What are the implications for the world, China, and the future trajectory of Sino-U.S. trade relations?
By Lorraine Zhu
In March, when New York City became the new global epicenter of Covid-19, my parents back in China anxiously shipped me a package of surgical masks. My NY-bound package has since been stuck in Beijing for a month. On April 30, I received an email from UPS, informing me that all medical exports are facing delays and subject to “tighter quality control.”
As the rest of the world battles the pandemic, China has imposed new restrictions on exports of face masks, test kits, ventilators, and other medical products that are crucial in fighting this global health crisis. On March 31, Chinese customs announced new rules that required additional national certifications on medical exports, regardless of whether the goods have been approved by the U.S. Food and Drug Administration. Later, China relaxed the rule by allowing an industry association to review and approve exports.
According to a spokesman from the Chinese Ministry of Foreign Affairs, the goal is to ensure higher quality standards of its exported medical goods. Indeed, concerns and complaints have arisen over the quality of some of its exports, as China attempts to rewrite the coronavirus narrative and put itself in a positive light by dispatching doctors and medical supplies overseas. Spain, for example, recently rejected a batch of test kits made by a Shenzhen-based biotech company, which reportedly had an accuracy level of only 30%. However, given China’s sheer size as a global supplier of medical goods, accounting for over 40% of the world’s imports of disposable medical equipment, these export restrictions have created a massive shortage of essential medical equipment in other parts of the world. The U.S. Department of State criticized China’s policy for disrupting “established supply chains for medical products just as these products were most needed for the global response to Covid-19.”
Interestingly, while the new export restrictions are predominantly targeted at filtering out unreliable Chinese products, U.S. businesses that specialize in medical equipment also bear the externalities. For instance, Massachusetts-based healthcare equipment manufacturer PerkinElmer had 1.4 million test kits sitting in its Suzhou warehouse, as the company was unable to obtain the required export certification from the Chinese government. Multinational conglomerate 3M faced similar complications from local authorities, preventing it from distributing the N-95 respirators produced in its Chinese plants. In addition, 3M was told by a Shanghai vice mayor that the city depends on 3M’s products “for its Covid-19 prevention efforts and lacks viable alternatives.” Are these restrictions therefore partially meant to serve China’s own strategic interest, or perhaps imposed as a political gesture (recall: Trump tweeted the term “Chinese Virus” on March 16)? One can’t say for sure. But one thing that is for sure is the economic repercussion of export restrictions: A direct result of the distortion of supply against urgent demand is a sellers’ market, in which prices soar as factories become overwhelmed with orders.
China’s medical export restrictions also reflect brewing tensions between the world’s two largest economies, which might even unwind positive progress in earlier U.S.-China trade talks. On January 15, the two countries reached a “Phase One” trade deal, putting a truce to an 18-month trade war. Ever since the coronavirus outbreak in the U.S., the Trump administration has granted tariff reliefs for more than 100 medical items imported from China, including face masks, protective gowns, and sanitizing wipes. With delays and deliberate interventions in Chinese exports of essential medical supplies to the U.S., hostility between both sides seems to have resurfaced, signaling antagonization rather than cooperation amid Covid-19. Looking ahead, the pandemic narrative aligns well with Trump’s protectionist rhetoric on bringing manufacturing jobs back to the U.S., and we are therefore likely to see a comeback of trade barriers especially against China. Meanwhile, the world might also learn its lesson from this pandemic: The current shortage of medical supplies could prompt countries to relocate healthcare-related industries as a strategic move to reduce their dependence on China. □
- Image source
- O’Keeffe, K., Lin, L., & Xiao, E. (2020, April 16). China’s Export Restrictions Strand Medical Goods U.S. Needs to Fight Coronavirus, State Department Says. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/chinas-export-restrictions-strand-medical-goods-u-s-needs-to-fight-coronavirus-state-department-says-11587031203
- Wu, W., & Bermingham, F. (2020, April 4). Coronavirus: China’s new export restrictions on medical supplies are bad for business and the world, insiders say. South China Morning Post. Retrieved from https://www.scmp.com/news/china/diplomacy/article/3078427/coronavirus-chinas-new-export-restrictions-medical-supplies
- Lau, S., & Zhang, P. (2020, March 27). Spanish capital ditches ‘unreliable’ Chinese coronavirus test kits. South China Morning Post. Retrieved from https://www.scmp.com/news/china/society/article/3077169/spanish-capital-ditches-unreliable-chinese-coronavirus-test-kits
- Lin, L. (2020, April 26). China Seeks to Ease Medical Goods Shipment Delays With New Rule. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/china-seeks-to-ease-medical-goods-shipment-delays-with-new-rule-11587910039
- DeBarros, A., & Zumbrun, J. (2020, March 6). U.S. Trade Officials Grant Tariff Relief for Face Masks, Medical Equipment. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/u-s-trade-officials-grant-tariff-relief-for-facemasks-medical-equipment-11583516931?mod=article_inline