Perversely, Today Senate Expected to Pass Bill Slashing Tariffs for Hundreds of Chinese Goods Including Those Spotlighted in Supply Chain Review as New Trade Data Show China Trade Deficit Growing Again
FOR IMMEDIATE RELEASE: June 8, 2021
CONTACT: Matt Groch firstname.lastname@example.org (202) 454-5111
WASHINGTON, D.C. – The White House 100-day supply chain review on pharmaceuticals and their ingredients, semiconductors, large capacity batteries and critical minerals and materials’ supply chains published today is an important step towards vital U.S. policy changes needed to rebuild domestic production capacity and diversifying import sources in critical sectors and requires urgent follow through by Congress and several federal agencies.
Paradoxically, a Senate floor vote is expected today on legislation that would slash tariffs on hundreds of Chinese goods, including medicines, for which the White House review has found overreliance on foreign suppliers in general and China in specific.
“Hallelujah that the Biden-Harris administration is prioritizing rebuilding U.S. production capacity and diversification of import sources for critical products like medicines because the COVID-19 crisis showed how decades of hyperglobalization eroded our resilience to the peril of all Americans,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “But what the heck is the Senate doing passing legislation that provides new trade benefits to China that undermine U.S. producers of critical goods and supply chain inputs and increase U.S. vulnerabilities from overreliance on imports in general and sole-source imports from China particular?”
The Senate bill is the revised version of the U.S. Innovation and Competition Act, the “China” bill that includes initiatives to revive American manufacturing to which an expansive trade title was added before Memorial Day after Sen. Mike Crapo (R-ID) threatened to block the bill. The Trade Act of 2021 amendment establishes duty-free entry until 2023 for imports of hundreds of COVID-19 related goods, including medicines, manufactured in China. This policy change would decimate U.S. firms that shifted production lines to make such supplies when U.S. overreliance on Chinese imports led to mass shortages of essential PPE in 2020.
The list of articles covered in the amendment, promoted by Sen. Pat Toomey (R-Penn.), hews to the International Trade Commission’s June 2020 report on COVID-19 related goods. Thus, it covers a wide range of PPE, such as face masks, respirators and aprons, medicines, test kits, and medical equipment, including ventilators. The Trade Act of 2021 also includes a corporate-lobbyist-goodies-packed Miscellaneous Tariffs Bill that eliminates tariffs on pages and pages of finished products and supply chain inputs, including chemicals that could be used in the pharmaceutical supply chain.
The Biden-Harris administration supply chain review report and the Senate floor vote collide on the very day that the U.S. Census Bureau released new trade data revealing a continued increase in the U.S. trade deficit, particularly with respect to China. The overall deficit increase was expected, as U.S. fiscal and monetary policies fuel demand while much of the rest of the world’s consumption trends remain sluggish due to the ongoing COVID-19 pandemic. Notably, the China trade-in-goods deficit is starting to grow. After decreasing for most of 2020, the four-month bilateral trade-in-goods deficit is up by 33.4% compared to 2020, an inflation-adjusted analysis of today’s trade data conducted by Public Citizen shows. Overall, the $284.4 billion trade deficit in the first four months of 2020 is more than 46% higher than the $193.7 billion deficit during the same period in 2020 in inflation-adjusted terms. The four-month deficit is also 37.5% higher compared to 2019.
“After COVID-19 awakened the public to the extreme U.S. supply chain vulnerabilities created by decades of hyperglobalization when they could not obtain critical goods, it’s infuriating that some in Congress insist on junking up legislation intended to counter that problem by doubling down on the very policies that created the overreliance and lack of resilience in our supply chains,” said Wallach.
Background: On February 24, 2021, President Biden signed an executive order directing the Administration to undertake a 100-day review of the supply chains of four key industries: semiconductors, pharmaceuticals and pharmaceutical ingredients, large capacity batteries like those used in EVs, and critical minerals and materials.
Analysis conducted by Public Citizen of key medical and other COVID-19 response goods shows the U.S. has grown even more dependent on imports from China and other nations during the COVID-19 crisis and is highly reliant on imports for certain categories of medicines.
The infographic display of this research shows that decades of hyperglobalization have undermined U.S. resilience against the COVID-19 crisis. Even into late 2020, as infections rose, the U.S. was unable to make or get critical goods people needed with growing shortages of Personal Protective Equipment (PPE). Corporate-rigged trade policies are to blame. These policies have eliminated more than 60,000 U.S. manufacturing facilities over the past 26 years and made it cheaper and less risky to move production overseas, pay workers less and trash the environment.
The infographics here show that:
- When it comes to critical medical goods, the U.S. has grown even more dependent on imports from China and the rest of the world. Data shows that the U.S.-China and U.S.-world deficits in COVID-19 related medical goods increased through June 2020 and did not return to pre-pandemic levels in the fall of 2020.
- The U.S. has a deep reliance on China and India for many categories of medicines, as shown by information about the countries the U.S. imported medicines from in 2019.
- S. exports of masks to the world continued to spike through September 2020. In fact, when domestic demand was highest (between January and April 2020) there was a major increase in U.S. exports of critical medical goods to China.
The COVID-19 pandemic awakened the public to the extreme U.S. supply chain vulnerabilities created by decades of hyperglobalization when they could not obtain critical goods. Yet, some Senators seek to expand the policies that created the overreliance and lack of resilience in U.S. supply chains. On May 27, the Senate voted to add the “Trade Act of 2021” to the U.S. Innovation and Competition Act. Sen. Mike Crapo (R-ID) threatened to block a vote on the China package absent inclusion of terms proposed by Sen. Toomey that guarantees duty-free access to hundreds of COVID-19 related goods, comprising several medicines, manufactured in China until January 2023.
Section 10004 of the text approved by the Senate on May 27 would suspend duties – including those subject to Section 301 tariffs on Chinese products – for “articles required to combat the COVID-19 pandemic” until January 2023. The list of articles is very similar to the one crafted by the International Trade Commission through its report on COVID-19 related goods in June 2020. Thus, it covers a wide range of goods from PPE, such as face masks, respirators and aprons, to medicines to test kits to medical equipment (ventilators and electrocardiographs, for example). Additionally, the amendment opens the floodgates for exclusions of the existing 301 tariffs on Chinese products, among many other policies that would entail tariff cuts.