The Wall Street Journal - 19.03.2020

THE WALL STREET JOURNAL. Thursday, March 19, 2020 |A19

Trump’s Tariffs Leave the U.S. Short on Vital Medical Supplies

W

hy would the U.S. increase
the cost and difficulty of
supplying protective gear to
doctors and nurses? Why would
Washington obstruct the acquisition
of lifesaving equipment? Because the
sclerosis of trade protectionism,
once it takes hold, constricts eco-
nomic health and adaptation.
Chad Bown of the Peterson Insti-
tute for International Economics cal-
culates that the Trump administra-
tion has imposed new taxes on
almost $5 billion of medical exports
from China, totaling about 26% of
U.S. health-care imports. With tariffs,
the U.S. government is making it
harder for first responders to pro-
cure masks, sterile gloves, goggles,
hospital gowns, surgical drapes, ther-
mometers and breathing masks.
America also imports about $22 bil-
lion of medical technology from
countries all over the world, includ-
ing CT systems, patient monitors and
X-ray devices.
U.S. medical distributors are busy
hunting for alternative producers and
testing their equipment for interop-
erability when they should be con-
centrating on getting supplies to
those in need. China, in turn, has di-

verted its sales to other markets. Af-

ter President Trump hit Chinese

medical suppliers with a 25% tariff in

2018, China’s exports to the U.S.

dropped by 16%. In some cases,

American users had no good alterna-

tives because suppliers must get cer-

tified by the Food and Drug Adminis-

tration, which can take more than

two years. U.S. medical-equipment

producers have also been plagued by

the president’s new tariffs on im-

ported components.

Mexico ranks second to China in

supplying protective medical equip-

ment to the U.S. But Mr. Trump’s er-

ratic threats have helped undermine

confidence in building that country’s

industries for export.

The administration recently of-

fered an indictment of its own eco-

nomic isolationism. It quietly—and

only temporarily—reduced tariffs on

a smattering of Chinese medical

products. Such half-measures fall far

short. If Chinese exporters face mul-

tiple demands, they will prioritize

countries without tariffs or time-lim-

ited tariff suspensions.

Two researchers at the World

Bank, Aaditya Mattoo and Michele

Ruta, have identified another trade

problem the U.S. has overlooked. By

March 11, two dozen economies had

restricted exports of medical sup-

plies, including Germany, France,

South Korea and Taiwan. Mr. Trump’s

misstatement about shutting down

trade with Europe caused anxiety

among U.S. providers because the Eu-

ropean Union is now the primary for-

eign supplier of America’s CT sys-

tems, hand sanitizer, patient

monitors and pulse oximeters, X-ray

machines and breathing masks. A

mere seven countries account for 70%

of the exports of artificial respirators,

vital tools for the seriously ill; if one

of them banned exports, prices could

increase by up to 10%.

There’s a lesson in the world-wide

surge of food prices from 2008-11—

overlooked in nearly every retrospec-

tive analysis of the financial crisis. As

president of the World Bank at that

time, I worked with the World Trade

Organization to limit restrictions on

agricultural exports. Nevertheless,

recent World Bank research shows

that export limits pushed up global

food prices by an average of 13% over

that period, and 45% for rice.

Crises cry out for international

leadership. In the postwar era, Amer-

ican officials reconciled global good

sense with U.S. self-interest. The

Trump administration should elimi-

nate all U.S. tariffs on medical prod-

ucts to reduce the cost of the pan-

demic response, and it should urge

other countries to do the same.

Forty-six developing economies im-

pose tariffs of 5% to 25% on respira-

tors. The U.S. should rally partners in

the Group of 20 to ban restrictions

on exports of medical products re-

lated to Covid-19 so that the world

avoids price spikes, prevents panics,

gains benefits of scale and special-

ized production, preserves variety of

sourcing—and saves lives.

In addition to coping with a pan-

demic, Americans face a new debate

about the country’s role in the world.

Some are using the pandemic to ar-

gue for greater isolation. That counsel

of retreat failed miserably to counter

the Great Depression in the 1930s and

the security threats of 1941. As re-

cently as the 2008 crisis, Americans

learned again that they couldn’t wall

themselves off from the world.

The U.S. will need to diversify

sources of key supplies, and compa-

nies will need to build supply chains

that are more flexible and resilient.

Nations and businesses should con-

sider prudent inventories and stock-

piles. But precautions shouldn’t de-

grade into costly, self-defeating

illusions of autarky. Export bans and

tariffs on medical goods increase

costs, create shortages and make

Americans less safe. If other countries

embrace these sorts of trade restric-

tions, major U.S. exporters, including

farmers, will be devastated.

Modern challenges—viruses, eco-

nomic disruptions, the environment,

cybersecurity, food supplies and

more—require economic powers to

act in concert, even as they pursue

their own national interests. Last

year the Health Industry Distribu-

tors Association warned presciently

that Mr. Trump’s medical tariffs

“put a risk to our nation’s public

health preparedness.” Americans

are now paying the price for the

president’s failure to recognize that

his trade wars and walls would

backfire.

Mr. Zoellick is a former World

Bank president, U.S. trade represen-

tative and deputy secretary of state.

By Robert B. Zoellick

From gloves to respirators,

protectionism is raising

costs for the providers

fighting the coronavirus.

OPINION

W

hile the coronavirus
pandemic dominates
headlines, an even
more consequential
crisis is unfolding un-
der the shadow of its wings. That is
the upheaval of the relationship be-
tween the U.S. and China, a pillar of
the economic and political world or-
der since the end of the Cold War.
The pandemic will pass; the crises in
Sino-American relations could be felt
for decades.

The Communist Party of China
this week escalated its war on the
American press. The official reason
for Tuesday’s order expelling
roughly a dozen U.S. journalists
working for this newspaper, the New
York Times and the Washington Post
doesn’t pass the laugh test. These
three papers, Beijing solemnly de-
clares, are agents of the American
government, lapdogs of President
Trump. Further, the Communist
Party insists that the U.S. treat
China’s state-owned and state-con-
trolled media outlets as if they were

Expelling U.S. reporters

will solidify the bipartisan

consensus that Communist

China is a hostile threat.

Beijing Escalates the New Cold War

actual journalistic enterprises. As

China’s “wolf diplomats,” a particu-

lar breed of hyperaggressive Foreign

Ministry representatives, and the

other party hacks repeating this

nonsense surely know, both conten-

tions are absurd. Any Chinese jour-

nalists who covered Xi Jinping the

way U.S. newspapers cover Mr.

Trump would soon disappear. Some

have.

In the past, the Communists con-

tented themselves with preventing

people in China from reading what

thefreepresshastosay.Thatisno

longer enough. Today, they’re labor-

ing to construct a new Iron Curtain

to keep the world from learning

what is happening within Chinese

borders.

The saddest aspect of my work as

Global View columnist has been docu-

menting the steady decline in the re-

lationship between the U.S. and the

People’s Republic of China. In the

past 20 years I have traveled widely

across China, participated in semi-

nars and colloquies with Chinese

scholars, lectured in Chinese univer-

sities, and taught Chinese students on

campuses around the world. China’s

rich culture, the brilliance of its

thinkers, and the eager curiosity of

its students are among the greatest

treasures of the human race. Nothing

could improve the world more than a

strong U.S.-China partnership. Noth-

ing is more dangerous for both coun-

tries and the world at large than a

long and bitter rivalry.

Like most Americans, I welcomed

the reforms of Deng Xiaoping and

the prosperity they brought China. I

hoped that China’s economic devel-

opment would open a path to peace-

ful and gradual political reform. Fail-

ing that, I hoped that common

economic interests would lead both

countries to avoid the kind of de-

structive rivalry that characterized

the U.S.-Soviet relationship during

the Cold War. But hope is not always

enough.

A relationship’s collapse is rarely

the fault of only one partner, and

Washington could have managed its

China portfolio better over the past

decade. But the heart of the problem

is the Chinese Communist Party’s re-

fusal to grow with the times and ac-

cept a wider, more humane, and in

the end more sustainable vision of

its relationship to Chinese society.

The party’s compulsion to enforce a

backward-looking conformity on a

vibrant, educated population pushes

it down a path of increasing repres-

sion and centralization of power, un-

dermining Beijing’s governance at

home and frustrating its drive for re-

spect and acceptance abroad.

In a system where the party’s wis-

dom and omnicompetence must al-

ways be acknowledged, a culture of

sterility and conformism inevitably

degrades decision making and, as the

world saw in Wuhan, leads to grave

errors. The culture of denial grows

denser, as does the party’s fear of in-

dependent voices and accurate infor-

mation. Such a state, however im-

posing and powerful it appears, is a

prisoner of its fears. A stronger,

more confident government wouldn’t

fear criticism from foreign journal-

ists or foreign intellectuals. China’s

Communists are very afraid.

There is another factor that weak-

ened U.S.-Sino relations. The finan-

cial crisis of 2008-09 led many in

China to believe that their system

was superior to the apparently ex-

hausted American model, and the

course of both the Obama and

Trump presidencies has confirmed

that analysis. Blinded in part by their

own propaganda, Mr. Xi and those

around him see the disarray in U.S.

alliances, the chaos in the Middle

East, the economic impact of the

pandemic, and America’s domestic

polarization at home, and believe

that their hour has come. They may

also hope that a global tussle with

the U.S. will stop Chinese citizens

from asking awkward questions

about Wuhan.

My Hudson Institute colleague

Michael Pillsbury has written about

an incident from the seventh century

B.C. in the Spring and Autumn pe-

riod of Chinese history. The exact de-

tails change from telling to telling,

but as he recounts it, the dominant

but declining Zhou dynasty kept

large ceremonial cauldrons in its pal-

ace symbolizing its possession of the

Mandate of Heaven. The ruler of the

rising Chu state asked a messenger

from Zhou how much the cauldrons

weighed. This was the signal to Zhou

that Chu, despite protestations to

the contrary, planned to attack and

enabled Zhou to prepare. A Chinese

saying encapsulates the lesson:

“Never ask the weight of the em-

peror’s cauldrons,” in Mr. Pillsbury’s

rendering.

Americans of all political stripes

have noticed that Beijing is inquiring

about our cauldrons. The expulsion

of U.S. journalists reinforces this

perception and may push the U.S.

into a more combative stance against

the Chinese Communists. The whole

world must now hope that Beijing

reconsiders its chosen path, not least

for its own sake.

AFP/GETTY IMAGES

Chinese Foreign Ministry spokesman Geng Shuang Wednesday.

GLOBAL VIEW

By Walter Russell

Mead

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Make America Fun Again: Pass a Summer Stimulus Now

H

arvard political scientist Rob-
ert Putnam argued in “Bowl-
ing Alone” (2000) that Ameri-
cans were spending less time
together. Today, Americans aren’t
merely alone—they’re not even bowl-
ing. Sports, theaters and restaurants
are shut down, and the coronavirus
is scaring off frequent flyers. This
makes for prudent health policy and
a brutal business environment.
Rather than pass an indiscrimi-
nate payroll tax cut that drip-feeds
dollars and doesn’t ensure recovery
in battered sectors, Congress and the
White House should target the most
vulnerable parts of the economy,
which often employ the most vulner-
able workers—janitors, ushers, bag-
gage handlers, busboys. We propose
that the federal government mail to
each American household a debit

card preloaded with $500 that can

be used for services in the “out of

home,” experience economy. Call it a

“Menu and Venue Voucher.”

The card would have a start date

of July 1, 2020, if public-health au-

thorities relax social-distancing re-

quirements by then, and expire a

year later. A school trip to a Picasso

exhibit, a bus ride to a bowling tour-

nament, or petting sled dogs from a

cruise ship in Alaska would qualify. A

Netflix subscription wouldn’t. The

point is not to make judgments

about taste but to restore the nerve

to go out.

Every stimulus plan raises doubts.

While this plan, which would cost

$64 billion, would not immediately

inject cash, it would assure employ-

ers and their lenders that a rebound

is on the way, so that business own-

ers could receive bridge loans and

keep going through the crisis. Tar-

geting industries usually fails be-

cause lobbyists who make the fattest

political contributions tend to grab

the biggest bonuses. In this case, it’s

obvious which industries are feeling

the most pain. The share price of In-

vesco’s Dynamic Leisure and Enter-

tainment ETF (PEJ) has, as of

Wednesday’s close, plunged by 56%

since Feb. 19, nearly twice as much

as the S&P 500’s 29% decline over

the same period. The same activities

targeted by health officials should be

beneficiaries of this fiscal offset.

This program wouldn’t be difficult

to administer, and there are prece-

dents. During the 2007-09 recession,

Taiwan sent coupons to its citizens,

which spurred buying during a wor-

risome time. In the U.S., health sav-

ings accounts often issue debit cards

for consumers to buy medicines and

treatments. The food-stamp program

now uses a debit-card equivalent,

too. What if some clever person be-

gan buying up the Menu Venue

Vouchers? That would be fine, for

families that sell their vouchers

would be choosing to spend that

money on priorities they deem more

urgent.

Some economists might warn that

such a program would kindle infla-

tion in 2021. But we’ve been listening

to such cries since 2009, with nary a

blip, while as of Wednesday the yield

on the inflation-protected 10-year

U.S. Treasury note implies inflation

of only 0.63%. And industries in the

experience economy expanded capac-

ity during the economic recovery,

with sleek new hotels and cruise

ships coming on line to accommodate

demand. It’s highly unlikely they will

be in a position to jack up prices,

even with vouchers in place.

The government’s first priority is

getting testing, treatment and aid to

hospitals and clinics. Still, the coro-

navirus threatens not only our bod-

ies, but the body politic. This pro-

posal would aid those parts of the

economy that can lift spirits and

bring us closer together once the

need for social distancing has

passed. It would give Americans

something to look forward to. Let’s

make America fun again and save

jobs while we’re at it.

Mr. Buchholz is former White

House director of economic policy

and author of “New Ideas from Dead

Economists.” Ms. Buchholz is direc-

tor of marketing strategy and special

projects at Princess Cruises.

By Todd G. Buchholz
And Victoria Buchholz

Send every U.S. household

a $500 prepaid debit card

to spend later this year in

the ‘experience economy.’

Trudeau Turns Trumpian, Temporarily

Toronto

P

resident Trump tweeted

Wednesday that, by “mutual

consent,” the U.S.-Canada bor-

der will temporarily close to “non-es-

sential traffic,” although “trade will

not be affected.”

Prime Minister Justin Trudeau

confirmed the move. “Travelers will

no longer be permitted to cross the

border for recreation and tourism,”

he said. “In both our countries, we’re

encouraging people to stay home;

we’re telling our citizens not to visit

their neighbors if they don’t abso-

lutely have to. This collaborative and

reciprocal measure is an extension of

that prudent approach.”

Is Mr. Trudeau turning Trumpian?

Yes, but only temporarily. The prime

minister announced Monday that in-

ternational flights from countries

outside the U.S., Mexico and the Ca-

ribbean would be shut down effective

Wednesday. “I know that these mea-

sures are far-reaching,” he said.

“They are exceptional circumstances,

calling for exceptional measures,” He

added: “If you’re abroad, it’s time for

you to come home. If you’ve just ar-

rived, you must self-isolate for 14

days, and finally all Canadians, as

much as possible, should stay home.”

It’s all a bit out of character for

the politician who personally greeted

thousands of Syrian refugees at To-

ronto’s Pearson Airport on Dec. 11,

2015. “To those fleeing persecution,
      terror & war, Canadians will welcome
      you, regardless of your faith,” he
      tweeted eight days after Mr. Trump’s
      inauguration. “Diversity is our
      strength #WelcomeToCanada.”
      No doubt Mr. Trudeau will return
      to his progressive vision once North
      America has contained the coronavi-
      rus. His departure from it is a mea-
      sure of how serious the crisis is.

Mr. Taube, a Troy Media syndi-

cated columnist and political com-

mentator, was a speechwriter for for-

mer Canadian Prime Minister

Stephen Harper.

By Michael Taube

The U.S.-Canada border is

closed by ‘mutual consent.’