By Kenneth Rapoza, CPA
Kimberly Glas was, arguably, the first to sound the alarm.
“Our textile members tell us that China is dumping masks and personal protection equipment into the U.S. now,” Glas, CEO of the National Council of Textile Organizations told the Senate Homeland Security and Government Affairs Committee on May 19 in a hearing. “Over a period of time, the Chinese have invested significantly in fiber production, the essential raw materials that are used in PPE. They have continued to invest in this entire production chain actually, and it has been at our demise.”
When the pandemic began in March 2020, members of the Trump administration, led by Peter Navarro, spoke with American companies to see what they could retrofit and retool to make the supplies needed to protect hospital staff. Autoworkers made ventilators. Textile firms made face masks, including the N95 masks. They invested money in production.
Seeing how medical PPE and masks are disposable, a constant, steady supply is needed. But instead of hospitals buying from U.S. producers, they can just go to Amazon and buy direct from China.
This New York Times headline says it all: “A Glut of Chinese Masks is Driving U.S. Companies Out of Business”.
“Our industry is in break-glass mode,” Brent Dillie, co-owner of Premium-PPE, a surgical mask-maker in Virginia that recently laid off most of its 280 workers, the NYT reported. The company got into the mask business after China, the world’s largest producer of protective medical gear, halted exports at the start of the pandemic. “Six months from now, many of us won’t be around,” Dillie told the paper, “and that won’t be good for America the next time there’s a national health emergency.”
Demand is also going way down now that lockdowns are lifted and states that were hardest hit, like in the northeast, are fully opened. No one is interested in placing orders now because of rules being lifted, our sources tell us.
PPE has been one of the major issues during the Covid-19 pandemic. We had almost none. China was the main source. It’s gotten everyone in Washington talking more seriously about supply chain resiliency, as Glas was invited to discuss last month in the Senate. Hearings on the subject of critical supply chains are now a regular occurrence in Washington, but a deeper look suggests that lawmakers are not doing enough to reshore important PPE, including medical gowns and N95 masks.
In a recent amendment to Chuck Schumer’s (D-NY) U.S. Innovation and Competition Act (formerly Endless Frontier Act), Sen. Mike Crapo (R-ID) stuck in an amendment, later approved, that would make it nearly impossible for the President to favor U.S. production for PPE. It sticks with the “work with allies” approach, though allies also needed the same equipment, and where they actually manufactured it at home, opted to keep it at home instead of selling it to the world.
The Crapo amendment calls for the duty-free entry of PPE into the U.S. during an emergency.
“Congress needs to confront the reality that China is willing to subsidize many industries, including health care products, to achieve near-monopoly domination,” said CPA Chief Economist Jeff Ferry. “If the U.S. is serious about reshoring some degree of resiliency and self-sufficiency on these shores, then we need legal changes, such as tariffs or the U.S. government buying only U.S.-made products, so U.S. producers can achieve scale and build profitable businesses.”
There are currently bills in the Senate that look to procure PPE directly from American manufacturers, no imports. The Make PPE In America Act by Senators Rob Portman (R-OH) and Sherrod Brown (D-OH) is the main one we are watching.
“We’re not looking for infinite support from the government,” Lloyd Armbrust, chief executive of Armbrust American, a mask-making company in Texas, told the Times. “We need the government’s support right now because unfair pressure from China is going to kill this new industry before the legislators even get a chance to fix the problem.”