On Thursday, President Trump signed an Executive Order (EO) that instructs federal agencies to maximize domestic procurement of essential medicines, medical countermeasures, and critical inputs for medical products, otherwise known as a “Buy American” mandate. Though the president framed his EO as a broadside against China (“[w]e cannot rely on China and other nations across the globe that could one day deny us products in a time of need”) the text of the EO indicates this is much more about the protectionist impulses of the president and his trade advisor, Peter Navarro, than it is about China.
As NTU President Pete Sepp stated, “‘Buy American’ mandates are inefficient and ineffective at any time, but they are particularly risky and counterproductive during a pandemic that has strained both the domestic and global movement of goods.” The EO could have been counterproductive even if limited to China; unfortunately, it is much broader than that.
Section 1 of the EO, stating the policy of the United States, says in part: “[i]t is critical that we reduce our dependence on foreign manufacturers for Essential Medicines, Medical Countermeasures, and Critical Inputs.” This statement sweeps in America’s trade and security allies more than it does China. As NTU Foundation’s Bryan Riley has pointed out before:
According to U.S. International Trade Commission data, China supplied 1.221 percent of U.S. pharmaceutical imports in 2019.
Buy American restrictions could mainly hit U.S. allies, who are the main suppliers of pharmaceutical imports.
The EO adversely impacts our trade relationships with Ireland, Switzerland, Italy, India, and dozens of other partners, and the Administration risks countermeasures from some of those allies that will harm America’s efforts to obtain the supplies necessary to fight COVID-19.
A short phrase in Section 2 (emphasis ours) gives away the true impact of the EO: federal agencies shall “[use] procedures to limit competition to only those Essential Medicines, Medical Countermeasures, and Critical Inputs that are produced in the United States.” Limiting competition is bad for American consumers and taxpayers at any time, but it’s a particularly head-scratching move when applied to medical products during a global pandemic.
Later in Section 2 (again, emphasis ours), the EO instructs the Department of Defense to “restrict the procurement of Essential Medicines, Medical Countermeasures, and Critical Inputs to domestic sources and to reject otherwise acceptable offers of such products from sources” in other countries. Much like the limits on competition outlined above, this phrase accidentally underscores how counterproductive this EO is - offers of essential medicines and medical countermeasures would be “otherwise acceptable” in the fight against COVID-19, but the Administration has decided they are not if they come from outside the United States.
Perhaps one silver lining is an exception outlined in the EO, for if the Order’s provisions “would cause the cost of the procurement to increase by more than 25 percent.” While this will likely limit the harm done by the EO’s “Buy American” mandates, policymakers should ask the Administration why a 10- or 15- or 20-percent increase in costs is acceptable for American taxpayers, especially as the nation racks up historic deficits and debt.
The Administration does ask for the Secretary of Health and Human Services to study “vulnerabilities in the supply chain for Essential Medicines, Medical Countermeasures, and Critical Inputs,” a smart move that may help U.S. policymakers identify where they need to make it more affordable for manufacturers to invest in America. However, this study is timed to be completed months after the “Buy American” mandates are put in place, rendering the study somewhat pointless and moot. It’s like a baseball hitter swinging the bat when the pitcher is still at the beginning of their windup.
The EO may have been framed by the president and in media as an effort to combat China, but the text of the EO indicates this mandate will be far more wide-reaching and painful for American taxpayers. The Administration would be wise to scrap it, and instead pursue pro-growth policies that make it more affordable for medical companies to invest in domestic manufacturing.