Why Trump administration should say goodbye to ‘Buy America’

It’s not often that Joe Biden agrees with President Trump. But the former vice president found common ground with his presumptive opponent this month when he announced he would outline a plan to bring medical manufacturing back to the United States, something the president has long endorsed.

This isn’t the first time political opponents have come together to support “Buy America” plans. Late last month, Sens. Marco Rubio, Florida Republican, and Elizabeth Warren, Massachusetts Democrat, introduced several bills designed to increase domestic production of drugs and other essential health products.

These bills reflect a growing fear that America’s dependence on foreign-made pharmaceutical ingredients poses a national security threat. But those fears are unfounded. Global supply chains hardly put America at risk. On the contrary, they keep the country healthy and prosperous.

The president’s “Buy America” plan would go even farther than congressional proposals. It would require the Departments of Health and Human Services, Defense and Veterans Affairs to purchase vaccines, pharmaceutical ingredients and more from American suppliers. Proponents argue the global COVID-19 lockdown proves the need to break America’s reliance on foreign suppliers, particularly China.

But the United States doesn’t rely heavily on China for essential medical supplies. Just 13% of the facilities that produce active pharmaceutical ingredients (API) for the United States are Chinese. Twice as many API facilities are in the European Union.

More important, relying on global supply chains has myriad benefits. For instance, manufacturing APIs in countries with lower labor costs and greater access to raw materials is much cheaper than doing so domestically. Manufacturing APIs in India can cut costs for American firms by up to 40%. Consumers share in those savings by paying lower prices than they would if the goods were manufactured domestically.

Global supply chains also help American manufacturers prevent drug shortages. If a crisis shuts down API production in Germany, American firms can turn to producers in India or Ireland. Relying exclusively on domestic providers would increase the odds that a slowdown in production would lead to a drug shortage.

Dismantling global supply chains wouldn’t make sense in any circumstance. But rushing a “Buy America” order through today would immediately compromise public health.

At present, only 28% of facilities that produce APIs needed for American-made drugs are located in the United States. The “Buy America” order would force domestic manufacturers to start producing 100% of necessary APIs almost overnight.

That simply isn’t feasible. Building a single pharmaceutical plant can take over a decade and cost more than $2 billion. No matter how hard they tried, it would take years for companies to build up a domestic supply chain. As a result, “Buy America” plans would lead to the very drug shortages they mean to prevent.

“Buy America” orders show the dangers of stifling free and fair global commerce with government diktats. Rather than pushing for more of these laws, policymakers would do well to eliminate those already on the books. Repealing every law that requires including domestic components in finished products would add a net 300,000 private-sector jobs and contribute $22 billion to the economy, according to a Heritage Foundation analysis.

No amount of bipartisan support would make “Buy America” a smart policy. Let’s hope Congress and the Trump administration realize as much — and change course before exacerbating the public health and economic crises we’re already facing.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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