At the Niskanen Center, we believe policy should be informed by strong causal evidence. Sometimes, though, we encounter promising ideas that are so big or novel that no government has yet tried them, and so scant evidence of their effectiveness exists. Such is the case with the use of trade policy to limit deaths from fentanyl and its analogs in the United States. To begin to fill in the blank spaces around this issue, we asked the political historian Kathleen Frydl to explore the history and potential of trade policy as a shield against an unprecedented public health crisis.
Trade policy once formed the basis for U.S. counternarcotics efforts, a time when Treasury Department officials threatened and used drastic sanctions like embargoes, along with subtler tools such as slower customs inspections. Over the past year, the President has threatened and implemented tariffs against our most prolific suppliers of illegally manufactured fentanyl. A tariff is a broad-stroke intervention, a direct tax on imports meant to protect a domestic industry. It punishes both domestic firms and foreign exporters, and it generates collateral damage, including supply chain disruptions and retaliation, without punishing specific bad actors. For these reasons, tariffs serve better as threats at the negotiating table than as tools of policy. To achieve a targeted outcome, a more targeted approach may deliver more–while disrupting less.
A less-known alternative, border adjustments, might accomplish many of the same goals as tariffs – compelling other countries to pick up the tab for negative externalities they generate – but can be deployed within the existing framework of international trade agreements, making them an attractive option to address specific threats to public health and national security. A border adjustment levels the trade playing field, imposing costs on imports from other countries to account for costs borne by Americans. To quote from this paper, border adjustments “balance rather than bias trade.”
That fentanyl has blown apart the old drug enforcement paradigm is widely noted among drug policy analysts. Produced in laboratories, often from legal and regulated substances, the drug is difficult to snuff out at its point of origin, and its potency and physical innocuousness make it hard to detect at customs checkpoints. In fact, most fentanyl seems to enter the country not on the backs of undocumented migrants, but nestled within freight or the luggage of seemingly legitimate commercial travelers. Meanwhile, evidence-based interventions meant to reduce demand work best to mitigate the harms of chronic opioid abuse but do little to reduce the danger of exposure to fentanyl, including unintentional consumption.
Border adjustments target the failures of governments that allow criminal activities to flourish. Placing governments in the target frame seems a logical way to incentivize the large-scale reforms needed to stem the flow of fentanyl. Criminals shift tactics and their organizations evolve; U.S. counternarcotics policy should be pegged to meaningful outcomes that will reduce overdose deaths, regardless of the current face of drug traffic. And, if governments refuse to implement needed reforms, at least border adjustments generate revenue to offset the high costs of harm reduction and drug treatment now borne by US taxpayers, insurers, and philanthropies.
We do not believe there is any one answer to the overdose epidemic. Synthetic opioid analogs are moving targets, changing almost daily in chemical composition and psychological effect. The drug trafficking organizations that distribute them and the chemical producers who supply their ingredients are sophisticated, often complex conglomerates. Threats of tariffs may satisfy an understandable urge to punch back at a foreign menace, but their effects on the human misery opioids cause is essentially untestable. This paper explores a more measured approach that may better serve the objectives of supply-side counternarcotics.