Export restrictions threaten ventilator availability

With help from Megan Cassella

Editor’s Note: Morning Trade is a free version of POLITICO Pro Trade’s morning newsletter, which is delivered to our subscribers each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.

Quick Fix

— Fifty-four governments, including many in Europe and Asia, have imposed restrictions on medical supply exports in response to the coronavirus, a new study said. It also found half of the world’s ventilator producers are in the EU, blocking export of the critical devices, and that rich countries could easily absorb the cost of reducing tariffs on medical goods and soap.

— House Democrats’ economic stimulus bill would require drug manufacturers and active pharmaceutical ingredient manufacturers to provide more information to the federal government, similar to provisions in the Senate GOP bill.

— House Majority Leader Steny Hoyer pressed President Donald Trump to use his authority to order companies to increase production of medical supplies, while a European company expressed concern over how that would impact its production at a facility in Pittsburgh.

IT’S TUESDAY, MARCH 24! Welcome to Morning Trade, where your host is delighted to tell everyone, belatedly, how much he likes The Who’s new album, simply called “Who.” The Roger Daltrey autobiography, released in 2018, is also great. Any late-breaking musical recommendations or news tips? Send them my way at [email protected] or on Twitter@tradereporter

Sign up for POLITICO Nightly: Coronavirus Special Edition, your daily update on how the illness is affecting politics, markets, public health and more.

Driving the Day

CORONAVIRUS INFECTS GLOBAL TRADE: Fifty-four governments around the world have imposed export restrictions on medical supplies and drugs in response to the coronavirus pandemic, according to a new study released Monday by Global Trade Alert, which has been tracking trade-restrictive measures since the global financial crisis.

The United States is not one of those countries, but the list includes the United Kingdom, Germany, France, Italy and other countries in Europe, as well as China, India, Russia, Saudi Arabia, Egypt, Pakistan, Vietnam, Indonesia and Malaysia. The study, authored by Simon Evenett, an economist at the University of St. Gallen in Switzerland, lays out some of the issues countries face as they struggle to ensure they have medical supplies:

— There are 25 nations that report $10 million or more in ventilator exports. The biggest producers — the United States, Germany and China — had more than $500 million in sales. Only one of the producing countries is in Latin America and none are in Africa, the Middle East, South Asia or Central Asia. Half of the world’s ventilator producers are located in the EU and are unavailable to other countries because of export restrictions.

— The total value of trade in six categories of itemsidentified by the World Customs Organization as COVID-19 medical supplies was just below $715 billion in 2018. Disinfectants and sterilization products accounted for the most trade, or $308.6 billion, followed by test kits and related apparatus, which totaled $185.3 billion.

— Canceling tariffs on medical supplies and soap worldwide to facilitate trade would reduce public revenues anywhere between $4.5 billion and $9 billion, a minimal impact on large economies, the report found.

Supply chain concerns: Although experts warn of the unintended consequences of restricting trade, the pandemic has put momentum behind efforts to reshore supply chains or at least guarantee domestic supplies of masks, gloves and medicines are adequate. Evenett said the export restrictions of other countries only provide a “political gift to nationalists and populists.”

White House trade adviser Peter Navarro is still pushing for an executive order that would tighten domestic procurement requirements for federal agencies that purchase pharmaceuticals and medical supplies. That order could reach the president’s desk for a signature by the end of the week, according to people close to the issue, but it has been the subject of pushback from other agencies and outside business groups.

TRACKING THE DRUG SUPPLY CHAIN: House Democrats’ economic stimulus bill released Monday night would require drug manufacturers and active pharmaceutical ingredient manufacturers to report quarterly on the volume of drugs they manufacture, prepare, propagate, compound, or process for commercial distribution prior to being imported or offered for import into the United States.

It also includes more than $3 billion to support research and development of vaccines, therapeutics, and diagnostics to prevent or treat coronavirus and $1 billion to support a U.S.-sourced supply chain of vaccines, therapeutics, and small molecule active pharmaceutical ingredients.

Other line items provide at least $500 million to support U.S.-based next generation manufacturing facilities, another $500 million to ramp up production of medical personal protective equipment and more than $1.6 billion for the Strategic National Stockpile to procure pharmaceuticals, personal protective equipment and other medical supplies.

Similar language in Senate bill: The Republican-crafted coronavirus stimulus bill currently stalled in the Senate would also require drug manufacturers to give the government more information when their supplies are interrupted, including details about active pharmaceutical ingredients, when those APIs are the cause of the interruption. The bill also requires drug companies to maintain contingency plans to ensure backup supply of products and to provide information about drug volume.

Even before the current crisis, there was concern the United States is too dependent on China and other foreign suppliers for APIs, which are the actual medicine in a pill or injection.

The FDA estimates that 13 percent of API manufacturing sites are in China, but it doesn’t have good information on the volume of APIs produced there. Further complicating the task, many APIs enter the United States in the form of finished medicines, and each pill could have APIs from multiple sources.

“The supply chain is very complex,” said Jonathan Kimball, vice president of trade and international affairs at the Association for Accessible Medicines. “There’s over 4,000 drugs that are currently on the market in the United States. So, it probably makes sense to identify what are the most essential drugs for the U.S. health care system, where promoting U.S. manufacturing makes sense.”

Whatever the government does, ensuring access to affordable drugs should be “at the center of U.S. policymaking,” Kimball said. “We can do that as we seek supply chain diversification and seek to incentives investment in the United States. We just need to be careful.”

CARGO AID IN STIMULUS: The Senate’s coronavirus economic stimulus bill also contains up to $8 billion in loan guarantees to help air cargo companies weather the crisis. But a top industry official described it as a contingency fund that they might not need to tap.

“It would only be available or needed by FedEx and the all-cargo industry if things really get bad,” Fred Smith, chairman and CEO of FedEx, said Sunday in an interview on CBS’s “Face the Nation.”

In many cases, Fedex, UPS and DHL have seen an uptick in demandfor their services because so many passenger flights that also carry cargo have been canceled.

Backlogs across the Pacific and Atlantic: The shutdown of passenger operations across the Pacific has “created significant backlogs coming into this country and a significant amount of traffic going back to China,” Smith said. “More recently, the same thing’s true across the Atlantic. Our purple tail airplanes are carrying a lot of stuff both ways.”

The House bill would provide $61 billion in assistance for airlines, including $37 billion in grants for employees of mainline, regional and cargo airlines and $21 billion in loans to airlines, according to a summary of the Democratic plan. Another $3 billion in grants is earmarked for employees of ground crews and catering contractors.

BOEING ON THE BRINK: One of the largest U.S. exporters, Boeing, said Monday that it was suspending production at its Puget Sound facilities in Washington state for at least two weeks due to coronavirus. The move follows the death of one of its workers due to the illness.

It also comes as the company is seeking at least $60 billion in economic assistance, including loan guarantees, for the aerospace manufacturing industry.

There is no specific provision for aerospace manufacturers in either the Senate bill or the House bill. However, the Senate package would create a $500 billion program managed by the Treasury Department to help businesses, states and localities.

Trump, at a press conference on Monday at the White House, repeated his support for aid for Boeing because of its importance to the overall U.S. economy.

HOYER CALLS ON TRUMP TO ADDRESS EQUIPMENT SHORTAGE: Demands for Trump to make use of the Defense Production Act he invoked last week to address the glaring shortage of medical equipment are growing louder, with House Majority Leader Steny Hoyer on Monday criticizing the president’s lack of action as “appalling.”

The DPA allows the federal government — and specifically Health and Human Services Secretary Alex Azar — to jump to the front of the line when it places orders with private companies for medical equipment, including face masks and ventilators. But in the days since, Trump and other White House officials have issued contradictory statements about using the powers.

“President Trump’s refusal to use the Defense Production Act to address the dire shortage of much-needed emergency medical equipment is appalling,” Hoyer said Monday afternoon. “We cannot meet this challenge without leadership at the federal level, and that begins with the President.”

A transatlantic fight for equipment: A Dutch company with manufacturing facilities in the U.S. is concerned the Trump administration might soon use the DPA to try to take medical equipment it’s currently producing for Europe.

Philips, which has a respiratory equipment plant in Pittsburgh, told the Dutch newspaper NRC that it fears use of the act would force it to supply only the American market.

“We are very worried,” a Philips spokesperson told NRC. The company is in direct contact with the U.S. government to try to stop the law from being invoked and trying to convince officials on “the importance of cooperation and of open borders for production and supply.”

International Overnight

— Trump on Monday said he planned to pull the U.S. economy out of its coronavirus-induced slumber in a matter of weeks, POLITICO Pro reports.

— House Democrats are following through on their threat to go rogue with their own stimulus plan, unveiling a more than 1,400-page bill Monday night packed with policy differences compared to the proposal Senate Republicans laid out, POLITICO reports.

— USTR hopes to start trade talks with the U.K. “as soon as possible,” POLITICO Pro reports.

— International Monetary Fund Managing Director Kristalina Georgieva warned G-20 leaders to expect a recession at least as bad as the global financial crisis and said the IMF is prepared to deploy its entire $1 trillion lending capacity.

— Trump postponed the Oct. 1 deadline to comply with new Real ID travel requirements due to the coronavirus outbreak, Bloomberg reports.

— The U.S. Export-Import Bank says it will hold an open board meeting by teleconference on Wednesday to discuss its responses to the coronavirus pandemic.

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [email protected]; [email protected]; [email protected]; [email protected]; [email protected] and [email protected]. Follow us@POLITICOPro and @Morning_Trade.