The Journal. - China Is Finally Doing Something About the Fentanyl Crisis

Episode Date: August 13, 2024

After years of pressure from the U.S., China is imposing new restrictions on chemicals used in the production of fentanyl. WSJ’s Brian Spegele says the move marks a small step forward after nearly a decade of sometimes-tense negotiations. Further Reading: -China Restricts Fentanyl Chemicals After Years of U.S. Pressure  Further Listening: -The Push to Test Drugs for Fentanyl  -How a Balloon Burst U.S.-China Relations  Learn more about your ad choices. Visit megaphone.fm/adchoices

Overdose deaths in the US have been rising. In 2022, a record 108,000 people died from overdoses. And there is one drug that's been behind a lot of them. Fentanyl is what's known as a synthetic opioid. And to give you a little bit of context, it's a narcotic, it's a drug, but it's an incredibly potent drug. That's our colleague Brian Spiegel. For Americans, the issue of fentanyl is front and center in many of their lives. How many people do we know, friends of friends or family members of friends, who have had

people impacted by the fentanyl crisis. To get this situation under control, the U.S. is targeting a major source of illegal fentanyl. China. Yeah, China is a critical player in all this. There's no way around it. China over the last decade has played such a kind of crucial role in the supply chain of fentanyl.

So, the United States can do a lot of things on the demand side. They can try to control how many people are taking fentanyl. But the United States really needs China's cooperation. And last week, the U.S. got that cooperation. Beijing agreed to regulate key chemicals fueling the fentanyl crisis. But getting here hasn't been easy. Welcome to The Journal,

our show about money, business, and power. I'm Kate Leinbach. It's Tuesday, August 13th. power. I'm Kate Leimbach. It's Tuesday, August 13th. Coming up on the show, how the US brought China onside in the fight against fentanyl. Make your nights unforgettable with American Express. Unmissable show coming up? Good news.

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Benefits vary by card, other conditions apply. In the U.S., there's a legal market for fentanyl in hospitals where it's used for pain relief. But there's also an illegal market, and that's been fueling the increase in overdoses. Fentanyl is often mixed in with other substances like cocaine because it's cheaper. Around 2015, fentanyl deaths are beginning to rise in the United States. This issue is getting a lot more attention, you know, public attention, and the question naturally became is, well, where are all these drugs coming from? And pretty

quickly it became clear from research by the DEA, for example, and other US government agencies that China was the supplier of it, or at least of a significant part of it. Chinese manufacturers were producing fentanyl and sending it to Mexico. From there, it was smuggled into the U.S. Even the Chinese, I don't think, had a great sense of how dangerous this was. And so there was a story that I remember that this was probably around 2015. Customs agents in China were inspecting outbound shipments and they came

across a shipment of fentanyl. They didn't even know what it was. And, you know, six customs agents felt really ill as a result of this in China. One of them fell into a coma just from purely just handling this stuff. And what did the U.S. do when it learned that fentanyl production was coming from China? Well, that was really the beginning of fentanyl production was coming from China. Well, that was really the beginning of fentanyl diplomacy, if you will, with China. We've seen now kind of multiple administrations come through

for the Trump administration, now the Biden administration. And I think what we've seen is a real hardening of attitudes across the board on US-China relations. And fentanyl has kind of been this one issue that really has only gotten worse under, no matter who was president. What did the US do to try to stop the flow of fentanyl from China? So the United States' focus at that time was, let's engage China on these substances themselves to

see if we can at least at a very basic level stop that flow. And they invested a bunch of resources into trying to walk down that path with China. But there wasn't much incentive for China to help. China does not have a drug problem writ large on anything resembling what the United States is grappling with right now. So when you think about purely incentives, China doesn't have the urgency, if you will, to deal with the fentanyl crisis in the same way. That's not to say they don't care about drugs.

They actually take a very hard line on drugs. But I think what has frustrated the United States is that many US officials believe because China does not have a domestic crisis, they've not prioritized this issue at all. And why doesn't China have a domestic crisis? It's a great question, actually. I mean, I think, remember, this is a country that dealt with the Opium Wars in the 1800s. It was incredibly devastating for China.

And so I think culturally, but also politically, they understand the dangers of drug addiction in a way that's very deeply rooted in their history, and also in the history of the Communist Party also. The punishments in China for drug dealing are also severe. The two countries held talks on the problem of fentanyl. The U.S. wanted China to stop the export of fentanyl.

But China said the root cause of the issue was America's failure to prevent and treat drug addiction. Then, in 2018, there was a breakthrough when China's leader Xi Jinping and former President Trump had a meeting in Argentina. So Trump and Xi Jinping are having dinner in Buenos Aires and it's really at the height of the trade tensions. And during that dinner is that Trump says to Xi, well, I want you also to ban fentanyl as a class of drugs.

And China, of course, they wanted to do a deal with Trump on trade. So they agreed to play ball on fentanyl. Trump agreed not to raise tariffs on Chinese goods. And Beijing announced it would restrict all variants of fentanyl. They did exactly what Trump asked them to do in that case. What we saw in the years after is that fentanyl itself, sales by Chinese companies to Mexico or the United States of fentanyl, fell basically to zero.

But stopping the flow of fentanyl is like a game of whack-a-mole. Even though China tightened the rules around the drug itself, Beijing didn't restrict many of the chemicals used to make it. These are called precursors. So China had been willing to schedule and control and restrict the sale of fentanyl, but they were not doing very much on the restriction in sale of these precursors.

These precursors were mostly being exported to Mexico and being made into fentanyl there, then smuggled into the U.S. And when President Biden took office in 2021, he made cutting the flow of precursors a priority. So right from the beginning, the Biden administration says, we think this is an issue that we can work with China on to build confidence in the relationship, to test China, to see how serious they are about working together with us on this. And then Nancy Pelosi goes to Taiwan. And that was in August of 2022. The people of Taiwan have proven to the world

that with hope, courage and determination, it is possible to build a peaceful and prosperous future, even in terms of the challenges you face. And now more than ever, America's solidarity with Taiwan is crucial. And the response from China is very, very angry. And among the acts of retaliation that China takes is that they cut off all counter-narcotics cooperation with the United States. How big of a deal was this for the U.S.?

Yeah, it was a huge deal. It was a huge deal. So I think what is very clear at this point from talking to US officials is that if China doesn't want to play ball at all, then it's going to be infinitely harder for us to make progress on this issue. So Chinese chemical companies kept selling ingredients for illegal fentanyl. And in 2022, fentanyl and other synthetic opioids were the cause of around 75,000 overdose deaths in the U.S. And so there's a lot of urgency from the government, local governments, but also the Biden administration itself,

to try to get this back on track. And the Chinese aren't ready to pick up the phone. Coming up, how the US Taiwan, things between the U.S. and China were not good. How did the U.S. get things back on track? Yeah, well, first we had a lot of silence. And going into 2023, as we saw a little bit of warming between the United States and China. There was clear momentum that was building to try to get Biden and Xi, President Biden and President Xi in the same room to have a summit. Both sides seemed to begin to see

it in their interest, but they weren't going to do it unless they had real deliverables to bring back. So what was China asking for? Back in the Trump administration, President Trump had put sanctions, blacklisted basically, a Chinese police forensics institute. And that institute had been implicated in human rights abuses against Uighurs, ethnic Uighurs in the region of Xinjiang. That's a very sensitive issue in and of itself. China did not like that

at all. And so the precondition that China then began setting out was, well, if you want to get counter-narcotics cooperation back on track, we demand you remove the sanctions. This left the Biden administration in a tough spot. If they lifted the sanctions, they could be criticized for being soft on China. If they didn't, more Americans would continue to die from fentanyl. For months, U.S. and Chinese negotiators tried to find common ground. And then last November, Biden and Xi finally met at a summit in California. The two leaders shook hands on a red carpet. And there he is, President Xi of China. The two leaders have known each other for decades.

And President Biden, of course, greeting him. Today's meeting expected to last more than four hours. President Biden, of course... Biden and Xi, at the end of that meeting, they come out and they say, we are going to restart kind of our kind of cooperation together. It's going to be in the end of that meeting, they come out and they say, we are going to restart counter-aracodist cooperation together. It's going to be in the form of a working group where we're going to begin to talk about these issues again.

And that's not exactly like a commitment from China that we're going to fix everything. But again, the United States had fairly low expectations and they just felt they needed to get China back in the room and engaging in good faith with the United States. Here's Biden after the meeting. So today, with this new understanding, we're taking action to significantly reduce the flow of precursor chemicals and pill presses from China to the Western hemisphere. How significant was that for the U.S. to drop these sanctions related to Xinjiang? It's a big deal in the sense that it showed the U.S.'s priorities.

So what was very clear is that the United States was prioritizing its own domestic kind of issues, an issue like fentanyl, over kind of these more general issues of kind of global human rights, if you will. So it really kind of showed a little bit of the United States' thinking as well. After that summit, China began to take some action. It quietly shut down some companies that sell precursor chemicals. And acting on U.S. intelligence, China arrested a suspect involved in money laundering for a drug cartel in Mexico. This is exactly what the United States was looking for. China making arrests, shutting people down.

And they've done some of it and probably not as much as the United States would like to see. And then last week, after years of US pressure, China agreed to do more. Beijing announced that in September, it will impose tighter restrictions on the production and sale of precursors. And the expectation is you are going to see companies basically drop out of this market, stop producing this stuff, because it becomes much more dangerous for you now that you're producing something that the government has said they are going to target domestically.

So on the ground in the US in the fentanyl crisis, how much of a difference will this make? It's definitely an important step without a doubt. The question is what's going to happen from here. So how does the United States get China to deal with it more holistically. Things like strict know your customer regulations, right? China, remember, has an incredibly powerful police force. They could pass a law that says do not provide support to criminal cartels, to Mexican cartels or to criminal organizations, period. They could do that. And that's the kind of thing I think the United States would like to see. But that's a much more complicated conversation to have. And I'm not sure how we're going to get there.

But that's exactly what they're talking about. That's the kind of thing they're talking about in these working group sessions that they've been having over the last few months. How committed would you say China is to this? Like, could there be a chance that they pull back? I think they're committed only as far as the relationship is seen as steady and helpful to China. So remember, China has been willing to use this

as a lever before in very dramatic fashion. And then when the case when, you know, Representative Pelosi went to Taiwan, they make no secret about their willingness to kind of turn on and off the engagement on this issue because they know it's so important to the United States. So what happens the next time, which is inevitable, the next time the US and China run into a rough patch,

whether it's on Taiwan or the South China Sea or technology restrictions, whatever it might be, does China attempt to use this as a point of leverage again? And that's, we're going to find out. We're certainly going to find out probably sooner rather than later. That's all for today, Tuesday, August 13th. The Journal is a co-production of Spotify and the Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts.

We're out every weekday afternoon. Thanks for listening. See you tomorrow.