The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) has announced that it is further restricting access by Huawei Technologies Co. Ltd. and its designated non-U.S. affiliates (“Huawei”) to U.S.-produced technology and software. BIS first added Huawei to its Entity List on May 15, 2019 and has continued to impose additional export restrictions on Huawei under the U.S. Export Administration Regulations (“EAR”). Most recently, BIS published a Federal Register notice to implement the following enhancements. Although BIS published this Federal Register notice on August 20, 2020, the following rule changes took effect retroactively as of August 17, 2020:
Addition of Thirty-Eight New Huawei Affiliates to the Entity List. In its announcement, BIS added thirty-eight (38) additional Huawei affiliates to the Entity List. This action now brings the total number of Entity List-designated Huawei affiliates to one hundred and fifty-two (152). The EAR generally prohibits anyone, anywhere in the world from supplying products, software or technology that is “subject to the EAR” to these Huawei affiliates without a BIS license.
Expiration of Huawei Temporary General License. BIS had previously issued (and then, on multiple occasions, extended) a Temporary General License which permitted certain transactions with Huawei Entity List affiliates in order to support existing networks, equipment and handsets that were in existence prior to Huawei’s initial Entity List designation on May 16, 2019. In its Federal Register notice, BIS announced that it would be allowing the Temporary General License to expire. As a result, pursuant to the expiration date set in its most recent renewal notice, the Huawei Temporary General License expired effective August 13, 2020.
Anyone who previously utilized the Temporary General License was required to obtain certain compliance certifications in connection with transactions conducted pursuant to the Temporary General License and the EAR will require those persons to retain those certifications in accordance with the EAR’s recordkeeping requirements.
Permanent Authorization for Cybersecurity Research and Vulnerability Disclosures to Huawei Entity List Companies. The Temporary General License also contained a provision which authorized the disclosure of certain information to Huawei Entity List companies in order to assist with maintaining the integrity and reliability of existing data networks. After allowing the remainder of the Temporary General License to expire, BIS permanently codified this narrow exception into the EAR in order to promote cybersecurity.
Expansion of the Huawei Foreign-Produced Direct Product Rule. In May 2020, BIS amended the EAR’s foreign-produced direct product (FPDP) rules to designate the following items as “subject to the EAR”: (i) foreign-produced items produced or developed by a Huawei Entity List affiliate through the use of technology or software controlled under certain Export Control Classification Numbers (ECCNs), and (ii) foreign-produced items that are produced using equipment which is the direct product of U.S. origin software or technology controlled under certain ECCNs and also produced according to software or technology specifications produced or developed by a Huawei Entity List affiliate. BIS has now significantly expanded this rule.
As amended, the new Huawei FPDP rule now completely disregards whether foreign-produced items produced by a 3rd party are produced according to Huawei specifications and instead extends the Huawei FPDP rule’s coverage to all foreign-produced items resulting from the specified software, technology or production equipment which are intended for incorporation into or for use in the “production” or “development” of any “part”, “component”, or “equipment” to be produced, purchased or ordered by a Huawei Entity List company or otherwise included in any transaction featuring a Huawei Entity List company as a “purchaser”, “intermediate consignee”, “ultimate consignee” or “end-user” (terms in quotation marks in the previous sentence are defined terms under the EAR).
As a result of these amendments, a much broader range of foreign-produced items are now “subject to the EAR” and therefore prohibited for export, reexport or in-country transfer to any Huawei Entity List company without an appropriate BIS license. Although BIS will normally review such license applications on a “presumption of denial” standard, these amendments did create an exception which states that BIS will evaluate license applications involving Huawei Entity List companies on a “case-by-case” basis when they involve foreign-produced telecommunications systems, equipment and devices below the 5G level.
The amendment did feature a savings clause, which allowed the continuance of certain qualifying transactions which were initiated prior to August 17, 2020.
Grant Leach is an Omaha-based partner with the law firm Husch Blackwell LLP focusing on international trade, export controls, trade sanctions and anti-corruption compliance.
The United States is formally demanding that the United Nations (U.N.) reimpose sanctions on Iran for its failure to meet commitments to limit its nuclear program set forth under the Joint Comprehensive Plan of Action (JCPOA). U.N. sanctions on Iran were lifted in 2015 as part of the terms of the JCPOA, which included the United States, European Union, France, Germany, the United Kingdom, Russia, and China as signatories. The U.S. formally withdrew from the JCPOA in 2018 and reinstated sanctions on Iran.
According to President Trump, the U.S. intends to restore “virtually all of the previously suspended U.N. sanctions on Iran. It’s a snapback.” Secretary of State Mike Pompeo is scheduled to go before the United Nations this week to officially notify the Security Council that the U.S. intends to restore U.N. sanctions on Iran. According to the Department of State’s press release, a range of U.N. sanctions will be restored within thirty (30) days, including the requirement to end all nuclear enrichment activities and the extension of the arms embargo on Iran, which is currently set to lapse in October.
The decision to request a snapback of U.N. sanctions on Iran follows the failure of an effort to extend a five-year U.N. arms embargo on Iran. The legality of the requested snapback by the U.S. has been questioned by other members of the JCPOA and the U.N. Security Council because the U.S. is no longer a party to the agreement. The Administration, however, maintains that as a permanent member of the Security Council, it has the authority under U.N. Security Council Resolution 2231 to push for a snapback of sanctions.
As a “participant state” in the JCPOA under the resolution, the U.S. claims it can assert “significant non-performance of commitments” by Iran to force a snapback within 30 days. It is not clear how the U.S. without support from Europe would enforce the U.N. sanctions. Without support from the rest of the Security Council, the U.S. will need to enforce sanctions unilaterally.
Nothing says “summer” like a fresh tomato. And thanks to trade, tomatoes aren’t just a seasonal treat for Americans. A trade policy battle, however, over our favorite little red vegetable that had simmered on the back burner for decades recently heated up again and might have threatened our ability to enjoy tomatoes year round.
While NAFTA – now replaced by the U.S.-Mexico-Canada Agreement (USMCA) – eliminated trade barriers for most agricultural exports, trade in tomatoes between the United States and Mexico remains complicated to this day. U.S. growers have made a fresh push for the Administration to protect domestic tomato production against imports of increasingly competitive Mexican produce.
Seasons of Discontent
The United States is the second largest producer of tomatoes in the world, but with each American eating an average of more than 20 pounds of tomatoes a year, we import them to satisfy high demand. Mexico is the largest exporter in the world and the United States’ top international supplier. Of the $2.4 billion worth of tomatoes the United States imported in 2019, $2.1 billion came from Mexico, representing 87.5 percent of total U.S. tomato imports.
Although Mexico exports a wide variety of seasonal produce to the United States ranging from bell peppers to blueberries, it’s trade in tomatoes that has been a consistent source of tension. That’s because tomatoes are one of the highest valued fresh vegetable crops in the United States and Mexican tomatoes directly compete with tomatoes grown in the state of Florida during the winter and early summer.
Over the last two decades, U.S. tomato production has declined substantially while Mexican imports increased. And while Florida is still the top tomato state in the nation, production there has declined steadily since 2000. Florida once had 300 tomato growers, but now has fewer than 50. Labor is one major reason for this change. Fresh tomatoes are largely picked by hand – and farm workers are increasingly hard to find and expensive.
Animated Suspension
Throughout this downward trend, the American tomato industry has complained that Mexican growers have an unfair advantage. The Mexican tomato industry has significantly ramped up production not just thanks to lower labor costs, but also extensive support from the Mexican government in the form of capital for producers, investment in infrastructure and technology to modernize the industry, and other subsidies throughout the supply chain.
The American tomato industry first filed a case with U.S. trade agencies back in the 1970s seeking relief from competition from low priced tomatoes from Mexico, which they alleged were being sold at less than fair market value in the United States (or “dumped”). The antidumping case was ultimately dropped, but after NAFTA was enacted, Florida tomato growers renewed their complaint, claiming Mexican tomatoes were a threat to the domestic industry. The U.S. International Trade Commission found in favor of U.S. growers. Facing potential antidumping tariffs on their exports, Mexican growers in 1996 entered into what’s known as a “suspension agreement.”
By law, the Commerce Department can suspend an antidumping duty or countervailing duty investigation when the parties in the case reach an agreement that meets certain statutory and policy criteria. Under the tomato suspension agreement, the Mexican industry agreed to reduce production and meet a minimum price floor for fresh tomatoes. Suspension agreements require ongoing monitoring to ensure compliance through a process that is completely separate from NAFTA or USMCA. The tomato suspension agreement of 1996 has been updated and expanded three times: in 2002, 2008 and 2013.
To-may-to, To-mah-to, Let’s Call the Whole Thing Off
The suspension agreements were intended to prevent further dumping and injury to the U.S. tomato industry. However, growers in the U.S. southeast have said the agreements were not successful in achieving that goal because provisions were either unenforceable or subject to loopholes. With those concerns in mind, the Florida Tomato Exchange submitted a request to the Commerce Department in November 2018 to terminate the 2013 suspension agreement.
In February 2019, the Commerce Department notified the Mexican government of its intention to withdraw. On May 7, the U.S. government officially terminated the 2013 suspension agreement and enacted a 17.56 percent duty on imported Mexican tomatoes. Some expressed concern the move would stir up a trade war between the two countries, leading to higher prices for consumers and a reduction in the winter tomato supply as Mexican growers shifted their acreage to other crops, though the Administration stated its willingness to resolve the dispute even as its antidumping investigation continued.
Then, in September 2019, the Administration announced a new suspension agreement had been reached with Mexican exporters, effectively putting an end to the investigation. The new agreement is meant to protect U.S. producers from being undercut on prices. It includes audits and border inspections to prevent imports of low-quality tomatoes that could have a similar effect of depressing prices.
USMCA’s Rotten Tomatoes
At the same time that the antidumping investigation was playing out, USMCA was picking up steam on Capitol Hill. After receiving bipartisan support in the House and Senate, USMCA was signed into law on January 29, 2020 and entered into force on July 1, 2020, officially replacing NAFTA. It is easy to see why most American farmers and ranchers rallied support for USMCA. Canada is the top market for U.S. farm products, with Mexico following in the number two spot. U.S. agricultural exports to both countries totaled $44 billion in 2018.
However, one vocal segment of the U.S. agriculture industry was not entirely happy with the USMCA provisions. Fresh produce growers in the U.S. southeast expressed concern that Mexico continued to undercut their prices, dumping cheap fruits and vegetables in the market during their peak harvest time. Farmers from states including Georgia and Florida argued they had watched NAFTA erode their share of the U.S. market and that USMCA was an opportunity to provide a remedy.
American growers from the southern region pushed for new protections in USMCA through antidumping and countervailing duty provisions as a way to even the playing field from what they see as unfair subsidies, labor and environmental practices by Mexico that make U.S.-grown specialty crops like tomatoes and blueberries less competitive.
To create some leverage in the USMCA negotiations, lawmakers from the southeast region introduced legislation, the Defending Domestic Produce Production Act, designed to make it easier for seasonal growers to petition the Commerce Department and the U.S. International Trade Commission to investigate Mexico’s subsidies and dumping of cheap produce. This change would measure injury to industries with short harvest windows (like tomatoes and strawberries) on a seasonal basis rather than having to prove nation-wide, year-round harm.
Hybrid Views in the Produce Industry
But the U.S. produce industry is not unified in its criticism of seasonal produce imports from Mexico or in its support for a trade remedy to the problem. Growers and distributors in western states like California and Arizona argued against including changes in USMCA because many of those companies work in both the United States and Mexico to ensure fresh produce is available year round. They also worried that Mexico would use the same approach against American produce like apples and grapes. Industry groups in Nogales, Arizona opposed the changes as well, citing a negative ripple effect on their economy if the produce from Mexico that passes through gateway communities were significantly reduced.
Twenty-three Senators and U.S. House members from Arizona, Texas, and California sent a letter to the U.S. Trade Representative opposing attempts to insert seasonal antidumping language into USMCA. The lawmakers wrote: “using USMCA as a vehicle for pursuing seasonal agriculture trade remedies risks pitting different regions of the country against each other.”
While the Trump Administration initially seemed sympathetic to the southeastern growers’ complaints, the provisions ultimately did not make it into USMCA given the concerns of other producers in the sector who would be potential targets for retaliation from Mexico. But the Administration committed to continue an investigation into the issue.
Is the Dispute Ripening Again?
In August 2020, USTR, the U.S. Department of Agriculture, and U.S. Department of Commerce held two hearings to collect feedback about whether trade policies are harming American seasonal produce growers. The hearings are part of an effort promised by the Administration to respond to any trade distorting practices within two months of USCMA going into effect.
At the listening sessions, lawmakers and growers from southeastern states spoke out about how their sector is impacted by subsidies and other practices by Mexico that they believe are hurting American agriculture. Senator Marco Rubio (R-FL) asked the Administration to use Section 301 authority to investigate and potentially take retaliatory action against Mexico.
Following the hearings, U.S. Trade Representative Robert Lighthizer said he is working with USDA Secretary Sonny Perdue and Commerce Secretary Wilbur Ross to come up with a plan to address the growers’ concerns by September 1. What action the Administration may take to protect American producers – notably located in states like Florida that may be key for the president’s re-election bid – remains to be seen.
What we do know is that southeastern produce growers seem cautiously optimistic that the new suspension agreement for tomatoes will be more effective than past iterations. And while most Americans are likely unaware of the ongoing tomato trade tension between the U.S. and Mexico, shoppers undoubtedly benefit from year-round access to affordable fresh produce.
Sarah Hubbart provides communications strategy, content creation, and social media management for TradeVistas. A native of rural Northern California, Sarah has melded communications and policy throughout her career in Washington, D.C., serving in government affairs, issues management, and coalition building roles in the agricultural sector. She is an alum of California State University, Chico and George Washington University.
This article originally appeared on TradeVistas.org. Republished with permission.
One of the most difficult aspects of global trading is the language barrier that businesses face. The famous cultural faux pas of brands trying to operate overseas never reflect well on the companies concerned, unless you subscribe to the theory that all PR is good PR.
Cultural missteps are a major reason global brands can’t simply stop at translation. They also need localization services. Localization is the process of preparing all parts of a product or message for a certain region. Below, we’ll look in more detail at what localization is, why it’s important, and how it can help your business.
What Is Localization?
Localization covers far more than translating a message from one language into another, although that is part of what it entails. Localization is about making sure a product or a piece of content fits into another market or location.
Localization must take many factors into account while converting a message or product. First and foremost, it makes sure that the item in question stays consistent across cultural barriers while also fitting into the new culture.
What is the localization process? Well, it adapts a message in several ways. It also addresses graphics. The content itself might be modified to suit the habits or expectations of the new market.
The layout of the text could be altered to fit a new language. Some cultures read right to left instead of left to right, so localization takes this into account. Formats such as phone numbers, measurement units, currency symbols, and addresses might be updated as part of the process as well.
Another large and integral part of localization is making sure the message or product conforms to new market regulations and consumer habits. For instance, different jurisdictions have different privacy laws, seller licenses, or censorship rules that a company must adhere to. On the business side, what works in one market for a product might not work in another market.
Why Is Localization from a Translation Company Important?
Given how much localization handles, it’s a necessary service if you wish to do business in a foreign market.
Why is localization important? Business ventures are notoriously risky as it is. Business dynamism records the number of firms that are born and fail. A positive business dynamism means that more firms are born than fail. However, in the US, 12 new firms per business establishment were created in 1978; this had fallen to 6.2 by 2011.
If you plan to do business globally, it’s important to use a translation company for your localization efforts. No business can afford to fail in a new region simply because it didn’t take local cultural nuances into account!
How Can Localization Help a Brand?
Professional localization services can make the difference between a company succeeding and struggling in a new overseas market.
Groupon has become a major case study in how not to expand into overseas markets since it began trying to do so back in 2011. The company rushed its service into the Chinese market without understanding Chinese consumer habits or culture. It accumulated $46.4 million in net losses and $2.1 million in revenue.
One issue Groupon failed to realize was that it pushed margins on deals too much for the Chinese market. In the US, Groupon makes 40% margins on deals. In China, no competitor makes more than 14%.
One of the largest factors localization takes into account is consumer and business habits within the new market. Without a strong localization team, it’s hard to understand certain details about a new culture, its purchasing habits, and its business trends, as Groupon showed.
Products and messages cannot simply be copied and pasted all around the world; localization is necessary for successful expansion in global markets.
How to Find the Best Localization Services
Many translation agencies also specialize in localization, especially larger agencies. You may want to start by checking with prospective translation agencies to see how they handle localization
When searching for services online, make sure the company has a professional website and proof of past work. A professional agency will have testimonials or a portfolio showing past work. Some smaller agencies or individuals may also have references that you can call.
You can also check around your professional network to see if anyone in your industry has worked with, and can recommend particular localization services.
When looking for localization agencies, be sure to check to make sure they have a background in business localization. Ideally, they should have worked with marketing messages and global business expansion in the past.
Finding a top-notch localization service is important; it can mean the difference between a strong entry into a certain market and a dismal flop.
The U.S. Department of Commerce (“Commerce”) announced in a Federal Registernotice that it is proposing significant changes to its antidumping and countervailing duty regulations. The last time such sweeping changes were undertaken were in 1997 after the WTO went into effect. Commerce is requesting comments on the proposed changes by September 14, 2020.
Among the most significant changes outlined in Commerce’s proposal are the changes to its conduct of scope proceedings, which determine whether a certain product is subject to the scope of an AD or CVD order; and to circumvention proceedings where importers are alleged to be avoiding duties, often by using components from the subject country to assemble the product in another country not subject to the relevant AD/CVD order. Currently, both types of proceedings are governed by the same set of regulations in 19 C.F.R. §351.225. Commerce’s proposal would separate the two proceedings into unique regulatory frameworks.
The proposed modifications also affect the following areas of analysis which are often contentious in the context of scope rulings and circumvention proceedings:
Proposed Changes to Scope Rulings/Proceedings
-The proposed changes to the scope would “codify and clarify” Commerce’s analysis with respect to mixed media products that involve commingled goods where a single item in a commingled product may be subject to an AD/CVD order. Mixed media products generally refer to a set of packaged goods that contain multiple products (g. a plastic toolbox with nails, screws, a level, a hammer, and a couple of screwdrivers where only the nails and screws are potentially subject to an AD/CVD order and the remaining items when examined individually are not).
-The changes would codify Commerce’s longstanding “substantial transformation” test or analysis, which is used to determine the country of origin of a product or products.
-The changes would codify the analytic framework in which the primary analysis in any scope inquiry is the language of the scope itself.
Proposed Changes to Circumvention Proceedings
-The proposed changes to the circumvention regulations would grant Commerce the authority to self-initiate anti-circumvention proceedings without the filing of a request or petition by the U.S. domestic industry.
-The changes would enhance Commerce’s ability to make circumvention determinations that would apply to the exporting country as a whole rather than on a company-specific basis.
-The changes would codify Commerce’s current practice with respect to various issues including the valuation methodology for parts and components; the criteria for determining whether a product is “later developed,” and the criteria for determining whether any alterations to the merchandise at issue are “minor.”
Proposed Changes to Both Scope Proceedings and Circumvention Proceedings
-The proposed regulations would also make other changes, including modifications of the deadlines in scope and circumvention proceedings and modifications to the information a party must provide in any request for initiation of a scope or circumvention proceeding.
-Perhaps most importantly, the proposed modifications to both the scope and circumvention regulations would retroactively impose duties on any unliquidated entries, dating back to the date on which the preliminary determination was issued during the original investigation, rather than to the date that the scope or circumvention inquiry was initiated, as is the case under the current regulations.
-The proposal also creates a new regulation to address procedures and standards related to Commerce’s consideration of covered merchandise referrals from Customs and Border Protection (“CBP”) in Enforce and Protect Act (“EAPA”) investigations.
Proposed Changes to New Shipper Reviews
-In addition to the proposed scope changes, Commerce also has proposed major changes with respect to new shipper reviews. These include: (1) requiring more detailed information at the outset of a request for a new shipper review so that Commerce can “expend its resources in conducting a new shipper review only where there is a reasonable likelihood that there ultimately will be a bona fide sale for Commerce to review;” (2) limit requests for new shipper reviews to only those producers or exporters who can demonstrate the existence of a bona fide sale by providing certain documentation, including a certification from an unaffiliated U.S. customer that it did not purchase subject merchandise from the relevant producer or exporter during the period of investigation and that the customer will provide information requested by Commerce. The proposed regulations would also codify some of the factors Commerce will consider in determining if a sale is bona fide.
Proposed Other Changes Affecting AD/CVD Procedural Filings
-Other changes in the proposal include allowing Commerce to impose a certification requirement on importers to ensure subject merchandise is properly classified as subject to AD/CVD duties.
-Commerce also proposes to amend the regulations governing reimbursement certifications to account for updated procedures.
-Commerce also proposes to set a deadline for parties to comment on industry support in investigations.
Additionally, the proposed rules make modifications to entry of appearance filing requirements and clarify or codify practices which Commerce has adopted as a matter of practice. For example, Commerce proposes to amend the rules to reflect that an interested party that submits a scope ruling application does not need to file an entry of appearance. Similarly, for circumvention inquiries, Commerce proposes to amend the rules to reflect that an interested party that submits a request for circumvention inquiry need not file an entry of appearance.
The proposed changes to the AD/CVD laws, especially the changes to scope and circumvention proceedings and new shipper reviews, will make it more difficult for foreign exporters and U.S. importers to reduce or eliminate potential antidumping and countervailing duties.
Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.
Stephen Brophy is an attorney in Husch Blackwell LLP’s Washington, D.C. office focusing on international trade.
The Alliance for Trade Enforcement—a Washington, D.C.-based coalition of trade associations and business groups dedicated to ending unfair trade practices—submitted a letter to U.S. Trade Representative Robert E. Lighthizer to coincide with Mexican President Andrés Manuel López Obrador’s July 8 visit to the White House.
President López Obrador met with President Trump and senior administration officials to commemorate the United States-Mexico-Canada Agreement (USMCA), which entered into force that same day.
In the letter, AFTE commends Lighthizer for holding Canada and Mexico to the commitments outlined in USMCA, including the upholding of intellectual property protections, improving enforcement of Mexico’s anti-piracy strategy, and reducing barriers to the Canadian market for U.S. dairy farmers. But AFTE also urged the trade ambassador to continue working to eliminate unfair trade barriers that harm American companies and “workers in every industry, from manufacturing and agriculture to the biopharmaceutical and service sectors.”
“Our coalition looks forward to working with Ambassador Lighthizer to level the playing field between American businesses and our trading partners,” said AFTE Executive Director Brian Pomper.
Online censorship can take many forms. With over four billion global Internet users in 2019, the lines around how we express ourselves online are being drawn and redrawn around the world.
In Europe, democratic governments are considering bans on so-called fake news and fines on social media companies that fail to delete “harmful” content. In the United States, tech companies are under fire for under- or overdoing their monitoring and expunging of material on their platforms that may be “extremist,” “hateful,” or merely repugnant or wrong-headed to some. Although free and open speech is fundamental to any democracy, U.S. culture is growing ever more hostile to dissenting opinions or genuine debate. The “cancel culture” is a harmful form of societal censorship.
When it comes to systemic state-sponsored censorship, North Korea, China, Russia, and Iran impose the harshest restrictions on Internet use by citizens and companies. Censorship is a tool of state control over the populace in those countries.
In China, political dissent or criticism of the Chinese Communist Party is punished, independent bloggers silenced, credentialed journalists from international publications denied access, and scholars made to fall in line with party views. But it isn’t only political speech that is banned or filtered. China maintains a system of surveillance and blocking technologies that comprise the “Great Firewall” between its citizens and many of the world’s largest commercial websites. The Senate recently held a hearing to discuss censorship of foreign companies in China as well as the government’s use of market power to extend the reach of censorship beyond its borders.
Firewalls and Filters
China’s State Internet Information Office appears to spearhead the monitoring and filtering of Internet traffic into and within China, but the endeavor is so extensive that as many as twelve other agencies comprise China’s censorship apparatus. The government exercises control over information technology infrastructure and deploys sophisticated software to scrub, deflect or block content and sites it deems illegal. China’s telecommunications companies, including China Telecom, China Unicom and China Mobile are enlisted to carry out and enforce state censorship measures, as are Baidu, Alibaba and Tencent, China’s main Internet platforms. Controlling much of the allowable content in China, these companies maintain strict filters – censoring themselves and their users – to comply with government requirements.
Content deemed illegal is required to be removed or sites are blocked altogether. The U.S. Trade Representative’s 2019 Report to Congress on China’s WTO Compliance cites industry calculations that “China currently blocks more than 10,000 sites, affecting billions of dollars in business, including communications, networking, app stores, news, and other sites.” Blocked sites include Dropbox, Facebook, Instagram, YouTube, Google search and Gmail, and foreign news services such as The Guardian and the Wall Street Journal. Services required for day-to-day business operations such as cloud storage are restricted to service portals approved by the Ministry of Industry and Information Technology, not privately-owned or controlled channels where the government could lose visibility and access to the data transmitted.
As a second line of defense, the Chinese government prohibits or strictly licenses wholly- or partially owned foreign firms seeking to provide value-added telecommunications services such as Internet-based calls, videoconferencing services, online search and data processing, or virtual private network (VPN) services.
Corporate Choices and the Cost of Censorship
In 2010, Google famously defied the Chinese government’s requirements to filter the content returned by its search algorithm. When Google redirected its users to its uncensored Hong Kong site, the Chinese government blocked it. Taking it a step further, the government throttled Google’s services, degrading them to the point where users become inclined to abandon the service, causing Google to lose substantial market share and withdraw from China. Washington DC-based think tank Information Technologies and Innovation Foundation (ITIF) estimates Google lost $32.5 billion in potential search revenue from 2013 to 2019. Eventually, Google began developing Dragonfly, a search engine designed to comply with China’s censorship requirements.
Other U.S. companies have contorted themselves to avoid censorship. U.S.-headquartered Marriott International apologized for listing Taiwan as a separate country after Chinese authorities shut down its website. International airlines fell in line too, changing their websites to refer to Taiwan as part of China under threat they would be banned from operating in China.
The Chinese government is also becoming more brazen about leveraging its market power to ensure foreign corporations and their employees avoid criticizing its policies outside of China. We are all familiar with the NBA’s backpedaling after initially supporting its employees’ right to exercise free speech in the United States in expressing support for Hong Kong. Increasingly, foreign firms will face a choice between protecting their right and the rights of their employees to freedom of expression or protecting their business dealings in China.
Not Just a China Problem
According to an analysis from Google, more than 40 governments now engage in broad-scale restrictions of online information, “a tenfold increase from just a decade ago.” Among the examples cited, YouTube has been blocked in Turkey. Several countries in Eastern Europe interfere with the popular blogging service, LiveJournal. Guatemala suppressed WordPress blogs during its 2009 political crisis. Iran stifles dissent by blocking social media platforms. Vietnam actively filters political content from social media.
Do Global Trade Rules Address Censorship?
Within the trade community, voices are growing louder that China’s Internet controls constitute a barrier to market access and are therefore a violation of China’s global trade obligations.
Foreign companies and industry have argued that China’s censorship measures are not even-handed; they are applied to non-Chinese products or service providers selectively and in ways that are more restrictive than those applied to domestic providers. They point to examples of similar content that draws a permanent ban of a foreign site whereas the domestic site is merely required to remove specific content.
The Chinese government’s guidelines for permissible or illegal content are vague, unpublished and not transparent. The criteria for IP addresses, domains and website addresses that are permanently or routinely blocked are a state secret. Foreign companies operating in China or seeking to export to China have no way to understand the basis or seek redress for limitation on their access to the Chinese market.
Weakening foreign industry’s case, however, is their acknowledgement that the market access commitments many WTO members have undertaken may not apply to all Internet trade. In the WTO agreement on services, a member’s commitments to national treatment and market access apply only to services specifically listed by members in their schedules. When the agreement was negotiated, many of today’s value-added Internet services did not exist.
The WTO agreements covering trade in goods and services permit measures “necessary to protect public morals,” to maintain public order or to protect national security, with the limitation that those measures should not be applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination or “a disguised restriction on international trade.” Legal experts debate whether a WTO suit against China’s censorship is winnable, and China experts are dubious whether China would comply regardless.
Cyber Sovereignty or Cyber Superpower?
China’s policy footing is unabashedly oriented to exercise absolute control over access to Internet content and services within its own borders. Centrally, the Chinese Communist Party will thwart communication it perceives “subverts state power or undermines national unity.”
The question is, how far will the government go to exercise influence over international norms for cyber governance? And how much state support will be thrown behind freeing itself from dependence on foreign technologies and services to become a global cyber superpower? Is censorship being used to lock foreign competitors out of China’s market to protect local competitors? How far will China go to censor communication it perceives as a threat outside China?
The apps we use that are created by mainland Chinese companies likely contain code to scan and block prohibited websites or language the Chinese government finds objectionable. But beyond sanitizing content, the government may specifically target sites for censorship outside of China.
The Chinese government recently disabled a social media platform in Hong Kong that was used to organize anti-China protests. Its actions may portend a broader approach to Internet censorship in Hong Kong which, according to the Hong Kong Internet Service Providers Association is home to more than 100 data centers operated by local and International companies that transit over 80 percent of web traffic for mainland China.
The Nexus of Censorship and Trade
Government measures to disrupt Internet access or prevent the dissemination of information online are generally considered to infringe upon the basic human right to freedom of expression. Now, industry actors along with open Internet advocates are leading the charge to consider censorship antithetical to the global trading system. At the center of the debate is China, the country with the most extensive censorship program in the world and which holds significant market power in the global economy.
The implications of commercial censorship run the gamut, from stifling key sales channels for exporters to China, to limiting or prohibiting foreign companies from providing Internet services in China, to extraterritorial censorship of overseas Internet sites and services. At a recent hearing on censorship and trade, Senator Bob Casey (D-PA) stated, “The actions undertaken by China are clearly insidious and counter to the necessary conditions of a fair global economic system.” That may be so, but global trade rules and institutions as they exist today are inadequate to alter China’s approach or mitigate the global impacts of China’s censorship.
Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.
This article originally appeared on TradeVistas.org. Republished with permission.
During our collective stay-at-home period, movie streaming has grown to the point where industry analysts are wondering whether many people will return to movie theaters. Netflix reported 15.8 million new subscribers for the first quarter of the year, more than double their forecast, according to the Wall Street Journal. Some studios are eschewing the traditional theatrical release and going straight to digital. As some indicator of how the trend is taking off, the Motion Picture Academy has said that — just for this year — movies released via streaming would be eligible for the upcoming Oscars.
Streaming movies online has been growing in popularity in recent years, but the coronavirus has accelerated the trend. Unfortunately, where consumer and commercial trends go, trade policy barriers may follow.
The Hollywood Juggernaut
Movies both reflect and shape our national cultures. Hollywood has traditionally dominated among international viewership (a phenomenon that has been shifting over recent years), sometimes to the consternation of “keepers of culture” in other countries. As far back as the 1920s, European countries offered subsidies to domestic film producers and imposed so-called screen quotas to establish a minimum number of screening days for domestic films. The OECD keeps track of restrictions on services trade in OECD member countries, including audiovisual services, the category under which movies fall. According to the OECD, eleven countries still today reserve a quota for local motion pictures shown in theaters or on television.
Other measures to shore up local culture against the tidal wave of cultural influence that is Hollywood include import quotas, tax breaks to domestic film industries, foreign investment restrictions, requirements for local sourcing of cast and crews, and blackout periods during which no new imported films may be released, often during prime movie-going periods or timed to political events.
Ready, Action…Trade
Such measures discriminate against the film industries of other countries and constitute barriers to trade. Policymakers have sought to address screen quotas in trade agreements such as the WTO’s General Agreement on Tariffs and Trade (GATT) and the original North American Free Trade Agreement (where Mexico agreed to reduce its screen quotas). Provisions to remove barriers to audiovisual services have also been included in many recent bilateral free trade agreements.
In the case of Korea, whose vibrant film industry reached a pinnacle of global recognition with the Academy’s choice of Parasite as Best Picture in 2020, formal restrictions targeting foreign films date back to Korea’s Motion Picture Law of the 1960s. The Korean government abolished its import quota in the late 1980s, and only after the Motion Picture Export Association of America (MPEA) in 1985 filed a complaint (later withdrawn) with the U.S. Trade Representative under section 301, the same tool being used today to try to address China’s technology transfer requirements. In 2006, just prior to the Korea-U.S. (KORUS) free trade agreement negotiations, Korea agreed to reduce by half its screen quota from a minimum of 146 days to the current 73 days per year.
Digital Era Trade Restrictions
While cultural protections for film have traditionally focused on theatrical screenings, screen quotas don’t work in the digital era, where on-demand audiovisual services such as Netflix and Amazon Prime are increasingly capturing viewership. As a result, new forms of trade barriers are popping up.
For example, China has imposed tighter regulatory controls in recent years, limiting foreign content purchased for streaming in the Chinese market, which has over 850 million digital consumers. U.S. streamers must license their content for China under a 30 percent streaming quota. Chinese content, however, can reach global audiences through video streaming platforms with no such numerical limits. In today’s tense political environment – and with China marking the 100th anniversary of the establishment of the Communist Party in 2021 – we could anticipate increased censorship, which would exacerbate the problem of foreign content scarcity while simultaneously elevating the risk of piracy and other illegal distribution of unauthorized content.
In line with a longstanding European Union (EU) focus on protecting the European film industry, the EU passed a law in late 2018 that requires Netflix, Amazon and other online streaming services to dedicate at least 30 percent of their output to films made in Europe, which they must subsidize by either directly commissioning content or contributing to national film funds. Regulation now applies similar rules to similar services, whether online or offline.
U.S. and European trade discussions are now focused on a limited set of issue areas, but in an earlier push for a Transatlantic Trade & Investment Partnership (TTIP) in 2013, the camera zoomed in on issues of culture in trade negotiations. At the time, the European Commission was given a negotiation mandate that expressly excluded opening the European audiovisual sector to competition from U.S. firms.
Competition Makes Most Things Better – Even Movies
Culture clashes aside, there is a strong case that greater competition has been the force behind successful film industries outside of Hollywood. Researchers Jimmyn Parc and Patrick Messelin posit that the success of contemporary Korean cinema is due to “less interventionist public policies over the last two decades,” together with “benchmarking, learning, and innovating among non-subsidized private companies.” They point to data from the decade preceding the industry’s opening in the late 1980s, when the Korean film industry released around 90 films per year with an average revenue of KRW ₩0.9 billion per film (roughly USD $0.7 million at the current exchange rate). From 1989-2005, around 75 films were released per year with an average revenue of KRW ₩2.7 billion per film (roughly USD $2.2 million at the current exchange rate), a signal of the improvement in film quality.
Brian Yecies of the University of Wollongong Australia agrees that Korea’s efforts to liberalize in the 1980s and address censorship enhanced competition. As Hollywood expanded into Asia-Pacific markets, Korean cinema became stronger. The increased distribution and exhibition of U.S. films, Yecies argues, gave birth to a new generation of moviegoers who also increased their consumption of Korean content. Park Moo Jong credits three elements with reviving the Korean film industry: talented young filmmakers, the virtual abolition of government censorship, and remarkable technological developments. In short, he says, “Good films attract fans.”
The Streamed Show Must Go On
In a 2019 submission to the U.S. Trade Representative, the Motion Picture Association pointed out that the industry’s international sales “now depend increasingly on member companies’ ability to capitalize on major distribution windows in the digital market.”
The need to remove barriers to stream internationally and enable competition holds true for online streaming as it has for many years for screening in theaters. As streaming gains momentum, trade agreements will continue to tackle the array of barriers the U.S. film industry faces abroad, from intellectual property challenges to subsidies to foreign investment restrictions. Likewise, negotiators will work to advance market access for creative content as it flows through both traditional and new distribution platforms. After Parasite’s surprise Best Picture Oscar win, who knows if 2021 may bring our first direct-to-digital winner? Put your feet up and get the popcorn ready.
Leslie Griffin is Principal of Boston-based Allinea LLC. She was previously Senior Vice President for International Public Policy for UPS and is a past president of the Association of Women in International Trade in Washington, D.C.
This article originally appeared on TradeVistas.org. Republished with permission.
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Countries utilize multiple platforms to open markets, set standards or other rules of trade, and resolve disputes. Progress in reducing barriers to trade and facilitating the flows of goods and services may be an outcome of negotiated free trade agreements between two or more countries or result from legally binding instruments agreed to in multilateral fora like the World Trade Organization (WTO).
In contrast, decisions in the Asia-Pacific Economic Cooperation (APEC) forum, a grouping of 21 economies that border the Pacific Ocean, are reached by consensus but undertaken on a voluntary basis. This format is credited with enabling members to “incubate” content for new trade negotiations and to work collaboratively on pragmatic regulatory and policy approaches to common challenges.
The APEC forum culminates each fall in a meeting of the 21 leaders, a gathering many associate with the annual “silly shirts” photo of top officials genially wearing the national garb of the host economy, rather than their typical business suit. However, the work of APEC goes on for many months before this fashion summitry takes center stage to solidify each member’s commitments.
This article introduces this cooperative, regional forum; highlights the priority focus areas set out by this year’s APEC host, Chile; and shines a spotlight on one such area – digital trade – as a case study into how APEC serves as a building block in the iterative process of co-creating norms for trade.
Spotlight on APEC
The 21 members of APEC, which includes economies as diverse as the United States and Papua New Guinea (last year’s APEC host), are home to almost three billion people and represent close to half of world trade.
When the organization formed in 1989, APEC had Australia, Brunei Darussalam, Canada, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and the United States as founding members. China; Hong Kong, China; and Chinese Taipei joined in 1991. Mexico and Papua New Guinea acceded in 1993, and Chile joined in 1994. In 1998, the addition of Peru, Russia, and Vietnam brought the organization to its current membership level.
Every year one of the 21 APEC member economies serves as the APEC Chair. Over the course of a year and typically in multiple cities, the Chair hosts a series of senior officials’ meetings, ministerial meetings, and a Leaders meeting. Ministerial meetings include gatherings of Trade and Foreign Ministers from each of the economies, as well as sectoral ministers overseeing other key areas, including energy, finance, and education. The host economy also welcomes the APEC Business Advisory Council (ABAC), up to three senior business leaders per economy, appointed by their governments, who provide private sector input into the APEC process.
Between 1989-1992, APEC dialogues were held at the senior official and minister level. In 1993, former U.S. President Bill Clinton began the practice of an annual leader meeting when he hosted an APEC meeting in Seattle. The following year, APEC leaders made a commitment to jointly work toward free and open trade in the Asia-Pacific by 2020. This commitment is known as the Bogor Goals for the Indonesian city where APEC leaders met in 1994.
A defining feature of APEC is that members voluntarily take actions to reduce barriers to trade and investment without a requirement to make legally binding obligations. Beyond a core focus on trade and investment liberalization, APEC also promotes business facilitation, with the goal of taking time, cost, and uncertainty out of doing business across the region, as well as technical cooperation, to boost the technical capacity of APEC’s less developed members to drive secure and sustainable economic growth.
From Idea to Fruition
Notable accomplishments within APEC include its work on environmental goods, where members have undertaken tariff reductions on a list of 54 environmentally friendly goods. This tariff-cutting effort laid the groundwork for ongoing negotiations at the WTO on an Environmental Goods Agreement with expanded product coverage.
Another key APEC deliverable has been the APEC Privacy Framework, which established principles and implementation guidelines for privacy protection, and which underpins the APEC Cross-Border Privacy Rules (CBPR) system. Currently, eight APEC members—Australia, Canada, Chinese Taipei, Japan, Korea, Mexico, Singapore and the United States—participate in the CBPR system.
APEC also delighted many travelers on the APEC circuit with the creation of the APEC Business Travel Card, which allows cardholders visa-free access to APEC economies for up to 90 days and special APEC fast lanes in the major airports of APEC members. According to the 2018 report of the APEC Committee on Trade and Investment to Ministers, as of the end of June 2018, over 278,000 cards had been issued.
Onward to Santiago
Like a Chilean fine wine, the business travel card is something nice to have in hand given the over 200 working group meetings, workshops, ministerial, academic, and business meetings taking place over Chile’s APEC year. Chile’s host year will culminate in the summit of the 21 APEC leaders in November in Santiago. As the host economy, Chile has identified four priority areas on which it seeks concrete deliverables:
Digital Society, an initiative encompassing efforts to develop cross-border digital trade standards and make needed changes to education and labor systems;
Integration 4.0, which seeks to tackle some of the newer sources of trade frictions and enhance connectivity through customs coordination and border automation;
Women, Small and Medium Enterprises and Inclusive Growth, an agenda designed to increase women’s participation in the economy and to enhance the ability of small and medium-sized business to realize the benefits of trade in the region, including in the area of digital trade; and
Sustainable Growth, which includes initiatives to protect the marine ecosystem and promote cooperation on both energy and smart cities.
Division of Labor on Digital Trade Rules
Chile’s focus on the digital economy reflects the priority that APEC leaders have increasingly placed on promoting sound policies to govern digital trade in the Asia-Pacific region. The spotlight on digital policy is also a good case study in the iterative way global trade norms are shaped and how an organization like APEC both influences and is influenced by parallel policymaking efforts.
APEC prides itself on its role as an incubator of ideas and driver of initiatives in emerging areas of trade that matter not only to the Asia-Pacific region, but also globally.
Dating back to its 1998 APEC Blueprint for Action on Electronic Commerce, which defined principles for the development of e-commerce in the region, APEC members have recognized that without a framework to govern the surge in digitally enabled trade, the full potential of digital technologies may not be realized. They also understood the challenges associated with designing regulatory frameworks that encourage growth while protecting privacy and security, particularly given differing domestic regulatory approaches on key issues like treatment of data. In its work on the various building blocks for digital trade – from cross-border privacy rules to trade facilitation and services liberalization – APEC has engaged multiple outside organizations, including the International Chamber of Commerce, the Organization for Economic Cooperation and Development (OECD), and the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFAT), facilitating mutually beneficial idea exchange.
In 2016, 12 APEC economies signed the Trans-Pacific Partnership Agreement or TPP (the United States later withdrew). The TPP’s e-commerce chapter covered a range of traditional and emerging issues, including customs duties, electronic authorization and signatures, cross-border data flows, source code, cybersecurity, and privacy protections. Initiatives like the APEC Privacy Framework inspired certain TPP provisions but, unlike the APEC framework, what is now known as the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP) is a binding agreement with enforcement provisions. The reforms required by the agreement, including prohibitions on data localization and protections for the movement of data, will set a new bar as CPTPP potentially expands to new members and as new trade agreements are forged.
For example, in mid-May, on the sidelines of this year’s APEC meeting of Ministers Responsible for Trade, Chile’s Minister of Foreign Affairs, Singapore’s Minister of Trade and Industry, and New Zealand’s Minister for Trade and Export Growth announced the start of negotiations towards a Digital Economy Partnership Agreement. The officials announced an intent to build on the CPTPP e-commerce chapter, but also look at emerging areas like digital identity and artificial intelligence. Any agreement reached between Chile, New Zealand and Singapore will be open for accession by other WTO members who can meet the high-quality standards to be established in the agreement.
Underscoring the iterative nature of trade policy building, the three APEC and CPTPP members indicated that their work would build on the work underway within APEC, the OECD, and other international forums; generate ideas for use by countries negotiating free trade agreements; and complement current WTO negotiations on e-commerce. In the latter talks, 76 WTO members (including all APEC members except Indonesia, Philippines, Papua New Guinea, and Vietnam) are working to create multilateral rules governing electronic transactions.
Culture and Consensus
APEC members leverage their APEC host year to drive progress on their national trade priorities in the spirit of collaboration and consensus. The various APEC meetings throughout the year also provide an opportunity to showcase the member’s unique achievements before large audiences of distinguished visitors, while also showing off the cities where the meetings take place. This year, for example, Chile will welcome more than 15,000 representatives of member economies, APEC observers, business leaders, and international press in Viña del Mar, Puerto Varas, and Santiago.
Shining a spotlight on the unique cultural offerings of a host economy – such as the Royal Barge Procession for APEC leaders on the Chao Phraya River in Bangkok in 2003 or China’s grand 2014 APEC welcome ceremony with light shows, singing, and dancing – is also a time-honored tradition. Unfortunately, the infamous “silly-shirted” photos tradition may be wavering. The last time the United States hosted APEC in 2011 in Hawaii, President Obama found APEC-like consensus agreement to nix the collective donning of aloha shirts and grass skirts, quipping, “I didn’t hear a lot of complaints about us breaking precedent on that one. I thought this may be a tradition that we might want to break.”
Leslie Griffin is Principal of Boston-based Allinea LLC. She was previously Senior Vice President for International Public Policy for UPS and is a past president of the Association of Women in International Trade in Washington, D.C.
This article originally appeared on TradeVistas.org. Used with permission.