A dangerous risk Australia faces from China
Australia has been "absolutely dumb" to become so reliant on goods from countries like China that it may impact on the country's sovereignty, an expert says.
The latest spat with China over Australia's call for an independent inquiry into the origins of COVID-19 has emphasised the vulnerabilities Australia encounters when it comes to a face-off with its largest trading partner.
China has lashed out at Prime Minister Scott Morrison, warning that any push for an inquiry will spark a travel and trade boycott. It has also warned of implications to Australia's university sector and consequences for many other businesses.
"Maybe the ordinary people will say 'Why should we drink Australian wine? Eat Australian beef?'," Chinese Ambassador to Australia Cheng Jingye told the Australian Financial Rev iew.
The economic consequences of any pushback from China are fairly well understood.
China consumes about 30 per cent of Australia's exports including minerals, resources and education services, and about 10 per cent of university students come from China, which is worth about $2 billion to Australian universities.
What's less clear is Australia's exposure to other impacts because of its reliance on overseas medicine supplies and other essential goods.
The coronavirus pandemic is now bringing attention to how much Australia and the rest of the world depends on medical products that may actually be coming from China.
Retired Air Vice-Marshall John Blackburn AO is one figure who has been trying for years to highlight Australia's exposure to global shocks because of a lack of resilience in Australia's economic, environmental, energy and infrastructure systems.
Australia currently imports 90 per cent of its medicines and Mr Blackburn told news.com.au about 22 per cent came from the US, about 57 per cent from countries in Europe and about 1.7 per cent from China.
While these numbers don't appear to leave Australia open to shortages from China, a deeper look at where the US and Europe are getting their active ingredients shows Australia is more exposed than these figures suggest.
Recent inquiries in the United States, which is the biggest single supplier of pharmaceuticals to Australia, have suggested America imports most of its active pharmaceutical ingredients (APIs) from China or India, but India also sources a large number of inputs from China.
"If China were to cut off its supply of drugs or APIs to the United States, it could lead to a public health crisis," an annual report stated from the US Government's US-China Economic and Security Review Commission, which was submitted to Congress in November 2019.
The exact extent of America's reliance on China cannot be verified and one significant problem is the lack of publicly available information on where ingredients used in medicines come from.
Mr Blackburn says pharmaceutical companies consider the information to be "proprietary".
In a report he helped produce for The Institute for Integrated Economic Research on Australia's medical supply chain, Mr Blackburn argues that Australia has left its resilience, and therefore its sovereignty and security, to a largely foreign-owned market.
CHINA HAS A 'CHOKEHOLD' ON SUPPLY
The World Health Organisation believes China makes up about 20 per cent of the global output of active pharmaceutical ingredients but others believe it could be more.
It's this lack of transparent information that could have serious implications for Australia, Mr Blackburn said, as if the US can't understand its own supply chain then the chance of Australia understanding its own was low.
It's believed the US imports 95 per cent of its ibuprofen and between 40 and 45 per cent of its penicillin supplies from China.
China is also the largest manufacturer of vaccines in the world, supplying about 20 per cent of the global supply.
In October last year, Anna Eshoo, Democrat chair of the health sub-committee of the US Congressional Committee on Energy and Commerce, said China had gained a "chokehold" over the global supply of penicillin, and globally dominated the manufacture of active ingredients.
"Beijing could use US dependence for critical drugs as an economic weapon and exploit the health and safety of our armed forces and the American public. This is a threat to our nation's security," she said in an opening statement to a 2019 inquiry.
It's unclear how exposed Australia is to the same threat.
"That's why our resilience is poor and that's what we've got to address as a matter of urgency," Mr Blackburn said.
"What capabilities do we need in this country to give us resilience in times of global crisis? We need trusted supply chains that are transparent, that we can verify and test."
'WE'RE BASICALLY DUMB'
In Australia, the Therapeutic Goods Administration (TGA) has launched a mandatory reporting scheme for medicine shortages and permanent discontinuations, to provide some insight into the situation.
At the end of Jan 2020, it reported 63 drugs as facing "critical shortages" and 13 anticipated to go into short supply.
The fluctuating availability of EpiPen Junior, which is used to administer a lifesaving shot of adrenaline for those with severe allergies, is just one example of a medicine experiencing shortages in Australia. Pharmaceutical giant Pfizer has blamed this on global supply issues.
Part of the problem is that some medicines are only manufactured at one location, even if they are supplied to many different companies.
Other medicines are manufactured in multiple locations but supplied by only one company.
This makes Australia, which imports 90 per cent of its medicines, and is at the end of a long supply chain, particularly vulnerable to shortages due to factors outside its control including manufacturing problems, difficulties in procurement, political instability, pandemics, global economic crisis and natural disasters.
Mr Blackburn said that any supply chain that relies on only one manufacturer for critical products is vulnerable, regardless of whether that manufacturer is located in China or any other country.
Despite these risks, Australia was not taking measures to ensure supply of essential items.
He said unlike Finland, which has a mandated stockpile of more than 1000 medicines, there was no requirement for pharmacies or other businesses in Australia to keep a minimum amount of certain medicines.
Australia does have a national stockpile but it's largely in place to deal with emergencies, such as influenza pandemics and biological, chemical or radiological incidents. It may not include day-to-day medications Aussies rely on.
"It's a similar situation to fuels," Mr Blackburn said, referring to the fact that Australia imports about 90 per cent of its fuel and has a very low stockpile that would only last 22 days if there was a shortage.
About 98 per cent of the country's imports and exports also rely on foreign-owned or controlled maritime trade systems.
"If there's a problem: a pandemic or credit crunch, then we have a serious problem getting imports and exports," Mr Blackburn said.
"We're basically dumb, absolutely dumb that we basically import everything and have a 'she'll be right' attitude but you know what, we won't always be right."
Mr Blackburn said analysis of Australia's potential to manufacture some medicine, gowns and masks needed to be done.
"We've got to have a certain percentage made here," he said.
Analysis was also needed on what goods Australia needed to survive and maintain its sovereignty. Supply of critical goods should be checked to ensure there was not only one source, which would make it vulnerable to disruption.
"If a supply chain is not transparent and verifiable then we cannot rely upon it," Mr Blackburn said.
"It doesn't matter if we can't get a T-shirt in a crisis but medicines are not optional.
"If we can't check a supply chain then that's not good enough.
"This is not about China, this is about being able to verify supply chains."
'EVERYONE IS OUT FOR THEMSELVES'
Mr Blackburn said people had got used to thinking about natural disasters as a localised event where if a cyclone happened in Queensland for example, NSW would come in to help.
"What we're seeing now is the first global crisis in most people's memories," he said.
"Everyone is out for themselves."
He pointed to Chinese-backed companies sending face masks and other medical supplies to China from Australia and the US hijacking medical supplies being sent to other countries.
Given this, Mr Blackburn said Australia needed a "baseline capability" so that if supply chains were disrupted the country had enough essentials to survive.
"Nothing of what we're seeing now should be surprising for people involved in risk analysis or scenarios in common use around the world," he said.
"We weren't well prepared because we turned a blind eye to it."
He said it was important for all levels of the community including business, industry and even individual members of the population to make themselves more resilient.
"If you can afford it you should have extra back-ups of medicines you need," he said.
"You should have a month's worth of food and water if you've got the money and space."
He pointed to those who lived in tornado zones who were well prepared with back-up power, food and water.
"We have to rethink how we prepare ourselves," he said.
"We wouldn't have fist fights for toilet rolls because we would already have taken the decision to be responsible and have back-ups.
"We have been too complacent in Australia because we've had a really good 30 years."
He said those who could afford it had a responsibility to take their share of the "resilience task" and not to rely on the Government.
"That's going to require a bit of a change of thinking, particularly among people in cities," he said.
"But as a community surely we've got to take responsibility and not just expect everything to be done by the Government."
Mr Blackburn said the coronavirus pandemic could also be a much-needed wake-up call as the world faced a climate crisis that could disrupt the world for much longer than the 12 to 18 months of the pandemic.
"We could get stuck in that (climate crisis) mode for decades because of inertia," he said.
"A pandemic is a far shorter term problem to deal with and hopefully it will make people think about this."