Rethinking Trade - Season 1 Episode 1: COVID-19: Bad Trade Rules Have Weakened Our Response

Trade expert Lori Wallach breaks down how corporate-led globalization has fueled shortages in our medical supply-chains and limited our ability to fight against coronavirus.

Transcribed by Kenya Juarez

RYAN HARVEY: Welcome to Rethinking Trade, where we aim to educate and mobilize folks around a new vision for trade that prioritizes the needs of working people and the planet over those of multinational corporations. I am Ryan, and I am joined by Lori Wallach, Lori is a long-time fighter for economic justice, she is among the leading experts on trade policy in the United States and she is the director of Public Citizen’s Global Trade Watch. How’s it going Lori?

LORI WALLACH: Hello!

HARVEY: I am sure you’re getting the same question that many of us are asking: How is it come to be that we are in this situation where the world’s largest economy doesn’t seem to have even the basic medical supplies like masks or respirators that we need in this time of extreme crisis?

WALLACH: Unfortunately, it’s actually a problem we have made for ourselves. This is not an act of God like the virus, this is actually hyper globalization, something a lot of people have fought, so I use the word “we” advisedly. Our current system of too much globalization promoted by decades of corporate-rigged trade agreements has made it much harder for us to limit the damage of this crisis, or to respond to it in a way that maximizes the chances for people to stay healthy and frankly our economy is taking a bigger hit because of this attenuated supply chains and the way we are too reliant on globalized production. 

HARVEY: Lori what does it mean when economists on TV talk about the supply chains being too brittle or too long? Or use terms like “sole-source”? What does this stuff mean?

WALLACH: “Too long” is a euphemism for us having outsourced our domestic manufacturing capacity, in the last 20 years since the China World Trade Organization Agreement, since NAFTA, we have lost more than 5 million of our manufacturing jobs, that’s about a quarter of them in 20 years. We have seen 60,000 manufacturing facilities closed and this wasn’t just a matter of greedy companies looking to pay workers less, but our trade agreements actually included provisions that incentivize outsourcing production to low-wage countries. If you look back at the big trade fight of the 2000s and 1990s NAFTA, the China permanent normal trade relations fight in 2000, what happened was exactly what opponents of those trade policies feared. 

So, too long means for instance, for the N95 masks that are essential for healthcare workers to stay safe, a lot of them are made in China and it would normally take 65 days from the time an order is put in to have that product delivered in the US, because it has to be made there, that has to be packaged, typically on a ship by ocean and has to go through customs. So, 65 days to get something urgently needed, we just don’t make enough domestically. 

Brittle means it’s too easy to break a supply chain, supply chain just means the way that different inputs and parts that we need to make something or for that matter a supply chain being it all comes from one place, it's too easy for some pieces to come apart. So, for instance just one part in one country is no longer being produced because for instance China had the coronavirus crisis earlier and shut down a lot of factories and here's an example that is very concrete. The company that makes Purell hand sanitizer, its sources a particular spring that makes the stuff squirt out in its dispensers in China. They chose as it was the cheapest place to have it made, you could have made it in the US. It was one source that got all those springs from, so when those Rings were not being produced at the same volume they could make the Purell but they didn’t have the piece to make the Purell container, so people could get a final usable bottle of Purell. When you look for instance at what’s brittle, you look back when even in 2003, when the SARS epidemic hit, China accounted for about 4% of global output of goods at that point and now it's over four times as much, some people say 20% at least 16% at the low end. So that means, whatever is happening in China  in January, when the pandemic first hit there, affects the entire world, as far as what we even can produce here, because these supply chains were so brittle we’re relying on stuff that's made some place else’s. 

And sole source means all the productions is in one place, China often but not exclusively, so when there's a problem there's no redundancy, and again this is not a surprise, we saw this on the SARS epidemic, 17 years ago when a particular kind of computer chip was not being made in Malaysia, when Malaysia was hard hit by SARS, and a bunch of production and manufacturing all around the world shut down because without that one particular part that was only being produced there it couldn’t go on. Sole source is in part because of the decisions companies have made to cut costs, so lay off people in other countries that used to make those things and it’s not just all trade, because also an anti-trusted monopoly of corporate concentration issues. And right now there’s one really clean example of that, it’s kind of scary the medical supply chain, so there’s been an epidemic of big guys buying up all around the world, smaller manufacturers, of you know, everything ventilators masks, etc. A lot of them are companies that are incorporated in the US or in Europe a lot of them have their production in China, but the thing is when they buy up the competition they are number one, trying to get rid of the competition of the prices, but also means there’s no redundant manufacturing, because how they are making their profits go up is if they used to be free factories that made something, they buy the competitor shut down the 2 competing factories, maybe they make the supply line to make the new brand, that they purchased when they bought the company they shut down, maybe they add some workers, but now it’s all been produced in one place, even it’s being produced in different names of brands these big companies brought up. That is a really serious problem even though it's not the sole source under our current globalized production system is way too concentrated. Here is one example, the masks everyone now is looking for, not the fancy ones, not the n95, so stuff we should just all have when we go out and about for essential stuff.

Before this crisis like in December, if you put December dates China made 50%, one country 50% of the supply and not surprisingly, when China had the crisis hit first, they stopped exporting this stuff. As of January, 50% of the supply was simply shut down, they are only starting to begin to share what they can produce but in January China also bought up the supply worldwide, they bought up 56 million units. To put this in perspective, China was able at that point to produce, having 50% of global capacity, they could do 10 million per day. And they bought another 56 million, they then basically made production of masks mandatory, the government just instructed companies, so they have increased their production 12 times. They are now making 115 million masks a day, but China has only started with very limited scale exporting any of it.  You know it's not just Chinese-owned companies, there's a Canadian firm: Medicare that is in Shanghai and as of last week there are newspaper stories that they were being allowed to export things that they made because the government basically said if any medical supply is being made here it is being kept here. 

The absence of masks, you can’t buy one for love or money in the US right now, is both because they're not making enough of them domestically and when there is a big lag in demand, you can expect the country that can make them to hold onto them to be accountable to their own people, and that is something is happening around the world. There’s been a lot of hoopla about “oh my goodness, countries are holding onto these supplies, they are banning exports to medical goods,” that is something Germany and France have done, Korea, Taiwan, India it's being attacked as if it’s some horrible criminal trade violation but if you think about it practically, you think of what Germany is doing, they make a lot of ventilators there; Sweden (the big ventilator companies are from Sweden, other ones the US and Germany) and the ventilators they ultimately send to Italy waited 12 hours because under their law you basically have to do a needs task, so you apply normally what they just exported but there were  temporary emergency COVID measures, we have to basically tell the equivalent of the centers to disease control, say:” Hey we want to export “x” number of  ventilators to Italy, can we have an authorization?” That agencies check to make sure that there isn’t immediate demand in Germany and then they approve it and the ventilators cross the door.

That is more or less democrat accountability of a government being responsive to the needs of their own people. The hysteria is misdirected as if it's like a trade violation, the problem is we don't have enough demand, it's not like Germany was saying: “We’re going to stay on these until Italy is desperate and willing to pay two times as much.'' We have demands in the world for let’s say100 ventilators and right now, world capacity is 60 ventilators, and in part that is because all of this consolidation and removal of excess capacity, not excess as it turns out. And we're trying to gear up to make up the difference but if it’s 60 ventilators available and a hundred of them are needed, and you are a country that makes the ventilators, it's not really a shock that you keep at 5 or whatever it is that you need before you send out the ones that others want. So, I think all of this is that brutal lesson this crisis, I certainly why a continental size country like the United States with the natural resources to be able to manufacture anything without having to rely on these attenuated brittle supply chains, should not have gotten its manufacturing capacity and looking forward it needs to learn from this lesson and start to bring back capacity for certain essential goods home.

Obviously that is a super important thing as we’re seeing for resilience, to be able to take care of core needs, but it has some great benefits, in the 5 million manufacturing workers who are a chunk of the 60 plus percent of Americans  who don’t have college degrees largely, who lost good paying jobs, could put their skills to a job that pays the middle-class wage which would have a corollary benefit of fighting income inequality, and it would make us much safer and more resilient in the face of this kind of a medical crisis or other crises.

HARVEY: And are those changes going to happen? Or what needs to happen to bring those kinds of changes about in your opinion?

WALLACH: That’s part of what we’re going to be thinking about and talking with everybody about on Rethinking Trade and need lots of folks thinking and best input, but what I will say is there are two things that are happening: 

One- yes, a lot of people who cheered on, profited from or just ignored the US manufacturing capacity are waking up to the perils, and  I can’t tell you how many people  who in the past said “Why are you so worried about this trade stuff?” Are emailing me and Facebook messaging me saying “Oh my Lord, I get it now” But that is not enough to make the change in policy, we’re all going to have to fight for it and we'll be sharing a lot about what that's going to look like because the corporations that have reaped the windfall profits of this current untenable ultra globalized system are doubling now. 

If you think about the concept of crisis capitalism- there’s a crisis, let’s see what kinds of outrageous things we can grab as companies that we never would have gotten away with if people were paying attention- they're trying to get more and more and you know they’re right now about to get a waiver of all of the tariffs, not on medical supplies but on everything, which is to say wedding dresses and designer clothes, pickup trucks, claiming that somehow that’s going to help deal with the crisis or that’s somehow going to help the economy. The White House is considering doing this, which of course can totally conflicts with Trump’s policy, and even worse it’s going to get the industry that now remain on the manufacturing capacity, the one that have any tariffs, textiles and autos, which are the very ones now trying to retool to make the ventilators and the masks. The textile companies have tooled up for masks, the auto companies are trying to make ventilators. And you know, it’s an outrageous thing to even be considering that but at the same time near the corporations are doing a big PR attack on how “The tariffs are in place to discipline against China’s trade violations, they're making it impossible to get medical supplies.” And I think the one that I wanted to end with, which is maybe the only competent thing that this administration has done in the face of this crisis, where everything else they’ve done has made it worse, from ignoring the crisis  to then downplaying on the crisis, to then not preparing for months, then to not controlling production to get the stuff we need, such as protection for our medical workers or now that there is some production on imports, not distributing it, all of that is wrong it’s a disaster.

The one good thing they have done is the US trade representative’s office a month ago went with a fine tooth comb through the trade schedules and got rid of all penalty tariffs and on any medical products and when they say medical products I've looked at the list, it’s really broad. So that is the only competent response yet, to listen to television news, read the newspaper and all the screaming about it, you’d think there were 200% tariffs on all these goods. Folks, the problem is not that we have protectionism on our trade front, the problem is we have not protected our basic needs and our manufacturing capacity, we're not talking about high tariffs on everything, what we're talking about is having a plan and some policies that make sure that we actually can make the things or get the things we need in a crisis like this.

HARVEY: Rethinking Trade is produced by Public Citizen’s Global Trade Watch, where we don’t just talk about trade, we fight to change it. Visit rethinktrade.org today to get involved in our campaigns and help us fight for global economic justice.