Apr 3, 2020

The Coronavirus Should Not Prompt Us to Rethink Globalization

In combating the pandemic, globalization is not the problem but part of the solution
Daniel Griswold Senior Research Fellow

The costly spread of the COVID-19 virus in the United States has prompted calls to rethink globalization. Trade hawks, such as presidential adviser Peter Navarro, contend that the supply-chain disruption caused by the virus is a “wake-up call” that America is too dependent on global suppliers for essential goods. Proposals include “Buy American” orders that would mandate a curb on imports of medicines and medical supplies from foreign suppliers, especially those in China.

The coronavirus challenge may require rethinking certain aspects of America’s economic integration with the world economy, but a mandated rollback of globalization would impose a man-made burden on the US economy by depriving Americans of the critical benefits of global supply chains, lower-cost imports, and foreign-born medical professionals.

Globalization promotes health and wealth

Globalization—the increase of trade, investment flows and travel across international borders—has been a source of strength for the American economy. Cross-border integration has delivered lower prices and more product variety for American consumers, created better paying and more sustainable jobs, opened up vast markets for US exports of goods and services, lowered borrowing costs for homebuyers and the federal government, and promoted more peaceful relations among world powers. Technological innovation and the wealth created by a more open market economy have given Americans the resources to meet public health challenges.

Indeed, increased economic integration has made humankind wealthier and healthier. The past three decades have witnessed the creation of a global middle class, now including half the world’s population. The percentage of the global population living in absolute poverty, defined by the World Bank as $1.90 a day, has dropped since 1990 from nearly 36 percent to under 10 percent—a decline in numbers of 1.1 billion. According to the United Nations, in the past three decades of rapid globalization, global life expectancy has climbed from 64.2 years in 1990 to 72.6 years in 2019. In that same period, rates of child and age-adjusted adult mortality fell sharply. A forced retreat from globalization would put those gains in jeopardy.

Imports from China are not a health threat

The most immediate challenge to globalization has been the “Buy American” proposal currently under consideration by the Trump White House that would force Americans to source more of their drugs and medical supplies from domestic producers. The rationale behind the proposal is that the United States has become too dependent on imports, in particular those from China, a potentially hostile nation that could inflict harm on the United States by cutting off access at critical times.

In fact, US trade with China is not out of proportion to what would be expected between the world’s two largest economies and trading nations. Nor has that trade left the United States more vulnerable to the economic downsides of the COVID-19 pandemic. In 2018, before the Trump administration’s Section 301 tariff actions against China came into full effect, Americans imported $539.7 billion in goods from China, according to the US Census Bureau. Those imports accounted for 21.2 percent of the $2.54 trillion in total US imported goods.

China accounts for a much larger share of imported goods in certain categories, but those categories do not include medical supplies or pharmaceutical products. The table below lists the top 15 categories of imports from China in 2018 by value. Dominating the list of top imports are non-medical categories such as mobile phones, computers, toys, sporting goods, apparel, furniture, household appliances, and footwear.

Medical products, however, rank far down the list, both in total value and as a share of total US imports. In 2018, Americans imported $5.1 billion in medical equipment from China, ranging from diagnostic machines to surgical face masks. That total represented 12.2 percent of US imports in that category. That same year, Americans imported $3.0 billion in pharmaceutical preparations from China—active pharmaceutical ingredients as well as the drugs themselves —representing an even smaller, 2.2 percent of total imports.

China is the dominant supplier of many common consumer items purchased by millions of American households every day—goods unrelated to critical medical supply chains. By using China as a lower-cost manufacturer and assembly platform, these goods are made more affordable and ubiquitous in American society. This means higher real wages for most American workers. It also means that laptop computers, smart phones and other telecommunications products are even more widely available, which has allowed more Americans to work remotely, conduct online commerce, and engage with social media, mitigating the disruption of physical distancing.

Foreign-born workers fill a vital role in the healthcare system

Globalization has also boosted efforts to fight the coronavirus through the contributions of foreign-born medical professionals and staff. The US healthcare system simply could not run without the hundreds of thousands of immigrant doctors, nurses, and personal care workers staffing US healthcare facilities. Foreign-born doctors are especially important in rural communities and other underserved areas.

According to a survey published in the Journal of the American Medical Association, in 2016 one out of six US healthcare professionals and workers was foreign-born. The share of physicians in the United States who were foreign-born was 29 percent, while the share of pharmacists and nurses born abroad was 20 percent and 16 percent respectively. In addition, foreigners made up 23 percent of all nursing, psychiatric, and home health aides. US hospitals and other healthcare facilities that have been strained to the limit by the coronavirus would be even less able to care for affected patients without this crucial benefit of globalization.

Foreign travel vulnerabilities

The one channel of globalization that has clearly contributed to the more rapid spread of the COVID-19 virus is international travel. In recent decades global travel and tourism have expanded dramatically, driven by more efficient and competitive air passenger service, the growth of the global middle class, and the greater freedom of people in China and elsewhere to travel outside their country. According to the UN’s World Tourism Organization, the number of international tourist arrivals has grown exponentially from 25 million in 1950 to 1.5 billion in 2019. According to the US National Travel and Tourism Office, the number of international entries into the United States has roughly doubled in the past two decades, from 42.2 million in 1999 to 79.8 million in 2019.

Foreign travel has been an engine of growth for the US economy and a great blessing to Americans who have been able to travel abroad. In 2018, US businesses earned $256.1 billion from Americans traveling abroad and foreign nationals visiting this country. That same year Americans spent $186.5 billion traveling on foreign airlines and visiting other countries. Between 1999 and 2018, US exports of travel-related services grew 129 percent and imports grew by 140 percent. In that same period, the US trade surplus in that services category more than doubled, from $34.0 billion to $69.6 billion.

This trade surplus in travel services may be one reason why the usual critics of globalization haven’t traditionally complained about the millions of non-immigrant visitors to the United States each year, even though this is arguably the one area where globalization has made the United States more vulnerable to the spread of COVID-19.

Globalization and COVID-19: the right response

The right policy response in the wake of the coronavirus should not be to forcibly curtail international travel, supply chains, or other channels of globalization. Instead, the US government should allow Americans to continue to benefit from all the economic blessings of globalization while implementing effective yet minimally intrusive procedures to guard public safety.

On travel, current bans on most international flights are temporarily justified to limit the spread of the virus. Even when such travel resumes, rules should be implemented to provide for more effective screening of potentially contagious travelers and more transparency and coordination among national governments about the emergence and spread of potential contagions.

As for global supply chains for medical goods, managing the risk of disruption should be primarily left to private companies and consumers. US supply chains for medical goods are already diversified and are not overly reliant on China. The main source of the recent disruptions in supply chains involving China has been the Trump administration’s tariff war, not any policy of the Chinese government. Rather than blocking international trade through misguided “Buy American” rules, American companies should be left free to make their own decisions about developing alternative suppliers and stockpiling inventory for use in emergencies.

The $2.2 trillion coronavirus spending bill passed by Congress at the end of March contained a promising contribution from the government. It directs the National Academies of Sciences, Engineering and Medicine to study America’s supply chains for critical drugs and medical devices and equipment and to make recommendations on how to protect them against potential public health or national security risks in the future.

Finally, the Trump administration and Congress should expand opportunities for foreign-born medical professionals to enter and remain in the United States, thereby expanding the capacity of the US healthcare sector to meet the extraordinary demands of the current pandemic. Steps could include expanding the number of short-term visas for foreign-born doctors and nurses and excluding all healthcare workers from the H-1B visa cap.

When it comes to combatting the COVID-19 virus, supply chains that go through China, lower-cost imports, and foreign-born healthcare workers are not part of the problem but are a vital part of the solution.

Photo by KAZUHIRO NOGI/AFP via Getty Images

Support Mercatus

Your support allows us to continue bridging the gap between academic ideas and real-world policy solutions.Donate