Puerto Rico Can Help Bring Pharmaceutical Manufacturing Back to the US
US healthcare workers have struggled to combat the pandemic with insufficient supplies due to reliance on foreign-produced drugs and medical equipment, according to the Hill.
The Trump Administration realized this issue last week and awarded a $354 million contract to a Virginia company to make COVID-19 treatments domestically. The pandemic has pushed lawmakers to realize that we need to reinvigorate US pharmaceutical manufacturing. Decades ago pharmaceutical companies operated in US territory Puerto Rico. However, after 1996 federal tax policy basically encouraged manufacturers to move to cheaper foreign countries such as China or India.
Puerto Rican pharmaceutical manufacturing would mitigate all the issues that US healthcare workers have been facing. Before 1996, tax laws granted drug and medical device producers favorable policies for manufacturing in US territories. During this time, Puerto Rico produced most of the pharmaceutical and medical devices used by the US.
Puerto Rico can still offer immediate solutions to the current crisis, however, if the administration and Congress use the next relief package to create economic incentives to address two urgent needs at once: re-domesticating pharmaceutical manufacturing and stimulating the Puerto Rican economy. However, President Clinton signed the Small Business Job Protection Act of 1996 to eliminate "corporate welfare."
The manufacturing that was done in Puerto Rico moved to China, India, or Ireland where tax and employment laws were lighter. The Tax Cuts and Jobs Act of 2017 only contributed to the undesirable manufacturing environment in Puerto Rico. Income generated from Puerto Rican business is treated as foreign income and taxed twice.
Some companies have managed to continue operations in Puerto Rico despite the massive changes. According to the FDA, 10 percent of pharmaceuticals used in the US was produced in Puerto Rico. The dollar value of pharmaceuticals produced in the territory exceeds the output of any other manufacturing area. The US needs to stop relying on foreign countries for its medical supplies and turn to Puerto Rico.
Puerto Rico has a manufacturing infrastructure, available factories, and cost-effective labor. The economy in Puerto Rico is struggling, but the next relief package could eliminate all of these problems. Eliminating the foreign tax treatment of manufacturing income generated in Puerto Rico and reinstating tax incentives for companies in the region would help bring US manufacturing home.
Furthermore, these policies would not cost taxpayers but instead increase tax revenue helping to drive down the massive government budget.
Restoring Puerto Rican manufacturing would greatly benefit the US.