Free Trade: Recipe for Overcoming Covid-19
Policy Summary
While American-first has been a theme for the Trump administration’s foreign policy, its unintended consequences have certainly restricted the collective response necessary to overcome Covid-19. President Trump continues to use populist rhetoric to convince Americans that the only way to ensure survival in the global arena is to pivot away from the international community, while shielding domestic business and industry from foreign competition.
For the past two years, under Section 301 of the Trade Act of 1974, the Trump Administration has continued to impose higher degrees of tariffs on a wide range of products from abroad. Imports from China, India, Canada, Mexico, and the European Union have been some of the main targets that have ended up in the crosshairs of U.S. trade policy. Products ranging from steel and aluminum to textiles and from electrical components to chemicals are among the valuable global inputs to production needed by U.S. firms to produce globally competitive products. Billions of dollars of these products have fallen under the blanket of tariffs imposed by the Trump Administration ranging from 15–25%, artificially raising the cost of production for many small businesses and manufacturers. Additionally, over $360 billion of Chinese imports have been targeted as well, encompassing more than 60% of U.S. consumer demand from China.
Unfortunately, many of these products incorporated within the president’s protectionist agenda are major components of the healthcare industry, many of which Americans have come to rely on for health, safety, and well-being. Nearly $5 billion of medical necessities from China alone were subjected to U.S. tariffs, accounting for almost 26% of all medical supplies imported by Americans.
To fight against the adversities of this global pandemic, medical professionals have acknowledged the importance of essential consumables such as personal protective equipment, masks, gloves, goggles, hand sanitizer, and medical-wear just to name a few. Additionally, for hospitals and medical facilities to properly treat patients, they should be equipped with necessary durable supplies ranging from respirators to CT systems and patient monitors. In the past, duties on these devices were relatively low, enabling hospitals and medical establishments to stock up on critical care inventory. Prior to the Covid outbreak, Americans were importing over $20 billion of essential medical supplies, which are now subject to higher prices due to heavy trade regulation. Currently, products like pulse oximeters, hand sanitizers, ultrasound and x-ray systems from China are subject to 25% tariffs, while personal protective equipment, goggles, and gloves are levied at 15%.
Back in 2019, medical professionals testified to Congress about the risk tariffs would pose to the healthcare sector by limiting necessary supplies in the likelihood of abnormally high demand resulting from a medical anomaly. Unfortunately, these warnings were disregarded.
Analysis:
The Trump Administration’s trade policy has been predicated on the idea of using one hand to solve a problem that the other hand creates. The president’s protectionist policies have shielded some businesses from foreign competition but has increased the costs of operating for others. Because of the difficulty of protecting one industry without causing harm to another, government ends up subsidizing those who have been adversely affected from the higher costs precipitated by the tariffs. Subsequently this begins the downward spiral of legislation that forces excess challenges on already-burdened taxpayers.
Fighting the effects of Covid-19 will take a mutual unified effort, which underlines the benefits of globalization and free trade. One of the very best ways to protect Americans from the affliction of this pandemic is to allow consumers the advantage of acquiring medical necessities from a global market, rather than limiting supplies from abroad in order to protect concentrated special interests. Because such a wide range of products have fallen under layers of costly trade regulation, it becomes almost impossible for medical manufacturers and suppliers to operate efficiently. While protecting certain participants in the upstream sectors of the market, others in the downstream sectors, who have in the past, depended heavily on selective imports, find themselves absorbing the increased costs of operating. Higher input costs mean fewer output returns. Because several domestic manufacturers are the ones bearing the burden of higher costs associated with tariffs, they have been less incentivized to prioritize the development of critical-care supplies, which exacerbates the shortages associated with global hoarding from other countries who the U.S. has come to rely on.
The driving success behind globalization has been as a result of countries being able to put aside political, social, and religious differences in order to come together to solve a common problem, ultimately promoting both peace and prosperity. Global actors who share collective interests rarely engage in conflict. However, when individual nations begin to deviate from unification, there exists more adversity. The beauty and efficiency of globalization and free trade is evident when we see how different nations have been able to take advantage of specialization and come together to produce globally competitive products like cars, computers, cell-phones, and other devices that the world has become the benefactors of. Supply chains have been the engine of enriched productivity, effectively being the paradigm that has given the international community the collective resources to ensure a higher standard of living.
It is no secret that because of the benefits of globalization and free trade, the quality of life has improved globally and that has shielded not only Americans, but others around the world, from disease and sickness. True, there are large swaths of the global population who unfortunately still live in abject poverty, but globalization and free trade offer the best possibility of alleviating the persistency of deprivation rather than the ideological mindset of the president’s nationalist-isolationist strategy.
Even before the pandemic, regulating demand of medical essentials from abroad through tariffs and quotas has put pressure on healthcare, especially since the baby-boomers are aging and requiring more medical services. It makes no sense to close the country off to the benefits of a global market, while almost ensuring that both patients and medical manufacturers would be restricted to a minimal supply of resources, all in the name of protecting some of the most powerful interests.
If the conditions dictate that a definitive second round of Covid could emerge, policies that force the domestic market into shortages and rationing by artificially limiting medical supplies from abroad should be considered both shortsighted and obtuse.
