Representatives of Canada and three Latin American nations said on Tuesday that they welcomed US efforts to reduce its dependence on China for pharmaceuticals by building supply chain alternatives with them.
Canadian authorities are working with US counterparts on “regulatory cooperation and flexibility, which is going to limit undue regulatory barriers in pharmaceutical trade”, John Layton, trade counsellor at Ottawa’s US embassy, said at a virtual panel discussion held by the Centre for Strategic and International Studies (CSIS).
Carlos De Costa of Brazil’s Washington embassy noted that Brasilia had set up “special economic zones” to encourage investment in pharmaceutical plants, among others, “without any kind of economic complexity, without any kind of taxes, to supply the whole world”.
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De Costa, the head of the embassy’s economic division, said that US President Joe Biden’s recent proposed economic partnership with Latin America could further bolster such trade.
“I was … impressed by how President Biden at the Summit of the Americas has stressed the importance of our working together for joint prosperity and for resilience in the supply chain,” he said.
Largely aimed at countering China’s growing influence in Latin America, Biden’s “Americas Partnership for Economic Prosperity” is to initially focus on “like-minded partners” that already have trade accords with the US. It also stops short of offering tariff relief and other terms that the administration intends to firm up over time.
Much like Biden’s Indo-Pacific Economic Framework – another initiative that aims to counter China’s economic integration with an entire region – the plan emphasises better coordination on environmental goals and labour standards instead of trade agreements that clear the way for better market access.
The new partnership’s lack of market access elements is not as detrimental, though, since the US already has free-trade agreements with 11 countries in the Americas.
César Remis, head of Mexico’s USMCA Implementation Office, also praised the initiative – despite his president’s absence from the summit last week where Biden announced it. Biden’s decision to leave Cuba, Venezuela and Nicaragua off the guest list prompted Mexican President Andres Manuel Lopez Obrador to pull out.
“There is potential to focus production and consumption of APIs,” he said, referring to active pharmaceutical ingredients, “and this is reflected in the interests of multinational companies like AstraZeneca”, which began producing Covid-19 vaccines in Mexico last year.
Maria Rocío Vargas Carrasquilla, senior investment representative at ProColombia USA, her country’s trade promotion authority, also touted free trade zones and Colombia’s efforts to lure investment to its healthcare and pharmaceutical industries.
“It will be really, really important to see how the economic partnership with Latin America that President Biden announced last week can really turn into concrete actions,” Carrasquilla said.
Shortages of personal protective equipment and other healthcare items in the US when the coronavirus pandemic hit in 2020 fed a Washington rancour toward Beijing that had already made the relationship contentious during the administration of former president Donald Trump.
After a review of American supply-chain vulnerabilities, the Biden administration reported in June 2021 that more than half the manufacturing facilities for dispensary-ready medications registered with the Food and Drug Administration were outside the US. Nearly three-quarters of all registered facilities producing APIs were in foreign jurisdictions, it said – primarily China and India.
Of all FDA-registered generic drug facilities making dispensary-ready medications, 63 per cent were outside the US, and 87 per cent of FDA-registered facilities making APIs used in generic products were overseas, the report found.
And the full extent of the supply-chain vulnerability remains unclear, the report said, so the reliance might even be higher.
Willy Shih, a Harvard Business School professor, told the US-China Economic and Security Review Commission last week that America’s drug supply chain was vulnerable to interruption because about 80 per cent of all fine chemicals come from China.
“We have a much broader dependence on China than I think most people realise” for a wide range of products including medicine, Shih said, which created a potentially “catastrophic effect” if supply lines were severed.
At another conference on Tuesday, this one about security issues, Representative Brad Wenstrup, Republican of Ohio, said he had no idea how vulnerable the US pharmaceutical supply chain was until Covid-19 hit.
“If you’d told me when I served in Iraq as a surgeon that my protective equipment and pharmaceuticals relied on China, I would have told you, how did we get here?” Wenstrup said at a Centre for a New American Security discussion.
“We probably never should have let our nation, especially our military, get in such a vulnerable position. But that’s where we are. So let’s respond to it.”
Wenstrup said that he had introduced legislation to create more incentives to encourage expanded medical manufacturing in the US.
Additionally, he said, US companies needed to dig deep into their supply chains, down to the level of active pharmaceutical ingredients, to assess their vulnerability.
Congressman Jim Himes, Democrat of Connecticut, agreed that the US needed to cut vulnerability but cautioned it was important not to go too far.
“There’s a reason why supply chain extends to all over the world. And that reason is that that’s the way we get lowest cost goods, right?” he said. “It is a point in time where Americans are struggling with inflation. They should just be mindful of that fact.”
Himes also called for a more careful separation between strategic priorities and areas where even adversaries both benefit and can cooperate.
“Areas like drug development, areas of hybridised crops, there’s an awful lot of smart people in China,” he said. “Where we don’t have a national security competition, we shouldn’t wall off the progress of innovations that cure diseases or make for better crop yields.”
Back at the CSIS talk, panellists were enthusiastic about US efforts to bring the medical supply chain closer – but not without caveats.
De Costa, for example, said the FDA should streamline the process by which it certifies Brazilian API producers.
“We already have an API industry here,” he said. “If we could make sure that we connect our industry to the pharmaceutical industry in the US, that would require faster regulatory procedures.”
De Costa also urged Biden to request renewal of its Trade Promotion Authority – also called a “fast track” authority – which sends proposed trade agreements to Congress for an up-or-down vote with no amendments, bypassing lawmakers who might try to block them.
The administration has been reluctant to request this authority, which expired nearly a year ago, since it prefers to focus on trade standards as opposed to access.
Additional reporting by Mark Magnier
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