THE TTALK QUOTES
On Global Trade & Investment
Published Three Times a Week By:
The Global Business Dialogue, Inc.
Washington, DC   Tel: 202-463-5074
Email: Comments@gbdinc.org
No. 7 of 2017
TUESDAY, FEBRUARY 7, 2017
Filed from Portland, Oregon

Click  here for last Wednesday's China quote from
The American Farm Bureau Federation
CHINA, WORLD TRADE & HEALTH

" [W]ould President Xi have gone to Davos and made that speech if Donald Trump had not been elected?"

Ralph Ives
January 27, 2017
CONTEXT
Ralph Ives is the Senior Vice President for Global Strategy and Analysis at AdvaMed, the Advance Medical Technology Association. A panelist at the GBD event on China Trade: Five American Views, Mr. Ives used his time to talk about America's medical device industry, the products they make, and their work in China. We'll get to those in a moment. He also talked about China's role in, and relationship to, the global trading system. His reference to the important speech that President Xi Jinping gave in Davos was his lead into that segment of his remarks. 

Here is a larger slice of that portion of Mr. Ives' remarks: 

" I was actually in Beijing while President Xi was in Davos, and, of course, I was following very closely about China being the new standard bearer for globalization. One quote struck me-this is from President Xi: "Countries should view their own interests in the broader context, and refrain from pursuing their own interests at the expense of others." 
 
"The China Daily had all kinds of great stuff about how President Xi is the new leader of the free markets. And one quote from the China Daily is "Free trade seen as key to global economic growth." And another: "Global governance needs the wisdom of China." 

"Now I'm thinking, would President Xi have gone to Davos, and made that speech, if Donald Trump had not been elected? Not sure. Do you think the Chinese are suddenly a little bit worried about the global trading system that we [the U.S.] basically led for so many years, that has benefited China so tremendously? Now maybe they've got to step up and say "well, yeah, it's pretty good after all." 
 
"I contrast that pronouncement with China 2025. Because in China 2025, the Chinese have indicated how they are going to take over industries, including the medical device industry. I think there are about 8 or 10 industries that they have labeled.

"For our industry, the domestics currently have about 40% of the market. [China's] objective is 80% of the market for domestics, and they've indicated basically some ways they are going to do that. ...

"Our concern really is what policies and procedures and measures is China going to implement to accomplish this? Is it going to improve its infrastructure? It has a great infrastructure. Those of you who have traveled in China go "wow, I wish we could have an airport like that." Even if you're out in the hinterlands. Are they going to improve training? Are they going to do those types of things? Or are they going to use their massive resources for subsidies and additional discrimination?"

***
On Medical Devices. But let's back up a bit. What products are we talking about? As Mr. Ives explained, AdvaMed members make tens of thousands of products - complicated things like deep brain stimulators, big things like MRIs and CAT scans, and many more such as orthopedic implants and pacemakers. Don't confuse medical devices with pharmaceuticals, he said. They are different, and have different development profiles. For example, the innovation cycle for devices is quite rapid, whereas for pharmaceuticals it can be many years.

It is a global industry and one that benefits from the global rules that have been in place essentially since World War II. Specifically, China's adoption of those rules has benefited the industry. As Mr. Ives put it:

"Our companies have tens of thousands of suppliers all over the world, China being one of them; and they have large investments in China - roughly a billion dollars or so. Clearly China is very important." 

China: Healthcare, the Market and Issues. Mr. Ives had high praise for what China has accomplished over the years. He said: 

"China has done an amazing job- hundreds of billions of dollars to improve the healthcare of their people. And they are justifiably proud of the fact that basically they have universal coverage. Now the level of care is a little bit different than what we would expect, but they are very proud of getting universal care, and they want their people to have good healthcare."

But of course there are issues. There always are. In addition to the China 2025 policies discussed above, Mr. Ives talked about regulatory and payment issues. He noted, for example, that when China cut off imports of U.S. beef over BSE, it also blocked the use of U.S. bovine heart valves. So there are issues - including the tendency to favor Chinese products - with both the central authorities, such as the China Food and Drug Administration, and the provincial authorities. Our impression in listening to Mr. Ives, however, is that those issues - the regulatory issues and the payment issues - are manageable. 
 
And yes there are other policies that either require responses or pose new challenges for American medical device makers in China. One of those is President's Xi's anti-corruption campaign; another is China's Anti-Monopoly Law. On the anti-corruption campaign, Mr. Ives noted that AdvaMed has a code of conduct which it is trying to encourage others to embrace. With respect to the Anti-Monopoly law, he said the law has already resulted in a fine for one of his members. He pointedly did not comment on the specifics of the case other than to say it was a little ironic. That is because American medical device makers have been told for years by the Chinese that their prices are too high and the fine was against a company that was trying to lower its prices.
COMMENT
If Mr. Ives was candid in laying out some of the more vexing issues facing his members in China - and he was - he was also clear about his main concern. This, as we heard him, was the need to avoid major disruptions in trade between the United States and China, disruptions which are the great inherent risk in the numerous points of friction, commercial and otherwise, between the countries. He mentioned this danger at the beginning of his talk and at the end. At the beginning he said: 

"And these types of delays and disruptions not only affect our business in the short term, but also can have long-term implications on the health care of the Chinese population and the global population. They can literally affect life and death decisions. So this issue of disruption of trade relations is very important to our countries."

He concluded saying: 

"What really concerns us is if China implements discriminatory measures, the Trump administration responds, and then we have the type of disruption our industry is really concerned about that I mentioned before. 
 
"So we recognize that it's complicated. Relationships are complicated whether they are personal or between countries. But we really hope that the two countries can find ways to dialogue and work out their differences without disrupting the market."

The risk to vital commerce posed by the flashpoints of differences between countries-especially the United States and China-is a big one. We shall return to it in one format or another. For this entry, however, Mr. Ives rightly has the last word: 

"We really hope that the two countries can find ways to dialogue and work out their differences without disrupting the market."
SOURCES & LINKS
Ives at GBD is a link to the audio recording of Ralph Ives presentation at GBD's January 27 China event.

Xi Jinping in Davos is a link to the text of the speech given by President Xi Jinping of China at this year's World Economic Forum in Davos, Switzerland, on January 17, 2017.

Made in China 2025 to you to a CSIS brief on Made in China 2025 by Scott Kennedy.

China Can’t Dominate is a Forbes article on Made in China 2025, with an assessment of it likelihood of succeeding.

U.S. Ag and China is the TTALK Quote from February 1. This highlighted the presentation by David Salmonsen of the American Farm Bureau Federation. Mr. Ives referred to it in his presentation, especially Mr. Salmonsen's discussion of China's ban on imports of U.S. beef.

CFDA is a link to the website of the China Food and Drug Administration.

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