia, Japan and India already have a forum for coordination.
By Paula J. Dobriansky
April 30, 2020 7:15 pm ET
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Workers in protective suits stand by a container ship in Qingdao, China, March 31.
PHOTO: /ASSOCIATED PRESS
The Covid-19 pandemic is prompting reconsideration of issues that were thought to be settled. One is the wisdom of China as a hub in vital supply chains, a reality driven by cost considerations and the belief that integrating China into the global economy would moderate Beijing’s behavior. Unfortunately, China hasn’t moderated. Beijing has been an unreliable supplier that pressures trading partners.

Roughly three-quarters of American companies report supply-chain disruptions in China, according to a spring survey conducted by the Institute for Supply Management. The Japanese and Australian economies have been severely hurt by China’s lockdown of Hubei province and other supply interruptions. China’s official Xinhua News Agency has threatened to exploit Beijing’s control over medical supply chains as retaliation against U.S. efforts to hold China accountable for its actions during the pandemic.

A re-examination is overdue. Japanese Prime Minister Shinzo Abe has set aside $2.2 billion of Tokyo’s stimulus package to assist Japanese companies in relocating production from China to Southeast Asia. The White House’s Larry Kudlow has suggested that the U.S. government could pay moving costs for U.S. companies that leave China. South Korea appears to be planning to shift several important factories from China to India.

Washington and its partners in Asia should set up new supply chains, restructure trade relations, and start to create an international economic order that is less dependent on China. A multilateral “coalition of the willing” approach would better align trading ties with political and security relationships. It would also help India and nations in Southeast Asia develop more rapidly, becoming stronger U.S. partners.

The Quadrilateral Security Dialogue is an optimal venue. Established by Prime Minister Abe in 2007 to discuss regional security issues, the Quad’s members are Japan, India, Australia and the U.S. In 2017 the Trump administration launched a free and open Indo-Pacific initiative, designed to support U.S. relations with India and offset China’s efforts to establish regional dominance. This further enhanced the importance of the Quad. Secretary of State Mike Pompeo held the first ministerial-level Quad meeting in September.

The Quad’s agenda should be broadened to include economic security, and the group could bring in partners like South Korea, Taiwan and Vietnam, in a “Quad Plus” format. Vietnam would be particularly worthy. U.S.-Vietnamese relations have improved dramatically in the past several years. Hanoi shares U.S. concerns about aggressive Chinese behavior and has been striving to become a leader in global supply-chain management and manufacturing.

The Quad-Plus should drive an agenda that balances economic, political and security imperatives. Rather than seeking to bring all supply chains to the U.S. or reorder all trade, it should focus on the most critical industries. The point would be to pair economic concerns with national-security aims, protect intellectual property, and ensure reliable access to public-health goods—so the U.S. is no longer at the mercy of Beijing for supplies in a pandemic.

Ms. Dobriansky is a senior fellow at Harvard’s Belfer Center. She served as undersecretary of state for global affairs, 2001-09.

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George Schultz: China has Troubles of Its Own
« Reply #3 on: August 30, 2020, 06:40:58 PM »
China Has Troubles of Its Own
Its economic growth is likely to slow dramatically as its population ages and labor force shrinks.
By George P. Shultz
Aug. 26, 2020 11:53 am ET


People are justifiably worried about China. It is wrecking Hong Kong and has lost international trust in the process, which makes it difficult to form future deals with its leadership. China’s divide-and-conquer diplomacy abroad, particularly toward countries smaller than the U.S., is aggressive and immature. Xi Jinping’s statist economic strategy has returned to the Maoist model, putting private enterprise under the thumb of the Communist Party at home and exploiting foreign trade relationships.

I support efforts to call out such outrageous behavior—and to work with partners and allies, who largely agree with us about this—to develop the most effective approach possible to deal with it.

Americans long underestimated China’s progress and its leaders’ ambitions. I reluctantly accept that today’s China is different from the one I once worked with constructively. But as we deal with the present, we should also consider future relations with a country that faces significant emerging internal structural problems. China’s next 20 years are unlikely to repeat its past 20.

Take the labor force. Growth in gross domestic product is a factor of a country’s labor-force and productivity growth. Deng Xiaoping once told me how the ingenuity and hard work of the Chinese people would power huge advances, given market liberalizations. That combined with an explosion in the pool of available workers—a youthful population bulge, plus migration from farms to cities. China’s GDP grew from 11% of the U.S.’s in 1997 to 63% two decades later, in the process lifting hundreds of millions out of abject poverty. But the labor force of Mr. Xi’s China is now declining—in contrast to the steady, immigration-driven growth of the U.S.—and is projected to lose 174 million workers by midcentury. To borrow a phrase from the political economist Nicholas Eberstadt, this will “bound the realm of the possible” in the Chinese economy.

A Shrinking Workforce
China's population by age, in millions, 1950-2100
Source: U.N. World Population Prospects, Adele Hayutin
Under 15
15-64
65+
Total population
1950
1970
1990
2010
2030
2050
2070
2090
0
200
400
600
800
1,000
1,200
1,400
1,600

Meanwhile, the Chinese population over 65 is set to double by 2050 to nearly 400 million. Many will need housing or other public assistance. A heretofore young, productive and risk-taking China budgets for essentially no social safety net. Successive generations of only children—as early as 1990, four-fifths of Shanghainese children had no siblings—have upended the traditional family model of caring for the elderly. And selection of boys during the era of the one-child policy means that now the country has a shortage of women. That doesn’t amount to a no-child policy, but it may produce a no-child result.

China today is no Potemkin Soviet Union—it has trillions of dollars in foreign currency reserves and is deeply integrated into global supply chains. But having consumed more cement in three years than the U.S. did in a century, excess capacity now plagues domestic industries and drives China’s global scramble for outward infrastructure lending.

Serious economic and equity tensions, for example in health and education outcomes, have grown up between urban and rural regions and will drive a need for cross-subsidy. Mr. Xi’s turn toward lending to fill in for slowing growth means local governments and businesses are now swamped in contingent debts, often off-book. An example is high-speed rail. State-owned China Railway took on nearly $1 trillion in debt to build that sprawling network; a few major lines are profitable, but most are not, and interest payments alone exceed operating revenues.

As Americans again debate their own attitudes toward the role of government, we should recall that Ronald Reagan and Margaret Thatcher’s calls for markets and personal freedom as engines of human prosperity were heard in Beijing, too; their insights helped power Deng and Jiang Zemin’s economic ascent. But Mr. Xi’s campaign to stamp out intellectual discourse in China has threatened those reforms—and therefore the country’s economic prospects.

Perhaps sensing the change in trend lines ahead, China has undertaken a slate of narrowly self-interested foreign policies. Having been secretary of state, I can attest to the diplomatic and military costs, expertise and experience that go into developing and maintaining an outward global posture. But with its current approach, I suspect China will struggle to win over durable partners in such efforts. In the process, there is a risk that our two countries stumble into confrontation due to missteps or mutual miscalculation.

China misunderstands us, too. To reduce the temptation for opportunism by anyone, including China, Americans must do better on our own challenges: government debt, stagnating and inequitable educational outcomes in disciplines that will define our future prosperity and security, and the demographic need for a reasonable and consistent immigration policy.

We should quietly develop specific off-ramps from conflict with China—e.g., rules of the road for military ships and aircraft with a communication mechanism to address any incidents; stockpiling of important traded goods such as pharmaceuticals, rare earths or agricultural products—that would improve mutual stability. It is important that leaders here—and leaders there—work from a realistic view of China’s position, our own position, and our collective future.

Mr. Shultz is a distinguished fellow at the Hoover Institution. He was labor secretary, director of the Office of Management and Budget and Treasury secretary under President Nixon and secretary of state under President Reagan.


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Re: Decoupling from China
« Reply #4 on: January 26, 2021, 08:19:30 AM »
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Crafty_Dog

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Decoupling from Chinese chips
« Reply #6 on: July 16, 2021, 11:31:46 AM »