President Trump’s top trade adviser said Congress should use the next coronavirus relief bill to help spur the return of manufacturing to Puerto Rico from China and India, part of a wider administration push to relocate supply chains deemed critical to U.S. health and national security back home.
In an interview with the Washington Examiner, White House Office of Trade and Manufacturing Director Peter Navarro said that the commonwealth of Puerto Rico, with its economy built historically around government and manufacturing, was well-equipped to reprise its role as a “major contributor” to the U.S. pharmaceutical supply chain.
“If you think about how the Puerto Rican economy is organized, there’s over 100 business parks around the island where such facilities could flourish,” said Navarro, who is also the policy coordinator for the Defense Production Act. “That’s something that Capitol Hill could help facilitate with some attention in the next phase. Puerto Rico once had a thriving pharmaceutical industry, but Congress all but put an end to that.”
The decadelong phaseout of a tax provision that allowed many U.S. companies to avoid paying federal taxes on profits generated in Puerto Rico led to job losses and severe contractions in the textile, chemical, and manufacturing sectors. High costs for water and electricity, at more than 4 times the amounts paid by industry in the territorial United States, have chipped away at Puerto Rico’s relative advantages for manufacturing, especially pharmaceuticals.
“We’ve got a broken system now where we push our manufacturers offshore,” Navarro said, with the pharmaceutical industry among the worst offenders when it comes to relocating American jobs.
“Big Pharma at the end of the multinational day cares more about profits than the American people,” Navarro said. “If they can make a few pennies moving their [advanced pharmaceutical ingredient] production to China or India, they’ll do it in a New York minute. And then when you try to hold them accountable, they’ll come up with every ‘why’ and whine in the lobbying book to stop you from doing it.”
Trump entered office on a promise to return manufacturing jobs to the U.S. The coronavirus pandemic has accelerated these efforts.
Navarro added: “If this crisis has taught us anything across party lines is that we do indeed need to bring home the pharmaceutical supply chain, that it is not just a public health issue, but a national security issue and an economic security issue.”
Some lawmakers agree that this is a pressing issue.
“The coronavirus was a wake-up call to everybody that our industrial capacity, especially in a time of need was something that made us pretty vulnerable,” said a press secretary for Sen. Marco Rubio, a Florida Republican, who pushed for language in the CARES Act about the risk of depending on China for key pharmaceuticals.
“It makes the most sense to at least start there. But that doesn’t mean that the only supply chain that we’d want to address is pharmaceuticals. There are a range of other industries that are critical to our economic and national security,” this staffer said, citing Rubio’s push for a rare earth minerals cooperative to secure the supply of industrial metals vital to semiconductor and other advanced technology manufacturing, including defense systems.
The White House took steps this month to block shipments of semiconductors to Chinese telecommunications giant Huawei through a regulatory amendment designed to stop the company from buying products made with U.S. software or equipment. The notice came as the Taiwan Semiconductor Manufacturing Company, a key Huawei supplier, announced plans to build a $12 billion chip plant in Arizona.
The administration also announced a $354 million drug contract with a generic drug manufacturing company that will use advanced continuous manufacturing to “bring home” pharmaceutical production, which Navarro said would make U.S. drug producers cost-competitive. “That project is the first big step in this long journey, but there will and must be others,” he said.
One senior administration official said that shoring up domestic manufacturing would be essential to paying off the country’s huge debt and that without advances in industrial policy, any research and development advantage enjoyed by the U.S. would be lost, eroding any innovation edge. “China is already back at work,” this person said.
