This week, in an unusual move, the State of Missouri sued China in federal court, seeking damages for China’s role in enabling the spread of the Wuhan coronavirus (COVID-19) pandemic, which has infected over 6,000 people in the state. The lawsuit, filed by the Missouri attorney general, alleges that “Chinese authorities deceived the public, suppressed crucial information, arrested whistle blowers, denied human-to-human transmission in the face of mounting evidence, destroyed critical medical research, permitted millions of people to be exposed to the virus, and even hoarded personal protective equipment—thus causing a global pandemic that was unnecessary and preventable.” The suit provides details on these charges and says they led to “enormous loss of life, human suffering, and economic turmoil” for which China must be held liable.
The weekly trade report with L.C.
The defendants named in the case are the Chinese Communist Party, China’s health and emergency ministries, provincial and local governments (Hubei and Wuhan), and the Wuhan Institute of Virology.
The possibility of suing China has been raised before, including on Capitol Hill (where some legislators suggested letting US citizens file lawsuits for damages). But to get any entity connected to the Chinese government in court, the US government would have to take away its sovereign immunity, a radical step with potential ramifications beyond the current case.
China’s bullying
Meanwhile China has been working overtime to discourage trade partners from investigating or criticizing its handling of the Wuhan coronavirus pandemic. Breitbart reports that
The Australian government’s call for China to explain its bungled handling of the deadly coronavirus pandemic could spark a boycott by Chinese consumers, who may no longer travel and study in Australia or buy major exports including beef and wine. That was the stark warning delivered Monday by Ambassador Cheng Jingye via an interview published in the Australian Financial Review.
Similarly, Reuters reports that
China sought to block a European Union report alleging that Beijing was spreading disinformation about the coronavirus outbreak…The report was eventually released, albeit just before the start of the weekend Europe time and with some criticism of the Chinese government rearranged or removed, a sign of the balancing act Brussels is trying to pull off as the coronavirus outbreak scrambles international relations.
China wouldn’t dare try such tactics if all its trading partners agreed that an economic attack by China on any one of them would be met with a boycott of Chinese exports by all.
Protection of US uranium supply urged
On April 23rd, the US Nuclear Fuel Working Group (NFWG) released its report, with recommendations aimed at pulling “America’s nuclear industrial base back from the brink of collapse.” The two principal proposals are to block some uranium imports from Russia and China and to create a national uranium reserve.
The NFWG does not recommend blocking uranium imports through broad protectionist measures, as the petitioners – Energy Fuels and Ur-Energy – had sought. They had requested an import quota assuring domestic producers at least a 25% market share and a Buy American requirement for government utilities and agencies that use uranium. But that had provoked push-back from the nuclear power industry and is allies. They claimed that they would face hardship if the price of their fuel were hiked.
The petition claimed that about 40% of US uranium imports come from countries that are not US allies (Russia, Kazakhstan, Uzbekistan, China). The report calls for limiting uranium fuel imports from Russia and China. Nevertheless, much imported uranium comes from allies. Thus in 2018 Canada supplied 24%, Australia 18%, and US domestic mines around 10%.
Uranium reserve proposed
In addition to the Russia/China recommendations, the NFWG report proposes setting up a uranium reserve for which the government would directly purchase $150 million of uranium a year from domestic mines. The administration’s budget request to Congress seeks $1.5 billion over ten years for this. The report also recommends expanding access to uranium deposits on federal lands by streamlining permitting and opening areas where mining is currently banned. Predictably, this recommendation is strongly opposed by environmental activists.
The report also calls for easing regulations on nuclear energy projects and enabling more financing sources for these projects through the US Export-Import Bank and US International Development Finance Corporation. It also calls for supporting R&D on new reactor technologies.
The president could issue executive orders to implement the recommendations.
India and Germany restrict Chinese investment
Last week New Delhi issued new foreign direct investment regulations requiring that countries sharing a land border with India must get government approval for investments — in order to “curb opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic.”
India is not the only country worried about China using the economic downturn to acquire assets abroad. Germany is similarly concerned and has also been tightening restrictions on foreign direct investment.
China has protested against the Indian restrictions, but, as some Indians have pointed out, China itself restricts foreign companies from some sectors, including information technology and pharmaceuticals. These are sectors of particular interest to India, and something New Delhi has complained to Beijing about in the past.
Phase One trade deal update
China’s ability to keep its commitments made in the Phase One trade deal with the US is becoming increasingly doubtful. The economic slowdown has suppressed consumer demand, making it extremely difficult for China to meet its promises to purchase agricultural, manufacturing, and energy products from the US.
One commitment that Beijing could comply with concerns intellectual property protection. In line with commitments made to the US, the Supreme People’s Court on April 21st released its annual report on IP protection by Chinese courts and announced new measures to tighten that protection. These included enhanced penalties for IP theft and making sure counterfeit goods are destroyed. These are steps Beijing has promised before. But they are also steps that China must take to facilitate its own technological development.
Tariffs suspended — but not Trump’s
The Trump administration has suspended some tariffs in a move aimed at relieving some of the stress felt by US businesses during the COVID-19 pandemic. But these are suspensions – for 90 days only – not elimination of the duties. Although there has been intense pressure for tariff relief from the private sector, the president has resisted. He continues to insist that his unilateral tariffs are bringing in foreign revenue to the US government. The new order only suspends Most-Favored Nation duties. That is, the only tariffs suspended are those that President Trump did not impose.
A statement welcoming the suspension from House Ways & Means Committee ranking Republican Rep. Kevin Brady (R-TX) acknowledged that tariff payments hurt domestic businesses: “By postponing payments of certain tariffs… President Trump is helping save American jobs. This will free up much-needed cash, allowing these businesses to pay these duties when they, as well as the economy, are on sounder footing.”
As a Cato Institute post noted: “the president has finally conceded that US importers pay the tariffs.”
US retailers and importers welcomed the MFN relief but said it doesn’t go far enough and called for further tariff removal.
July 1st the official USMCA start-up date
The White House formally notified Congress on April 24th that all procedures have been completed: the USMCA will enter into force on July 1st. Canada and Mexico certified their completion earlier this month.
To qualify for duty-free treatment once the USMCA is fully in effect, 75% of a vehicle’s components must be manufactured in North America – up from NAFTA’s 62.5%. Seventy percent of steel and aluminum in a vehicle must be not only finished but melted and poured in the region. Forty to forty-five percent of car parts must be made by workers earning at least $16 an hour.
US vs WTO and Canada
In an escalation of administration hostility to the World Trade Organization’s dispute settlement system, Washington argued that a recent WTO Appellate Body decision upholding a dispute panel ruling siding with Ottawa is invalid.
The decision came in the case Canada brought against US countervailing duties (CVDs) imposed on Canadian supercalendered (glossy) paper. The CVDs were imposed in 2015 and Canada complained to the WTO the following year.
The case is a major irritant in relations with Canada. It focuses on the methodology the US uses in determining if unfair subsidies exist, in particular the use of “adverse facts available” as the basis for calculating duties when foreign respondent companies are not cooperating or supplying complete information.
A larger context
WTO members, including the US, sometimes don’t comply with rulings, in which case they generally accept some form of retaliation from the country that brought the complaint. The issue in this case isn’t that the US is refusing to comply with a ruling. Instead, the US is insisting that the ruling itself is invalid. It claims that all three AB judges who ruled in this case were not eligible.
But given the gravity of the difficulties that the US and its allies are facing with China — from pandemic and law courts, to strategic commodities and industries, to the South China Sea — the US administration would do well to mend the minor fence breaks with its allies.
L.C. reports on trade matters for business as well as Founders Broadsheet.
Photo credit: Wikipedia Commons
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