US PPE Restrictions Unlikely to Have Large Impact on US Exporters, Trade Observers Say

U.S. restrictions on exports of personal protective equipment are not expected to have a significant impact on U.S. industry, particularly because most U.S. companies produce those goods overseas, trade observers said. Companies have been more heavily impacted by recently announced Chinese restrictions on medical exports, which have caused customs delays and a backlog of shipments, the U.S.-China Business Council said.

“The biggest impact has been [from] China’s restrictions,” Doug Barry, USCBC spokesperson, said in an email. Some USCBC members produce and export medical goods from China and have faced longer inspections from authorities, who are increasing scrutiny of 11 medical exports as part of a measure announced earlier this month (see 2004100043). Barry said USCBC offices in China have worked with local officials to try to “expedite” the process and continue to press them for faster inspections. “The new requirements, while well-intended” are “delaying shipments when and where they are needed most,” Barry said.

Although Chinese restrictions are slowing shipments, the U.S. measures issued by the Federal Emergency Management Agency (see 2004090069), which do not apply to exports to Canada and Mexico, are unlikely to place a significant burden on industry, trade lawyer Doug Jacobson said. Most exporters in the medical industry source or produce their goods outside the U.S., including in China, Jacobson said. More than 42% of the world's imports of face shields, protective garments, gloves, goggles and other medical equipment originated in China in 2018, according to an April 15 report from the Peterson Institute for International Economics.

“If a U.S. company is going to export to the [European Union], they wouldn't import it into the U.S. first. That makes no sense. They would ship it directly to a warehouse in Europe,” Jacobson said. “I just don't think that there are that many companies who are really affected.”

Jacobson said he is not sure why the Commerce Department Bureau of Industry and Security, which oversees a broad range of U.S. export controls, is not overseeing the restrictions. “BIS should be the agency because it administers the Defense Production Act,” Jacobson said. BIS did not comment. Jacobson also said FEMA may not have the experience to oversee the export restrictions. “There really is no precedent,” he said. “I’m sure they can muster the resources, but they’re a logistics agency, by and large.”

As export restrictions increase, U.S. companies are facing obstacles resuming operations in China, Barry said. Restarting operations has been particularly challenging in the hospitality, transportation and automotive sectors, Barry said, but less so in the consumer products sector. And although U.S. agricultural exporters have seen an increase in Chinese buyers due to China’s purchase commitments (see 2003240041), Barry said “2020 will be a challenging year for US companies doing business in and with China.”

Some companies are concerned the increased export restrictions could lead to heightened trade tensions, especially as the COVID-19 pandemic wears on, according to a trade policy director for a large car manufacturer. Despite the recent phase one trade deal (see 2001150073), the pandemic has led to an increase in hostilities between the U.S. and China, the person said. “Tensions are rising,” the person said. “They are not abating.” Similar tensions across the globe could be made worse by the lack of a functioning World Trade Organization dispute settlement system (see 2001240027), which may be allowing countries to restrict exports without oversight.

“If a case is brought forward and somebody argues it’s not WTO-compliant, who ultimately adjudicates that?” the person said. “That was always part of the litmus test we had for doing anything, and that’s not happening now.”

The U.S. and China need to work together on a “coordinated” response to the pandemic instead of introducing more restrictions, Barry said. “If we can put aside our disagreements to produce public goods for the world,” he said, “it will help everyone recover faster and could create a new paradigm for future relations.”