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Hong Kong Sanctions Bill Passes Congress

sanctions

Hong Kong Sanctions Bill Passes Congress

On July 2, 2020, Congress passed the Hong Kong Autonomy Act.  Once signed by President Trump into law, the Act will require the Secretaries of State and Treasury to designate certain persons and financial institutions deemed responsible for eroding Hong Kong’s autonomy and in turn require the President to sanction such designated parties.

The Act comes on the heels of Beijing’s passage of a national security law that critics claim undermines the “One Country, Two Systems” framework that has been in place since the British handover of its former colony in 1997. Under the 1984 Joint Declaration between the U.K. and Chinese governments governing the terms of the handover, certain guarantees were required to be written into the Hong Kong Basic Law (i.e., the de facto Hong Kong constitution) to ensure certain political rights and the semi-autonomy of the territory from mainland China through at least 2047. The recently passed national security law is the latest in a string of moves by Beijing to more closely integrate Hong Kong with the mainland.

Summary of the Legislation

The Hong Kong Autonomy Act would require the Secretary of State to identify and report to Congress within 90 days persons providing or attempting to provide a material contribution “to the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.” This is defined under the Act to include any person who “took action that resulted in the inability of the people of Hong Kong . . . to enjoy freedom of assembly, speech, press, or independent rule of law; or . . . to participate in democratic outcomes; or . . . otherwise took action that reduces the high degree of autonomy of Hong Kong.” Once a report is made to Congress, the President is required to impose property blocking sanctions and visa restrictions on the identified parties within one year. The Act requires that the Secretary of State provide an unclassified assessment for imposition of such sanctions “so as to permit a clear path for the removal of economic penalties if the sanctioned behavior is reversed and verified by the Secretary of State.”

Similarly, between 30 and 60 days from the Secretary of State’s report, the Secretary of the Treasury would be required to identify and report to Congress “any foreign financial institution that knowingly conducts a significant transaction” with a foreign person identified by the Secretary of State. Within one year, the President must impose at least five of ten possible “menu-based” sanctions on the financial institution, which include, for example, restrictions on loans from U.S. financial institutions, restrictions on bank transfers subject to the jurisdiction of the United States, and/or asset blocking sanctions. Within two years, the President must impose all ten of the sanctions on the financial institution.

Both reports by the Secretary of State and Secretary of the Treasury must be unclassified and available to the public, although certain provisions would allow for the omission of information that would compromise an intelligence operation or subvert law enforcement activities. The reports are required to be updated no less frequently than annually.

Although the sanctions provisions are characterized in the Act as “mandatory,” the Act also empowers the President with a high degree of discretion to remove identified persons or financial institutions or terminate existing sanctions under the Act if the President determines that the material contribution or significant transaction by the identified party:

— “does not have a significant and lasting negative effect that contravenes the obligations of China under the Joint Declaration and the Basic Law;”

— “is not likely to be repeated in the future;” and

— “has been reversed or otherwise mitigated through positive countermeasures taken by” the identified person or financial institution.

The President is required to notify Congress and provide a rationale when exercising this discretion. Further, the Act authorizes the President to waive the application of sanctions if the President “determines that the waiver is in the national security interest of the United States” and notifies Congress of the waiver and the rationale for doing so.

Context

Hong Kong has been rocked by mass protests since last summer, which were first sparked by a bill proposed in April 2019 that would allow extraditions to mainland China. The proposed law drew significant protests from critics who claim the bill would be contrary to the Joint Declaration because, among other things, it could be used to target political dissidents. Ultimately, Beijing withdrew the extradition bill in September 2019. However, while protests have subsided somewhat in the wake of the COVID-19 pandemic, they have persisted more or less continuously.

Notably, the Basic Law required Hong Kong to pass legislation to address national security, which the city has never done, despite some unsuccessful attempts. Citing Hong Kong’s failure to enact its own national security legislation and the protestors’ “collu[sion] with external forces,” on June 30, 2020, Beijing enacted its own national security law applicable to Hong Kong which, inter alia, criminalizes “secessionist, subversive or terrorist” activities with penalties of up to life in prison; empowers Beijing to deploy mainland security forces; and overrides the ability of local Hong Kong courts to interpret the law.

Likely Practical Effect

The Hong Kong Autonomy Act represents an escalation in tensions between the United States and China. However, because of the wide discretion granted to the President under the Act, the actual effect of the legislation is unclear for the time being. In particular, the Trump Administration reportedly attempted to delay passage of the bill, and has thus far resisted imposing significant sanctions under a similar bill targeting China for alleged human rights abuses of minority Uighurs in order to salvage his trade deal with Beijing.

Because the Secretary of State must take the first action prior to set in motion any sanctions under the Act, the speed with which Secretary Pompeo makes the required designations will be a good indication of the Trump Administration’s intent. Parties interested in potential sanctions under the Act should monitor the State Department for developments.

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By Ryan Fayhee, Roy (Ruoweng) Liu and Tyler Grove at law firm Hughes Hubbard & Reed LLP

trade policies

HOW ARE COUNTRIES MAINSTREAMING GENDER IN TRADE POLICIES AND PRACTICES?

Tracking How Much She Trades

On July 7, the International Trade Centre rolled out a new tool to track the types and prevalence of trade policies designed to promote more trade by women-owned businesses.

Called “SheTrades Outlook” and funded by the UK, the index initially covers 25 countries as wide-ranging as Australia and Canada to Mauritius, South Africa, Rwanda, and Samoa, applying quantitative and qualitative data to rank them across 83 indicators and six policy areas. Analysts interviewed more than 460 institutions and organizations in these countries, evaluating factors including women’s access to opportunities for skills development, finance, and global markets, and networks.

Dashboard of SheTrades

The index also queries whether governments and national organizations offer tailored support to enterprises owned and run by women to enable them to grow their businesses globally, whether programs exist to help women entrepreneurs win government contracts, and if governments have begun to collect gender-disagreggated data that might better inform policies to support women in trade.

Finally, SheTrades Outlook compiles recommended practices across these policy areas to share the experiences of countries covered in the index as a global resource.

Example of SheTrades Tracker

Starting to Get the Picture

SheTrades Outlook seeks to create a more complete picture of how women participate in the global economy through trade. Doing so will help inform trade policies and national trade promotion programs that better serve women as critical drivers of productivity and economic growth worldwide.

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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.

nebraskans

NEBRASKANS SUPPORT TRADE BUT TRUST IN MEDIA AND WASHINGTON IS LOW

A new survey of Nebraskans finds that citizens appreciate trade’s benefits, especially for farmers and ranchers, but want more reliable information about trade policy.

Anxious but confident: the more international trade the better

Nebraskans surveyed are anxious about the economy but confident with respect to the importance of trade to their state’s agricultural production complex.

Released last month by the Carnegie Endowment for International Peace and the University of Nebraska-Lincoln (UNL), the new report, “U.S. Foreign Policy for the Middle Class: Perspectives from Nebraska,” assesses state views about how U.S. foreign policy interacts with the economic wellbeing of the middle class in the nation’s heartland. The research team interviewed over 130 Nebraskans in six communities across the state in the summer of 2019 (before the economy was further affected by the coronavirus pandemic) to gauge their perceptions.

Whether respondents hailed from urban Omaha or rural Scottsbluff, and whether they worked directly in agriculture or in health care, local government or education, those interviewed were remarkably consistent and clear on the subject of trade policy and the state’s agriculture sector: the more international trade, the better.

Focus Group Cities

The big picture is not the only picture in the Nebraska economy

Macro-level statistics obscure the importance of Nebraska’s agriculture sector. The Bureau of Labor Statistics reports that manufacturing contributes more than twice as much as agriculture to Nebraska’s GDP (10.9 percent versus 4.9 percent, respectively). But within manufacturing, “food and kindred products” is the top category. The broader agricultural production complex includes processing but also transportation, warehousing, agriculture-related research, and other professional services such as IT, legal, insurance, and financial.

Thus, while Nebraska has a diversified economy and workforce, one in four jobs is directly or indirectly tied to the state’s agricultural production complex, according to UNL researchers. Some interviewees pointed to main street businesses like car dealerships as a barometer for agriculture, saying that farmers are more likely to purchase new cars or trucks when they have profitable years.

As the report notes, “Even if they do not hold one of those ag-related jobs, most Nebraskans likely benefit in some way from the revenues the sector generates. That may explain why so many of those interviewed, whether directly involved with agriculture or not, said they supported any trade policies that worked best for farmers, ranchers, and others associated with the agricultural production complex.”

Trade a most important foreign policy

Exports dominate the discourse on trade

The Nebraskans interviewed spoke about trade almost exclusively in terms of exports, perhaps not surprising for a state that consistently ranks highly in the production and export of many agricultural products from soybeans and corn to beef and beef products. Nebraska’s most important export markets are Canada and Mexico, U.S. free trade agreement partners.

The majority of those interviewed saw U.S. trade agreements as benefiting Nebraskan agriculture, in particular the U.S.-Mexico-Canada Agreement (USMCA) and the U.S. trade deal with Japan (as a second best alternative to the Transpacific Partnership, from which the U.S. withdrew in 2017). While many supported the President’s tough stance against China, they also worried about the potential for future lost market share due to shifting supply chains brought on by the trade war. In the voice of one interviewee, over the long run, the United States needs to “focus [more] on developing markets…and less…on picking a fight with China.”

The seeming invisibility of imports

Imports were rarely mentioned by those interviewed, whether from a consumer or supply chain perspective. Aside from one manufacturer who said that increased steel tariffs had put cost pressure on his inputs, most discussion of tariffs revolved instead around retaliation on U.S. agriculture exports, not the impact of U.S. tariffs on imports. This is not surprising: exports are celebrated in news releases and headlines. Import data is portrayed in the negative light of trade imbalances. Imports of intermediate goods make up 60 percent of global trade by some estimates, but in the form of parts and components for the production of final goods, they lack visibility.

U.S. import tariffs have likely affected consumer prices to some degree. In research prepared for the Yeutter Institute by Edward Balistreri of Iowa State University, tariffs imposed in 2018 and 2019 as part of the U.S.-China trade war may have cost Nebraska’s households as much as $600 per year through a combination of lost export opportunities, increased productions costs, and increased consumer prices. A potential doubling of tariff costs on imported items theoretically risked households near the lower bounds of the middle-income range falling out of the middle-income bracket while those tariffs were in place. Despite being a pocketbook issue, the cost of imports was notably absent as a topic of discussion across interviews.

View on China engagement

There is more than one “heartland”

The Carnegie Endowment conducted similar interviews and focus groups in Ohio in 2018 and Colorado in 2019. There are important nuances among and within these three states. On trade policy, Nebraskans were far more aligned in their views than Ohioans.

Nebraskans tend to view agriculture as the backbone of the state’s economy, leading to more consistent opinions on the beneficial role of trade. Ohio has a much larger manufacturing workforce that has experienced heavy losses in recent years, with trade policy and globalization often taking the blame. This perception has led to deep divisions over trade policy among those interviewed in Ohio.

In comparing the three states, the report notes that such “place-based economic considerations appeared to drive attitudes on the intersection of U.S. foreign policy with the perceived economic interests of America’s middle class.”

“I don’t trust Washington”

Unfortunately, where participants in all three states did seem to agree was in their mistrust of institutions and their sources of information regarding foreign policy.

Project participants consistently said they did not trust the news media or official Washington to provide unbiased information about trade and foreign policy. As a result, many said they do not always feel they have enough knowledge to develop well-informed opinions. They also do not believe that decisions about foreign policy are made with middle America’s economic interests in mind.

One Nebraska participant illustrated a common sentiment in expressing, “I don’t think anybody knows what the truth is and I don’t …trust Washington to tell me what the truth is.” If participants wanted to learn more about trade and foreign policy, they often said they did not know where to find trustworthy sources of information.

Quote about trust

How to amplify middle-class voices?

At a time of intense debate over what the aims of U.S. trade policy should be, such depth of perspective from Americans across the country is important. Do we need new structures to gather it?

The Office of the U.S. Trade Representative formally seeks public comment as part of its process to determine negotiating priorities and statutorily maintains 26 advisory committees to make sure U.S. negotiating objectives “reflect U.S. public and private sector interests.” The advisory system includes a committee designed for input from state and local level leaders. Yet these structures are neither visible nor accessible to most Americans.

Elected officials may of course offer input outside of these constructs. Nebraska Governor Pete Ricketts gave an example on an episode of the Yeutter Institute’s Trade Matters podcast:

“When there was a rumor that the United States was going to pull out of the South Korean Trade Agreement, I picked up the phone on a Friday afternoon to call our U.S. Trade Representative, Ambassador Lighthizer, to tell him how bad that would be for Nebraska,” Governor Ricketts said.

“He called me back on Sunday afternoon, so very responsive…he doesn’t always tell you what you want to hear, but certainly wanted to listen as I was talking about why South Korea was such an important trading partner.”

Place-based trade policies?

Governor Ricketts’ comments and the report findings reinforce a central conundrum of trade policy: it has disparate impacts on the economies of different U.S. states.

In their pursuit of the national interest, foreign policy professionals, including trade negotiators, understandably do not want to pick winners and losers or wade into domestic politics. But integrating more information about the economic experience of middle-class Americans into the trade policymaking process can help inform policy options that anticipate the losses — and local opportunities — from trade policy.

Meanwhile, what about those who said they wanted to learn more about trade and foreign policy, but did not know where to find information they could trust? They also reported that locally trusted leaders can play a key role in how people think about policies. Perhaps such leaders are a starting point for deeper conversations about trade.

Related in the series by The Carnegie Endowment on U.S. Foreign Policy for the Middle Class:

-Perspectives from Colorado

-Perspectives from Ohio

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Jill O'Donnell

Jill O’Donnell is a professor of practice and the director of the Clayton Yeutter Institute of International Trade and Finance at the University of Nebraska-Lincoln. She is the host of the institute’s Trade Matters podcast. She served on the research team for the report discussed in this article, along with colleagues from the University of Nebraska-Lincoln’s Bureau of Business Research and the University of Nebraska Public Policy Center, in partnership with the Carnegie Endowment for International Peace.

This article originally appeared on TradeVistas.org. Republished with permission.
customs

Customs Changes Course: No Longer Accepting Requests to Defer Duty Payments

On Friday, March 20, 2020, Customs announced that it was accepting requests for short-term relief from payment of estimated duties, taxes and fees due to the COVID-19 emergency, as discussed here.

Nevertheless, on March 26, 2020, Customs issued “Additional Guidance for Entry Summary Payments Impacted by COVID-19” that revised the information and policy in the earlier announcement. In its “Additional Guidance” Customs stated that it was no longer accepting requests for additional days for payment of estimated duties, taxes, and fees, but commented that CBP retains the right to allow additional days for payment in narrow circumstances, such as physical inability to file entry or payments, based on technology outages or port closures.

Single payments, daily and periodic monthly statement payments of estimated duties, taxes and fees that should have been tendered from 3/20/2020 through 3/26/2020, payment must be initiated by 3/27/2020. Trade members who did not pay Customs for estimated duties, taxes and fees from 3/20/2020 through 3/26/2020 must initiate payment by 3/27/2020.

Separate from reversing its policy on a limited number of “additional days” for duty relief, we also reported that CBP was considering a more extended 90-day tariff relief plan. Recent reporting, though, indicates that this 90-day tariff relief plan has been shelved. We understand that a number of senior administration officials (including Treasury Secretary Mnuchin and economic adviser Larry Kudlow) were in favor of granting the relief, but were outweighed by others within the Administration (Peter Navarro) as well as influential individuals in the private sector aligned with more protectionist policies.

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Robert Stang is a Washington, D.C.-based partner with the law firm Husch Blackwell LLP. He leads the firm’s Customs group.

 Julia Banegas is an attorney in Husch Blackwell LLP’s Washington, D.C. office.

USITC to Probe Changes in Indian Trade Policies

Washington, DC – The US International Trade Commission (ITC) has launched an investigation into significant changes in India’s trade and investment policies by that country’s newly-elected government.

The decision by the agency comes in response to a request made in a September 25 letter sent jointly from the House Ways and Means Committee and the Senate Committee on Finance.

“Given the recent national elections in India and the formation of a new Bharatiya Janata Party-led government, and our interest in receiving the most comprehensive and up-to-date information possible,” the letter read, “we now request that the Commission conduct a second investigation concerning India’s industrial policies that discriminate against US trade and investment since the first ITC investigation.”

As requested, the ITC said it will “provide information about any significant changes by the new Indian government to the trade and investment policies identified in the Commission’s ongoing investigation.”

The agency said it “will also include information on any new relevant trade and investment policies and practices in India, focusing on the period from mid-2014.”

It added that the agency expects to deliver the report to the committees by September 24, 2015, the official statement said, adding that it will hold a public hearing in connection with this investigation on April 7, 2015.

The new investigation is the ITC’s second probe regarding India’s trade and investment policies requested by the two committees.

In 2013, the committees jointly asked the agency to investigate Indian policies that restrict US trade and investment.

The ITC is expected to submit its report in that investigation – Trade, Investment, and Industrial Policies in India: Effects on the US Economy – to both the House and Senate committees on December 15.

10/29/2014