Bloomberg has an article discussing a US planning session for a global pandemic, which took place in 2019:
Last October, about 50 national security experts gathered in Washington to role-play a global response to a frightening scenario: a pandemic sparked by a mysterious new coronavirus ravages the world, hitting North Asia, Europe and the U.S. especially hard.
They got many things right, but were wrong about one aspect of the policy response:
One thing it got badly wrong: Those involved — a mix of professors, international-relations theorists, intelligence experts and others — assumed the U.S. would lead the global response. . . .
“Usually, when we see a global crisis like this you would expect there to be more international cooperation, more collaboration,” said Yanzhong Huang, director of the Center for Global Health Studies at Seton Hall University in New Jersey. “That kind of spirit of collaboration I found was shockingly lacking in the current Covid-19 outbreak.”
Nationalists have been taking power all over the world in recent years, and now we discovering one of the costs of that selfish ideology.
READER COMMENTS
E. Harding
Mar 22 2020 at 7:53pm
Sumner, I vehemently agree. The recent crisis has exposed the hollowness of populism, racism, Western cultural chauvinism, populist derision of libertarianism, calls for government handouts, and calls for border control (except as a temporary and pragmatic matter). They have no place in combating the crisis.
The only supposedly “nationalist” governments that have handled the crisis well have been Taiwan and Russia (and Taiwan’s nationalism has only made the crisis worse). Russia’s sound response has not been due to its nationalism, but its understanding of its perilous place in the world and its historically pragmatic center-right leadership. Britain, Brazil, America, Italy, etc. have all flopped at containing the pandemic, Japan has not been nearly as responsive as Taiwan/Hong Kong/Korea and China did not do well in containing it, either. Trump’s horrendous, truly nauseating display of Chinese-style downplaying of the epidemic has been one of the biggest public health disasters in American history.
In these trying times, we don’t need nationalism. We need someone like Moon (or Putin).
Phil H
Mar 22 2020 at 9:04pm
I’m not sure this is fair to the Americans!
It started in China, and China does plenty of the nationalism thing. They first denied it, then didn’t ask for much help.
Since then, when it went international, I think there have been functioning mechanisms of international cooperation. Not the flashy head-of-state summits, but the grind of air traffic negotiations, notifications of quarantine requirements, etc. Not so much global division of labour in producing needed goods, in part because we were working on shutting down shipping, rather than adding new international traffic… I’m sure that could have been done better.
Scott Sumner
Mar 23 2020 at 1:37am
The US government had a CDC person stationed in China to work with the Chinese and find out more about epidemics. We pulled that person out last year. Word is that the administration considers China our enemy, and doesn’t want our scientists working with their scientists. Are these articles false?
TMC
Mar 23 2020 at 12:55pm
Getting false information from our CDC in China (he would have most certainly been fed false information) would have made it more believable. This would have slowed our response time. Our distrust of China served us well in this case. Chalk it up as a win for the nationalists.
Scott Sumner
Mar 23 2020 at 8:03pm
That seems pretty far fetched to me.
Warren Platts
Mar 23 2020 at 12:57pm
Scott, do you seriously think that the Chinese politburo does not consider the United States to be an enemy? Then why are they undergoing the largest military buildup–that started long before Trump came on the scene–in recent history?
Indeed, that the coronavirus might be an escaped bioweapon cannot be ruled out. There are some very strange things about that virus. It is different enough from SARS-1 to form its own clade (a distinct evolutionary lineage). If you apply the standard mutation rate to the measured genetic distance you get a divergence time of about 260 years ago. However, evolution can be sped up through artificial selection. Genetic distance strictly measure the number of mutations, not time of divergence.
The part of virus’ genome of concern is its Receptor Binding Domain (RBD). The virus appears to be supremely well adapted to binding to human ACE2 receptors in lungs, explaining its extreme contagion. This is why the notion that the virus originated from some animal host is problematic. If the virus is well-adapted to humans, that entails it would be maladapted in some other animal host.
The idea that a weakly binding virus evolved within a human population is also problematic. Why then would there be the cluster around the Huanan Seafood Market? And there should be more diverse strains. There are none.
What is surprising is that the virus has found a “solution” to the protein folding problem that standard computer models did not predict based on the amino acid chain coded by the RBD. Thus it would be impossible for a human scientist to predict that this amino acid sequence would bind well to ACE2 receptors.
However, (as described in the recent Nature paper) an intensive artificial selection program involving ferrets as the host (because ferrets have virtually identical ACE2 receptors to humans) and starting with the original SARS-1 virus, could produce the novel coronavirus. That would explain both the unexpected RBD and the genetic distance.
Such a program would involve hundreds of ferrets at a minimum. Normally, such animals, once their usefulness for the experiment is over, they are destroy and cremated.
But what if you were a lab tech at the facility making $5/hr, and you had in your possession a bunch of live ferrets? You might be tempted to sell them to the Huanan Wholesale Seafood market–a sprawling complex covering 2.5 acres. (And it is true that ferrets are sold in Asian wet markets.)
It wouldn’t be the first time. A scientist in Beijing was jailed after he made a million dollars selling used monkeys and lab rats to a wet market there.
Once a group of 8 doctors and scientists formed a private Wechat group figured out that the virus was actually a form of SARS, they were arrested. Well, I guess, if your government is sitting on top of this fantastic new bioweapon, you might want to try to keep it a secret. Of course that cat got out of the bag.
Anyways, if you really feel the need to point fingers in the middle of this crisis, point them where they belong: toward Xi Jinping and his Communist comrades, not Trump. He’s done a pretty good job considering the information available and he hasn’t arrested any scientists.
Jon Murphy
Mar 23 2020 at 6:04pm
Yes, some more great examples of the dangers of nationalism in a crisis. Well done, Platts!
TMC
Mar 24 2020 at 11:06am
Examples of an authoritarian government. Don’t conflate the two.
Mark
Mar 23 2020 at 6:33pm
A virus that is virtually impossible to control, and primarily kills the old and infirm, would be a terrible bioweapon.
Scott Sumner
Mar 23 2020 at 8:06pm
A bioweapon? Seriously? For what purpose?
Yes, there’s a cold war between the US and China right now, and the US is the primary cause of the cold war.
Warren Platts
Mar 24 2020 at 3:57pm
There is no smoking gun, but we ought not to dismiss the possibility out of hand. Let’s not kid ourselves. Of course China has a biological warfare research program. The United States has one; no doubt Russia does too. Iraq used to have one. Moreover, the Wuhan Institute of Virology is the only Bio-Safety Level 4 facility in China. Therefore, the biowarfare research must be ongoing there in Wuhan. How the virus got from the WIV to the “seafood” market 20 miles away may seem puzzling, but not if used lab animals were being sold there.
As to the purpose of a bioweapon, Generals Qiao and Wang explain that clearly in their book Unrestricted Warfare:
Consider for a moment the idea that maybe, just maybe, the virus represents an escaped bioweapon. (It wouldn’t be the first time a dangerous virus escaped from a Chinese lab: at least twice in Beijing, the original SARS-1 escaped twice, but was contained before it could escape into the wild.) That would explain certain of the Chinese government’s actions–and inactions.
First, the bioweapon hypothesis would explain the initial attempts to cover up the episode, including the arrests of the 8 doctors and the order to destroy samples. Once it was clear, however, that there was no hope of containing the virus (that, after all–if it was a bioweapon–was designed to be hyper-contagious), the bioweapon hypothesis would explain the lax attempts to contain the virus within China, and indeed apparent active attempts that on the face of it look like deliberate efforts to spread the virus to other countries. (To my mind, the only difference between those “Hug a Chinese” videos and an Al Quaeda instructional video on how to carry out a proper suicide bombing is that the former is more insidious.)
Economically, such a strategy would make zero sense. If you are poor, it is better to be surrounded by rich neighbors than poor neighbors.
But from an international relations framework, and you are playing Great Game politics and you are aspiring to be the world’s sole, unipolar superpower, such a strategy might be considered rational. Because what counts in power politics is relative power. If the virus were to spread to the ROW and cause just as much–indeed probably more–havoc than was caused in China, China’s relative position would be preserved, and indeed likely enhanced. I think it was Mao who said something to the effect that he did not fear a nuclear war with the United States because if they each lost 300,000,000 people, the USA would be finished, but China would still have a billion people.
Am I being paranoid. I certainly hope so. The enormity of the alternative is too much to contemplate. Then again, we are dealing with a regime that apparently has no problem with locking up 3 million of its citizens for having the wrong religion (and we have certainly seen that movie before).
Jon Murphy
Mar 24 2020 at 4:21pm
Yes, we can. We can apply logic and reasoning and facts. Is it possible that COVID is a bioweapon? Sure. In the same way it’s possible fossils were placed here by Satan to mess with people’s faith: some folks believe it, but the scientific evidence says otherwise.
Nobody nukes their own country and hopes the fallout spreads over their enemies, and yet that’s precisely what you’re proposing China’s doing with COVID: infect their own people, have a massive lockdown, and hope and pray that the US might get infected.
Warren Platts
Mar 25 2020 at 1:05am
Jon, slow down. This is what I wrote, in a nutshell.
IF the novel coronavirus was crafted from the original SARS-1 virus with major gain of function in mind, THEN:
A. The original release must have been accidental (obviously);
B. (Given A) It would have been rational (from a Mearsheimerian offensive realism framework) to ensure (through plausibly deniable inaction and/or deliberate positive action) that the rest of the world also got infected.
Jon Murphy
Mar 25 2020 at 8:25am
Right. I know what you wrote. I am explaining to you why we can dismiss possibilities out of hand when they are illogical, such as COVID being a bioweapon.
Warren Platts
Mar 25 2020 at 6:08pm
Jon, maybe you should reread what you wrote:
For the last time, this is exact the opposite of my argument. I explicitly stated that the release was accidental–as in not intentional.
Furthermore, I stated that–given the devastation being wrought from the accidental release–it would be rational from an offensive realist frame to ensure–not hope and pray–that the US and ROW also got infected.
Your “argument” is a straw man.
Louis Le Marquand
Mar 23 2020 at 4:16am
Nationalism is not a political philosophy which is built up from the moral code of selfishness. Nationalism is built of the idea of altruism i.e. self-sacrifice. The metaphysical unit of reality is consider to be the nation state as a whole and individuals as mere cogs in the collective. It is the duty of the individual – the nationalist day – to sacrifice for the national interest or for society.
there were many instances in Hitlers writings and speeches in which he praised the Aryan, not for any superior intelligence but for his loyalty to the group and a resounding commitment to sacrifice. Hitler repudiated individualism, liberalism and capitalism as a “selfish” bourgeois way of life.
Scott Sumner
Mar 23 2020 at 8:09pm
I think you are mixing up nationalism and patriotism. Hitler didn’t want to help Germans, he wanted to empower certain types of Germans.
TMC
Mar 24 2020 at 11:17am
And you are mixing up nationalism with racism. If Hitler were a true nationalist, Jews would be included in his definition of German, as they had been ‘German’ for since the beginning of Germany as a country.
Jon Murphy
Mar 25 2020 at 11:49am
Well, no. For many nationalists as it exists in real life (so let’s not go down this “no true Scotsman” path), national identity is tied to blood. I, a white male, could go to Japan and have a child born there. That child, white like me, could grow up in Japan and spend his whole life there. But he would never be “Japanese.” (We can see this by the orders that Japanese people return to Japan, regardless of where they were born or for how long, from the Japanese government in WW2).
So, the Jews, regardless of how long they were in Germany, were not German. Likewise, we see many nationalists within the United States stating that some Americans are not “really” Americans since they do not have certain values, or act in certain ways, etc.
Jon Murphy
Mar 23 2020 at 8:32am
Your point is especially obvious when we see Peter Navarro berating other nations for giving us their research and access to their medicines in the midst of all this.
Warren Platts
Mar 23 2020 at 1:27pm
Jon, I guess you must have missed that Xinhua article where they said China could withhold pharmaceutical exports, and thus the United States would be “plunged into the mighty sea of coronavirus.” They make 80% of the prescription drugs consumed in this country. 3M, a nominally American company that makes surgical masks was banned by China from exporting masks back to USA. It is an untenable threat to national security. We might has well have China manufacture our F-35’s for us.
In general, this entire episode is the empirical refutation of the free trade/open borders globalist paradigm. That some people refuse to accept that the pandemic as such a refutation clearly demonstrates that free trade/open borders globalism is not a theory of economics or international relations. It is a mere ideology, an irrefutable religion.
As for the idea that nationalism is the root cause of the pandemic, that is pure psychological projection. Each nation state has to figure out for itself how to proceed. What would an alternative even be like? And of course we are cooperating. French and Australian scientists have already come up with promising therapeutics. We are all sharing information and supplies. The one country that has been the least cooperative is China.
Jon Murphy
Mar 23 2020 at 4:56pm
An excellent example of the dangers of nationalism! I am reminded of Smith’s story of the man and the Chinese Earthquake in TMS.
Jon Murphy
Mar 23 2020 at 5:03pm
Citation needed. The US Department of Commerce, the US imports just 25% of the drugs it uses, and half of those come from just 4 countries: Ireland, Germany, Switzerland, and Isreal.
Warren Platts
Mar 24 2020 at 5:05am
“Gary Cohn, then chief economic advisor to President Trump, argued against a trade war with China by invoking a Department of Commerce study that found that 97 percent of all antibiotics in the United States came from China. ‘If you’re the Chinese and you want to really just destroy us, just stop sending us antibiotics,’ he said.”
https://www.cfr.org/blog/us-dependence-pharmaceutical-products-china
Jon Murphy
Mar 24 2020 at 10:14am
Mr Platts:
Your citation does not support your claim. To say a majority of some subindustry produced overseas means that the the percentage of the overall industry is produced overseas is incorrect. It is vitally important that you understand this point.
If you do not understand this point, now is the time to ask.
Warren Platts
Mar 24 2020 at 4:03pm
Jon, you must be conflating quantity (Q) with value (Q x P). Yes, the USA makes superexpensive designer drugs. But that does not change the fact that of the quantity of pharmaceuticals consumed withing the USA, 80% of them come from China, either directly or indirectly.
Jon Murphy
Mar 24 2020 at 4:18pm
Ok, you do not understand (we can see you do not understand given the irrelevant reference you made to quantity versus value).
You are making the fallacy of composition. You are assuming that just because some subset of the whole has characteristic X, that it must also apply for the overall whole.
A simple example will show the fallacy:
Approximately 30% of potato output comes from Idaho. It does not logically follow that 30% of US agricultural output comes from Idaho. In fact, only about 1.9% of US agricultural output comes from Idaho.
I still cannot find where that 80% number comes from that you’re quoting. It’s not in your citation, but if we proceed from the part you did quote, all we can say is 97% of antibiotics come from China. It does not logically follow that “of the quantity of pharmaceuticals consumed withing [sic] the USA, 80% of them come from China, either directly or indirectly.” It would be akin to saying that 30% of the food eaten in the US comes from Idaho, when we can see that figure is around 1.9%.
Another example:
100% of planets in the Solar System revolve around the Sun. it is illogical to claim, then, that 100% of all planets in the Galaxy revolve around the Sun. And yet, that is the same logic you employ here.
Again, applying actual data to the question, we see that only about 2.2% of US pharmaceutical imports come from China (source: US Department of Commerce).
Warren Platts
Mar 25 2020 at 1:44am
Jon, your reference, as I suspected, is all values, not quantities. Look at the column headings. All those numbers, they are all dollar figures.
Anyways, here is the relevant quote from the Council on Foreign Relations piece:
Yes, I can see it also says India. However, India gets 80% of its API’s from China, per Rosemary Gibson’s testimony before Congress. Keep in mind we are talking about generics here–almost all of which are made abroad–and not just prescription drugs, but also things like aspirin, ibuprofen, and vitamin C. 90% of the medicine (quantity-wise) Americans consume are generics, 90% of which are manufactured overseas, mostly in China. You all are welcome to your opinions, of course, but I don’t think that is a good idea for the reasons outlined in the CFR piece, and Rosemary Gibson’s testimony before Congress.
Jon Murphy
Mar 25 2020 at 10:41am
Right. And I am saying that is irrelevant. Besides, adding up quantities alone doesn’t make sense (see, for example, any opening chapters in a stats textbook).
Right. And again, I am saying you are misinterpreting the numbers through the fallacy of composition.
Again, citation needed. All you’ve given me are mere assertions and fallacious interpretations. I need something more concrete.
Jon Murphy
Mar 25 2020 at 12:00pm
Actually, no need for citation. I found it (Association of Affordable Medicines). Once again, we see you are mistaken in your interpretation. 90% of prescription consumption is generics, however, generics only represent 22% of all drug consumption in the US. (though I still want to see a citation for your claim that 90% of them are made in China as other reports, including your earlier citation, do not support your mere assertion).
Dylan
Mar 25 2020 at 4:02pm
Jon,
I’m not sure what you’re arguing about here? OTC drugs are generic, in the sense that they aren’t covered by patent. I don’t follow that portion of the industry very well, but given the economics, I’d be pretty surprised if much of those drugs were manufactured in the U.S. (packaging and fit/fill maybe).
And, for our purposes here, volume (in terms of doses) seems to be the most relevant metric. I disagree with the conclusions that Warren draws, but his data appears mostly correct.
Jon Murphy
Mar 25 2020 at 4:23pm
That’s where the disagreement lies. The data are correct. Platts’ conclusions are absurd. He asserts that “They [China] make 80% of the prescription drugs consumed in this country.” This conclusion does not follow from the evidence that China makes a lot of the inputs for some parts of the drug market. When we look at the actual data, we see China’s factor in the US pharmaceutical market is relatively small.
Jon Murphy
Mar 25 2020 at 4:26pm
Actually, “disagreement” isn’t the right word; it implies a difference of opinion. Mr. Platts is flat out wrong.
Warren Platts
Mar 25 2020 at 6:41pm
Jon, you are seriously confused. Again, you are conflating quantity (Q) with value (Q X P). Here is a quote from the Association for Accessible Medicines:
Do you see? 89% of the quantity of prescription drugs consumed is generic (the vast majority of which are manufactured overseas) but the value (measured in terms of dollars) is only 26% of all dollars spent on prescriptions.
And you completely mangled what Dylan was trying to say. He agreed with my premise–that roughly 80% of the quantity of medicince consumed in the USA is imported (no one knows the exact pp), but that he disagreed with my conclusion–that we should strive to reshore generic medicine manufacturing back to USA (or Puerto Rico where most of it used to take place).
Then you write:
And here, once again, you are conflating quantity and value. When someone takes a medicine, what they are after are the Active Pharmaceutical Ingredient (API). So China can export 100% of the API for medicine X to USA, and then a company puts it in gel capsules, packages it with a brand name, and delivers it to a store that then sells it for 4X the cost of the API. And then you turn around try to say that only 25% of medicine X came from China! lol!
Jon Murphy
Mar 25 2020 at 7:32pm
That is an incoherent interpretation of that quote. Your denominator and numerator are not in the same terms. I believe you made that mistake, but not the scientists quoted in the report.
Again, no. That is a factually incorrect interpretation of the data. The literal meaning of the quote from my report proves that. It’s not a P v Q issue (which, again, is irrelevant). It’s a subset verses set issue. See my analogy of potatoes and the solar system.
This is real basic stuff.
Dylan
Mar 25 2020 at 8:14pm
I do want to disagree also with your characterization of drug development here, the API is to a drug as steel is to a car, important for sure, but not at all the finished product. The generic drug manufacturers are doing a lot more than sticking it into a gel capsule and packaging it (in fact, many times that step is actually done somewhere else by a different company).
Warren Platts
Mar 26 2020 at 12:40pm
@Dylan: Yes, I agree I vastly oversimplified the drug manufacturing process. Most Americans have no clue how anything is manufactured. It is all magic to them.
However, without the API, a drug is a mere placebo. And when people state that 80% of our medicine comes from China, they are referring specifically to quantity of APIs, and not to any downstream value added.
I have a question for you since you know the industry. If the United States should not attempt to reshore production of generic pharmaceuticals: What would be your policy recommendation?
Dylan
Mar 24 2020 at 5:16pm
Jon,
There’s a Council for Foreign Affairs piece that says about 80% of API, the building blocks for small molecule drugs, comes from China. I believe that India is the largest importer of drugs by quantity, but they get almost all of the API these days from China.
Jon Murphy
Mar 24 2020 at 6:54pm
Yes, that is true, but note that is very different than saying “They make 80% of the prescription drugs consumed in this country.”
Dylan
Mar 25 2020 at 4:56pm
It is different, but the point still stands that if China cut off the API for drug manufacturers, the rest of the world isn’t in a position to be able to quickly make up the difference.
And this isn’t just some hypothetical issue. note today that India banned the export of hydroxychloroquine and chloroquine, as they are looking to stockpile for domestic use if it turns out to be effective.
Jon Murphy
Mar 25 2020 at 5:00pm
Actually, that’s not necessarily the case. As prices rise, quantity supplied increases. Other sellers would step in to make up the loss in supply from China.
We saw this in 2010 when China tried to embargo rare earth shipments to Japan. Despite being Japan’s primary supplier, as soon as the price went up, Japan started producing their own rare earths and importing from other places.
The Law of Supply and Demand are ironclad. Not even China can overwhelm them.
Dylan
Mar 25 2020 at 8:09pm
Yes, other suppliers can ramp up, but they can’t do so overnight. Much of the productive capacity just isn’t there anymore. Sure, with time, supply and demand would cause more capacity in other places to come online, but I honestly don’t know how long that would take. As a point of reference, I did some work for an Indian pharmaceutical company, that also happened to be one of the largest remaining API producers in India, due to some problems in one factory, they were required to move API production to a different location and the process took ~6 months, during which time there were worldwide shortages of some drugs where they were the sole supplier of API.
Like I said, I disagree with Warren that we should try to reshore drug manufacturing, but that doesn’t mean I dismiss out of hand the problems with having so much production concentrated in one place. We’ve seen what can happen to supply chains if production has to shut down even for totally benign reasons.
Warren Platts
Mar 26 2020 at 12:02am
@Dylan: Exactly: we don’t have 6 months or 3 months to wait around for new factories to be constructed when the number of infections are doubling every 3 days. Moreover, unless there are guaranteed permanent protections in place, there is no incentive for a U.S. company to build a new factory knowing they will be subject in the future to predatory pricing financed CCP subsidies. Thus, there should be fat tariffs on imported pharmaceuticals, and government agencies like the DOD and VA should be required to purchase Made in USA-only medicines tbqh.
Jon Murphy
Mar 26 2020 at 10:25am
True, but irrelevant. Of course, things take time, but that timeframe is very short (in Japan’s case, it was less than a month. Here in the US with the supply disruptions, it’s been about 2 weeks). And, as we saw above, China’s involvement in the US pharmaceutical market is very small and in highly substitutable products; if they were to cut us off, we’d see fairly small results.
That’s simply not true. The US is one of the largest pharmaceutical manufacturers in the world (I think we’re 2nd overall, behind only Germany). China isn’t even in the Top 10 (I think I saw they’re around 20th). Overall manufacturing, we’re either 1st or 2nd, depending on the measurement. In terms of industrial production, we continue to hit new heights (current recession notwithstanding). Much like Mark Twain, reports of American demise continue to be exaggerated.
Jon Murphy
Mar 26 2020 at 12:24pm
Indeed. They adjust, and they adjust extraordinarily quickly.
In a society where market competition is the norm, then adjusting to changing conditions is the key to survival. Firms and individuals that face competition build robust supply chains and back-up plans. Indeed, one of the features of globalization and market liberalization over the past few decades have been to make supply chains amazingly robust!
Protectionism (or “scarcityism,” as I like to call it because it hinges on the idea that relative scarcity is a sign of wealth rather than relative abundance), on the other hand, makes supply lines fragile. By reducing the number of participants in a market (what Adam Smith refers to as the division of labor and the extent of the marketplace), it reduces the number of back-up plans that firms can have.
Furthermore, as a practical matter, in a protectionist world, adjustment to competition is no longer the norm. Instead, spending scarce resources for protection becomes the norm. This creates a culture not of robustness and adjustment, but of stagnation and lack of innovation.
Warren Platts
Mar 26 2020 at 12:30pm
Jon, you literally have NO CLUE what you are talking about. Your absurd, bizarre claim that “we see that only about 2.2% of US pharmaceutical imports come from China” is an insult to the intelligence of all who read this blog. Rosemary Gibson spent 3 YEARS researching this topic for her latest book China Rx; I’ll take her word over yours any day. Google is your friend. And while you’re at it, look up the difference between quantity and value.
Jon Murphy
Mar 26 2020 at 1:32pm
Mr. Platts-
You are free to believe whatever source you wish. If you wish to choose that book over the Department of Commerce statistics, that is your choice.
But if all you have to offer to the conversation are mere assertions, personal insults, appeals to authority, and grammatically and logically incorrect interpretations, then I’d say we have nothing more to discuss and the lurkers surely find the case for protectionism to be extraordinarily week.
Warren Platts
Mar 26 2020 at 2:16pm
Jon, here is the relevant line from your vaunted Department of Commerce report.
Now, could you please explain how you arrived at your estimate of 2.2% of US pharmaceutical imports coming from China? Because if you are correct, that is an important finding that totally upends the conventional wisdom!
Jon Murphy
Mar 26 2020 at 2:43pm
Uh…the “conventional wisdom” is that China is a small portion of US pharmaceutical imports, so no, I don’t “upend the conventional wisdom.”
Now, how I arrived at the fact of 2.2 percent:
Simple: I took the imports from China for code 40100 ($2,638,742) and divided it by the total number of imports for that category (about $149,090,974). That works out to be 1.8% (the 2.2% was because I used 2018 figures).
You see, that’s how one determines a percentage: they take the amount and divide it by the total.
Note 2.2%<97% (or 80% or whatever number you use. We can see the weakness in your case given the number you use changes every time depending on the story you want to tell).
Warren Platts
Mar 26 2020 at 4:18pm
Alright Jon. Thank you for taking the time to answer my question.
However, as I suspected, and as I now know, you are equivocating between:
(1) “quantity” (Q) of APIs, measured in terms of mass that originate in China–including Chinese APIs that pass through intermediate countries like India, as expressed as a percentage of total U.S. consumption (including domestic production); and
(2) “value” (QxP) measured in terms of dollars of “pharmaceutical preparations” (that includes all extra value added, such as starch fillers, gel capsules, packaging, etc.) that are imported imported directly from China and expressed as percentage of total “pharmaceutical preparations” imports, excluding domestic production.
In other words, your argument is an irrelevant red herring that does not touch Rosemary Gibson’s findings to the slightest degree.
Have a nice day.
Dylan
Mar 26 2020 at 5:58pm
@Jon
Really, you should know better than to do what you’re doing with the import numbers. There’s just a lot wrong with your assumptions.
Supply chains as you know are extremely interconnected. Very little of finished pharmaceutical products come directly from China, and that is what the link from the Commerce department is measuring.
That doesn’t mean that China isn’t (currently) essential in the supply of drugs, it’s just that they take the APIs that they produce, send them to India, where they are turned into drugs, which are then shipped to other places in the world where they are put into packaging, and then shipped to yet other places in the world that handle marketing, etc…
I’d be curious to know about your “quickly” ramping up speculation. One of the issues that has been a problem for a few years is generic drug shortages, for drugs that are not big enough sellers to support multiple manufacturers. If there’s a problem with a plant, production goes down, and it can take months to fix. These are generic drugs, and competitors are free to enter, but they judge that the expense of tooling up to make a drug isn’t worth it, if they will only get a month or two of sales before the original manufacturer fixes their problems. I know that Pierre says shortages require government action, but I think the more conventional understanding includes situations where supply is suddenly quickly curtailed, while demand remains the same or increases.
Then we get to the whole measuring by value or by quantity. Beyond what Warren says, it’s important to note that a big chunk of the drug manufacturing that is still done in the U.S. is for biologic drugs. These are complex to make, so offshoring has been limited. They are also usually very expensive, and treat relatively few people. These are the drugs you get via an infusion, usually in a hospital setting. Last I checked (and this was a number of years ago), biologics were approaching 40% of drug spending by value, but were something like 1 or 2% of prescriptions. That’s great from an economic point of view for the U.S., since the big value add work is being done here, but if you’re concerned about the amount of essential medicines that we make at home, then you’re much more interested in the drugs that millions of people are taking. You’re concerned about the supply of antibiotics. Vaccines. Statins. You’re less concerned about drugs for ultra-orphan diseases that cost $500,000 a year.
As I said, I disagree with Warren’s conclusion. He asked me what my policy recommendation would be, and honestly, I don’t have one. My instincts are that, even with the potential downsides, the benefits to the world from increased trade outweigh the occasional black swan event. I agree with Jon that supplies can be ramped up relatively quickly if they really have to. And I worry that protectionism can end up doing more harm than good, even to the industry it is trying to protect. Look at how bad and outdated our shipping industry is compared to the rest of the world because of the Jones Act.
Still, I expect a little better from you in terms of engaging with the argument on it’s own merits, and I feel that you’re not up to your normal standards here. Warren has talked about being concerned about quantity over value for several posts now, and yet when he asks you how you computed your numbers, you come back with a pretty snarky answer, that still deals in value over quantity (which I get, quantity seems to be harder to get if you don’t have access to something like IMS, which I no longer do)
Jon Murphy
Mar 26 2020 at 6:04pm
I’ve made no equivocation quantity and value. I’ve been perfectly frank and open that I have been using value. I’ve even explained why I use value (in order to make comparisons, everything must be in the same units. You cannot add quantities of different pills/ingredients/etc. To use quantity is incoherent. Again, that’s just basic analytics).
Now, we can see you have failed to impeach my data, relying rather on personal attacks, red herrings, mere assertions, grammatically incorrect interpretations, incorrect statistical analysis, and other smokescreen tactics. You have yet to provide any evidence for your claim “[China] make 80% of the prescription drugs consumed in this country.” The few futile attempts you have made to provide support have just shown you making the fallacy of composition.
One would hope you have more than just mere assertions and poor reasoning to support a claim such as yours. But we can see how weak the case for scarcityism truly is.
Dylan
Mar 26 2020 at 6:56pm
@Jon
It’s true that measuring by quantity does pose issues like you mention. Industry standard is to look at number of prescriptions. That’s not prefect either, but is something that is observable, and close enough to be able to make comparisons. Prescriptions tend to be for either 30 or 90 days, and groups like IMS will standardize that data so that it is more or less apples to apples.
FWIW, the value number isn’t directly comparable either, since people use many different measures, sometimes even in the same document.
Jon Murphy
Mar 26 2020 at 7:02pm
Indeed, but these are all from the same table, so we do not have that issue here.
Jon Murphy
Mar 26 2020 at 7:37pm
To be clear: we can have a conversation about importing drug components from China is problematic, but we need actual, non-exaggerated numbers to have that conversation. Using figures like “they make 80% (or 97% or whatever) of the drugs consumed” that are prima facie absurd and are unsupported by evidence or logic (claiming that the number only looks small because generics are cheaper than prescription would require nearly a 100% discount on generics. And the facts simply do not support that).
There are theoretical and empirical and practical issues with protectionism. But my objection with Platts deals not with any of those. My objection is with his factually incorrect numbers.
Dylan
Mar 26 2020 at 8:20pm
Jon, actually, that’s not too far from the case. The generic market in terms of prescriptions is about 90% in the U.S., and discounts are often 90% or more after a year or so of generic entry (it takes that long because there are rules in place that give generic exclusivity to the first generic drug that enters the market for 6 months, so it takes time for lots of competition to enter). For popular drugs, where you’ll get 10 or more generic players competing, you will see discounts of 99% compared to the branded price.
So, I’ll say again, if you’re trying to get an idea about the vast majority of the prescription drugs people are taking, and are concerned about the supply chain, you should be looking at number of prescriptions rather than value.
I agree though, that to understand the issue, real numbers are important. Now that I’m unemployed and don’t have access to the expensive subscription services, I have to rely on my faulty memory and some incomplete internet searches. The 97% number that Warren originally stated certainly wasn’t accurate. 80% for API seems like it is closer, but I don’t have any authoritative sources on that. I do know that India used to dominate that space, but had been unable to compete against China, and that this was a source of domestic concern for the pharma companies that have been worried about being so dependent on Chinese companies (historical distrust between the two countries hasn’t helped). But, just as Warren’s original number was the wrong way to look at this, your 2% number is also misleading and I don’t think it helps to illuminate the issue.
p.s. my quip about using different definitions in the same document was from what I think was a CMS spreadsheet, which I finally figured out after hours of head scratching, used a different definition of drug spending in two different cells in the same worksheet, that made it impossible to get numbers to add up to 100%.
Jon Murphy
Mar 26 2020 at 10:50pm
Again, though, that tells us nothing of use. One Percoset + one Vicoden does not equal 2 pills. They are different things. To get an idea of the economic impact, which is what Platts is arguing, you need everything in the same terms. Otherwise, it is misleading.
They can be, but it depends. Not every generic is 99% of the brand name, which is what would have to be true for anything remotely to approach Platts claim (which he has yet to prove any evidence for).
That is correct. But note the jump in logic Warren made because he doesn’t read carefully: he used the number of 80% of a given input into the drug Mfg to mean “[China] makes 80% of the drugs consumed in this country” (emphasis added). That is flat out false. That is where my objection rises. The whole “value versus quantity” thing is just some red herring he constructed to hide that fact.
This is common behavior for Platts. he makes absurd claims and just moves goal-posts whenever challenged
Dylan
Mar 27 2020 at 12:26pm
I think this is where the misunderstanding comes in, I didn’t think that Warren was concerned about the economic impact, but the health impact. And there, number of prescriptions is a much better indicator then the cost of those prescriptions. Sure, it isn’t perfect by any means, you get prescriptions for Viagra mixed in with Sovaldi, but still, if you learned that 90% of pharma prescriptions were manufactured in just one country (not saying that is the case, just for illustration purposes), that would be useful information to know, and far more relevant to health impact than learning that 90% by value comes from just one country. It’s also perhaps important to mention that prescriptions aren’t looking at the number of pills, but at things like 30 day supplies of a drug, so it doesn’t matter if one drug has 3x a day dosing, and another one is just 1x.
I’m not trying to defend the original claim. Obviously, 80% of finished drugs don’t come from China, China is a relatively small player in the global pharmaceutical market, at least when it comes to finished drugs. But the numbers you cited, with only 25% of drugs imported, doesn’t seem likely either. It should particularly set off some alarms about the data when you see Ireland as one of the big importers, since Ireland has very little drug manufacturing, but is the location of incorporation for many large pharma companies that make their drugs somewhere else. You also mentioned manufacturing staying close to home because of expiration, which as far as I know, isn’t an issue for the vast majority of drugs (not that they don’t expire, but the timelines are long enough that it still makes plenty of sense to make the drugs and ship them)
Warren Platts
Mar 27 2020 at 2:49pm
Jon, what does a drug really consist of? When you smoke your joints before you start writing something, what is it that is really getting you high? Is it all that burnable leaf matter, or is it the THC, the API of pot, if you will?
Answer: it is the API. I have been very clear that we are talking about APIs–Active Pharmaceutical Ingredients. Not starch fillers or gel capsules or packaging or shipping and handling.
Moreover, we are not talking about the economic impact of the fact that the VAST MAJORITY of APIs consumed in USA are made in China. The economic impact is there, to be sure. If we reshored our pharmaceutical industry, we could probably create 800,000 jobs according to an article I saw on twitter yesterday. But the economic impact is a secondary consideration.
The primary consideration is the MEDICAL impact that would happen if China decided to embargo drug sales to the United States. And that is a distinct possibility, according to Xinhua (that in case you don’t know is a news service owned owned and operated by the CCP; whatever Xinhua says, that is because the government wants that message sent):
Yes. I know. You have no problem with China holding us hostage. But that is your value judgement (there is no economics argument that can settle that question). Thankfully, most Americans do not share your values.
As for your “fallacy of composition” that is just a silly straw man. Apparently, you are committing what I guess could be called a fallacy of decomposition. You are apparently mystified how 97% of antibiotic APIs could be made in China, and yet only 80% of total APIs come from China. The solution is very simple. Some drugs are more than 80% Chinese origin, some are less:
Do you see? 97% of antibiotics come from China, but only 40-45% of heparin comes from China–no doubt because a bad batch of Chinese heparin killed about 100 Americans just a few years ago.
Also, note the source of those figures: It is your Department of Commerce. They are the experts. Who am I to question their numbers? To figure this stuff out is a very difficult process–Rosemary Gibson spent 3 years researching this problem–something that cannot be answered by looking at a couple of lines on an import table showing dollars worth of imports.
So give it up dude. You lost this one Jon. You should gracefully admit you learned something new today. All you are doing by digging your heals in is destroying the credibility of the entire free trade establishment.
Mark
Mar 23 2020 at 6:28pm
No, this episode proves the importance of global trade. When the outbreak hit China first, China (even as the world’s largest producer of masks and similar medical supplies) had to import from other countries. Now that the outbreak is more serious in other countries, China is exporting. If every country had to produce all the supplies it needed, it would be impossible to surge supplies to the countries that needed them instead of having supplies just stockpile in the countries that produced them. Self-sufficiency is impossible; even China did not achieve it.
Mark Z
Mar 24 2020 at 4:43am
We should stop buying masks from China because if we don’t, they might stop selling them to us? That’s an interesting argument.
Masks have a three year shelf life . Hospitals could fairly easily continuously stockpile enough to prepare for a supply chain disruption, which would be far more efficient that pursuing surgical mask autarchy.
Lorenzo from Oz
Mar 26 2020 at 3:15am
Given all the Western/Eurosphere democracies seem to be performing as bad as each other, I am deeply sceptical of attempts to criticise or elevate political ideologies on the basis of this pandemic. Let me assure you, EVERY ideological group looks at this crisis and sees support for its prior positions. (E.g. “open borders kill”.)
Lorenzo from Oz
Mar 26 2020 at 3:29am
Actually, the big take-away from the pandemic so far seems to be “be Taiwan”. Not sure that there is much in the way of ideological lessons from that.
Lorenzo from Oz
Mar 26 2020 at 3:32am
Case in point, Curtis Yarvin, (“Mencius Moldbug”), the doyen of neoreaction wrote this piece on January 30th. As Arnold Kling notes, his ideology enabled him to spot the danger quicker than most.
https://americanmind.org/essays/rip-globalism-dead-of-coronavirus/
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