Is Taiwan the Next Hong Kong?
China Tests the Limits of Impunity
At the G-20 summit in Buenos Aires in December, U.S. President Donald Trump announced that his Chinese counterpart, Xi Jinping, had agreed to tighten China’s controls over manufacturing fentanyl, a powerful synthetic opioid that is orders of magnitude stronger than heroin.
First synthesized in 1960, fentanyl is regularly used as a fast-acting general anesthetic in surgeries. Yet over the past four years, illicit fentanyl, much of it produced in China and mailed to U.S. buyers, has emerged as the major driver of fatal overdoses in the United States. In 2013, the National Forensic Laboratory Information System, which collects information on drugs seized and identified by U.S. law enforcement, had only 934 reports of fentanyl. The next year, it had more than 5,000 reports of fentanyl and in 2017, nearly 59,000. Over the same time period, the number of fatal drug overdoses in the United States rose from around 44,000 to 70,237. Of those, the number involving synthetic opioids other than methadone—a category dominated by fentanyl and its analogs—rose from 3,105 to 28,466, an increase of more than 800 percent. Synthetic opioids now account for more fatal overdoses than any other drug category. In 2017, more than half of overdoses for either cocaine or heroin also involved synthetic opioids.
The details of what, exactly, China has agreed to do about fentanyl remain unclear. In a statement released during the G-20, the Chinese Foreign Ministry said that Beijing had “decided to schedule the entire category of fentanyl-type substances as controlled substances, and start the process of revising relevant laws and regulations.” Fentanyl itself has been controlled internationally for more than 50 years, but China may be considering a blanket ban on all fentanyl analogs, following a similar regulation published by the DEA in early 2018. Such a ban, however, would be largely symbolic—it would do little to help China police its vast and underregulated pharmaceutical and chemical industries, let alone have any effect on America’s overdose crisis.
Still, policymakers in Washington should see Beijing—on this issue, at least—as an ally. Some in the White House have suggested that China is intentionally shipping fentanyl to the United States to get even with the West for the Opium Wars. It is not, and such attitudes are unproductive. In fact, the Chinese government is currently working to improve oversight of its pharmaceutical and chemical industries—a difficult task, given their size and the weakness of China’s regulatory regime. As Chinese regulation gets better, however, the government will gain more control over the illegal production of drugs such as fentanyl.
Yet even if China were successfully to crack down on fentanyl and fentanyl analogs it would not fix America’s opioid problem. Any decrease in Chinese fentanyl production will be offset by a shift in production to one of the many other nations with an entrepreneurial, lightly regulated chemical industry that has good connections to the United States. India is an obvious candidate. Washington should continue to cooperate with China on drug control, but as long as U.S. drug users demand illicit opioids, entrepreneurial chemists around the world will find a way to supply them.
Unlike traditional opioids, such as heroin, synthetic opioids are not derived from the poppy plant—they are created in laboratories using inexpensive precursor chemicals. This means that creative chemists can easily circumvent regulations by tinkering with fentanyl’s molecular structure, creating scores of new derivatives, such as furanyl fentanyl and acetyl fentanyl. Trained chemists can make fentanyl relatively easily, given sufficient incentive to do so.
Today they have that incentive, thanks to the Internet. Foreign producers can readily reach buyers in the United States by listing their drugs on online marketplaces. And because pure fentanyl is so potent, producers do not have to rely on criminal networks to smuggle it to consumers. Instead, they can ship small quantities (tens of grams) straight to buyers using the international postal system and private express consignment carriers, such as FedEx and DHL. Any Foreign Affairs reader who is interested can just search the Web and place an order.
According to the DEA, China and Mexico are the two major sources of fentanyl that enters the United States. Mexican cartels dominate the importation of illegal drugs to the United States, and they have a history of importing methamphetamine precursors from China, synthesizing the drug, and then smuggling it in bulk across the U.S. border. They appear to be doing the same thing with fentanyl today. Yet Mexican-sourced fentanyl is generally of low purity. According to reports from the DEA and Customs and Border Protection (CBP), fentanyl trafficked into the United States from Mexico is, on average, less than ten percent pure. Chinese fentanyl, by contrast, is commonly more than 90 percent pure. We calculate that, adjusting for purity, almost 80 percent of the fentanyl seized by CBP in financial year 2017 was seized at mail and express consignment carrier facilities in shipments of no more than a kilogram. CBP indicates that most of these parcels originated in China.
China’s role in the supply of fentanyl and precursors is a consequence of the country’s large and underregulated chemical and pharmaceutical sectors. During the 1990s, the pharmaceuticals industry was one of China’s fastest growing, and today it includes some 5,000 manufacturers with an annual production capacity of more than two million tons, making the country the single largest exporter of active pharmaceutical ingredients (APIs) in the world. China is also the world’s leading chemical exporter by value. The U.S. State Department estimates that China has approximately 400,000 chemical manufacturers or distributors. Both industries have huge semi-legal gray markets. In 2007, industry analysts estimated that uncertified manufacturers produced half of the APIs sold in China, with most exported to foreign markets.
China’s chemical and pharmaceutical sectors have outgrown the government’s capacity to regulate them. The central government, through the China Food and Drug Administration (CFDA), designs the rules governing national manufacturing standards for APIs, but it generally relies on provincial authorities to enforce them. This division in enforcement responsibilities creates opportunities for regulatory capture, non-enforcement, or outright corruption. Some provincial governments are known to protect, promote, and sometimes even manage local economies and industries against the will—or simply without the knowledge—of Beijing. So although fentanyl is a controlled substance at the national level, unscrupulous manufacturers may dodge official regulations.
The CFDA is attempting to address this problem by hiring more inspectors and improving its enforcement capabilities, but the agency remains woefully underresourced. From 2015 to 2017, the CFDA, which employs about 2,000 inspectors, has averaged just over 600 inspections per year. Compare that to the U.S. Food and Drug Administration, which is tasked with monitoring a smaller and more compliant industry. The FDA maintains some 5,000 full-time employees in its Office of Regulatory Affairs, who conducted around 5,000 inspections in fiscal year 2017. The CFDA simply does not have the ability to keep tabs on all the country’s drug producers. In 2017, it claimed to have inspected 15 manufacturers of narcotic or psychotropic drugs, precursors, or pharmaceuticals. Three failed the inspection for either improperly handling their mailing and transportation certificates or failing to control their samples.
Beijing knows it has a problem with enforcing regulations, which extends beyond the chemical and pharmaceutical sectors. Chinese companies in a variety of industries are cutting corners at the expense of consumer safety, selling, among other things, pet food that contains melamine, toothpaste tainted with antifreeze, children’s toys painted with lead, contaminated blood thinners, and defective vaccines. In this environment, it is no wonder that drug manufacturers are operating on the margins. In an effort to get its regulatory house in order, in March 2018 the central government proposed a reorganization of the CFDA, combining it with other regulatory bodies. Details of the reorganization have not been finalized, but industry observers suggest that it is intended to extend the CFDA’s regulatory reach and reduce gaps in oversight. At the same time, Beijing has started to crack down on controlled substances, often at the request of other countries. Since late 2015, Chinese authorities have scheduled more than 170 chemicals, including dozens of synthetic opioids and two important fentanyl precursors.
Trump’s attempt to press Beijing on fentanyl is the latest in a long history of U.S. government efforts to push source countries to cut their drug exports. Since 1986, the president has been required to issue annual reports identifying major drug-transit or drug-producing countries and certifying that they have made serious attempts at drug control. Yet decertification, which can lead to U.S. sanctions (such as refusal to vote for World Bank loans to the country), has largely been a political tool—Syria has always been denied certification, while Mexico has never been decertified, even during periods in which drugs were pouring over the border and Mexican drug control efforts were notoriously ineffective and corrupt.
China is unlikely to be decertified, even by Trump: a popgun is no use against an elephant, particularly one that never forgets an insult. The Chinese government, moreover, has no interest in letting this problem fester. The illegal synthetic opioid market is trivial in terms of revenues for the country and not even regionally significant within China. Beijing is fiercely protective of its international reputation for controlling crime, and it will want to remove its illicit opioid industry from the list of issues that wealthy nations can credibly complain about. Persuading Beijing to cooperate with Western anti-drug policies is a much easier task than convincing the government of Afghanistan to fight poppy cultivation, which would deprive rural Afghans of a major source of income, and would be impossible anyway given the weakness of the Afghan state. On the other hand, Washington cannot treat China like Colombia and make drug control the number one priority of the bilateral relationship. The U.S.-Chinese agenda is simply too crowded with other important issues.
Recently, Washington has largely encouraged China to schedule emerging substances. Operationally, U.S. law enforcement agencies, such as the DEA and the Department of Homeland Security, continue to cooperate with their Chinese counterparts by sharing information, helping target suppliers, and offering technical assistance, while the DEA has worked to highlight legal changes by the Chinese government expanding the set of prohibited substances. Yet the Trump administration’s inability to fill vacancies in key agencies with permanent appointments, such as the DEA and the Office of National Drug Control Policy, have, since 2017, impeded the United States’ ability to coordinate its drug policy with its partners abroad.
Under U.S. President Barack Obama, the State Department was instrumental in working with international organizations like the United Nations and the Universal Postal Union to tighten controls over fentanyl precursor chemicals and expedite the adoption of electronic mail-tracking systems. Trump’s decision to withdraw the United States from the Universal Postal Union, however, has stymied Washington’s ability to press for measures to improve control of international mail in order to make it more difficult to ship fentanyl. Likewise, Trump’s disputes with China over trade and other issues could hinder future cooperation on narcotics. Harsh rhetoric may deter China’s efforts to issue blanket bans on fentanyl or to conduct joint operations with U.S. law enforcement.
U.S. policymakers should remember that international drug supply chains are extremely resilient. In the mid-1990s, Peru was the main source of coca for Colombian cartels, which flew the Peruvian coca paste into Colombia, where it was processed into cocaine and then trafficked to the United States. Washington began a program, Air Bridge Denial, to disrupt the supply chain between Colombia and Peru. This program, however, merely accelerated the shift of coca cultivation from Peru to Colombia, with little effect on the availability of cocaine in the United States.
Unlike coca or poppy, synthetic drugs like fentanyl can be produced almost anywhere. The Netherlands, for example, used to be the main source of amphetamines for the European market, but once Dutch authorities cracked down, production rapidly shifted to central Europe. Assume for the moment that within the next three years China is able to eliminate the flow of fentanyl to the United States. A hungry U.S. market for opioids and an established chain of domestic distributors will attract fringe chemical manufacturers or unscrupulous chemists in other countries to take the place of Chinese producers, especially now that buyers in the United States can purchase their drugs online.
In the event of a Chinese crackdown on fentanyl, India is a plausible candidate to take China’s place in the supply chain. India has a large chemical industry and is one of the world’s leading producers of APIs. Regulation is lax and corruption is rife: India ranked 81 out of 180 in Transparency International’s 2017 Corruption Perceptions Index, four spots below China. India is also a major U.S. trading partner: in 2017, it exported about $50 billion in goods to the United States—well below China’s $500 billion, but a substantial sum nonetheless. India is already known as a source of tramadol, another synthetic opioid, for drug markets in Africa and Asia. And this fall, Indian authorities reported their first seizure of a small clandestine fentanyl lab.
None of this is to say that Washington should not encourage and assist the Chinese government in its efforts to strengthen its regulatory capacity, preventing the production of illicit opioids such as fentanyl. Even a brief interruption to China’s supplying of our fentanyl market will save some lives. But Chinese fentanyl did not create America’s opioid crisis; rather, Chinese fentanyl is merely meeting America’s appetite for opioids, which has grown steadily over the last two decades thanks to the oversupply of prescription painkillers.
The U.S. government should be focusing more of its efforts on domestic demand-side programs, doing what it can to extract individuals from illicit drug markets—especially those awash in synthetic opioids—through medication-assisted therapies such as methadone and buprenorphine. The opioid problem is such that policymakers should also be considering innovative interventions such as heroin-assisted treatment, which provides users with pharmaceutical-grade heroin rather than potentially contaminated street drugs—an intervention that has proved successful in five western European countries. Chinese efforts to crack down on fentanyl production are welcome, but they cannot eliminate an opioid market for which U.S. demand, not foreign supply, is the primary component.