The weekly trade report with L.C.
A coalition of 116 countries back Australia’s push for an independent coronavirus inquiry. A group of 54 African nations has joined, Australia’s SBS News reports, “bringing the total number of countries on board to 116.” SBS adds:
The African Group’s 54 member states will co-sponsor the motion, joining 62 other countries including Russia, Indonesia, India, Japan, Britain and Canada. The European Union’s 27 members are all on board, along with Brazil, South Korea, Mexico, Turkey and New Zealand.
Xi wants WHO sweetheart inquiry, mañana
China’s government strongly opposes Australia’s call for an independent inquiry. Instead, Chinese Communist Party Secretary General Xi Jinping said that “any review should be conducted by the World Health Organisation and only after the pandemic had passed.”
The WHO is notoriously under the thumbs of the Beijing government – a matter which is provoking interest in the Trump administration to defund it.
China punishes Australia for truth inquiry
The Wall Street Journal reports that
The Xi Jinping government…has already taken punitive trade measures against Australia, targeting farmers in particular. China has banned the import of four Australian meat products and threatened a loss of tourists and students from China and other economically harmful retaliation. The US endorsed the initiative and Canberra isn’t backing down, while Foreign Minister Wang Yi warned other countries not to politicize the virus.
According to The Age (Australia), just before Xi addressed the WHO Assembly,
China’s Ministry of Commerce announced it would hit up to $1 billion worth of Australian barley exports with a tariff of up to 80 per cent over technical infringements. The move, which was first threatened last week, effectively wipes out Australian barley trade with China and follows weeks of high-profile lobbying from Australia over the coronavirus inquiry.
Beijing deliberately infects world and Hong Kong
It’s not hard to guess why the Beijing Communists oppose an independent inquiry. The regime, not wishing China to be the lone sufferer from the deadly virus it had infected its own country with, deliberately concealed its seriousness, hoarded medical supplies purchased abroad, and deliberately allowed thousands of infected travelers go abroad to infect the rest of the world.
It similarly refused to block infected Chinese from entering Hong Kong. This was to suppress the anti-Beijing demonstrations by sickening its population and forcing it to quarantine itself.
Administration, Congress prepare China measures
Meanwhile, Sen. Lindsey Graham (R-SC) and seven other Republican senators introduced on May 12th the COVID-19 Accountability Act that will authorize the President to impose sanctions on Chinese individuals and entities if Beijing doesn’t provide a “full accounting” of the origins of the coronavirus outbreak. The bill would include authorization to restrict loans, freeze assets, ban travel to sanctioned individuals and entities, and bar Chinese companies from listing on US stock exchanges. Asked about the Graham bill, the President told reporters he would “certainly take a look at it.
Modest cooperation
China did recently meet a requirement on intellectual property protection, and this week began the purchase of significant amounts of US soybeans, lifted restrictions on US barley and blueberries, and also announced a second round of exemptions on some of the retaliatory tariffs on US exports, including ores, chemicals, some medical products. For its part, the USTR this week announced more exemptions from the US Section 301 tariffs on a range of Chinese products, many medical-related.
But not for Huawei
But at the same time, the US Commerce Department announced on May 15th a long-anticipated move to further tighten restrictions on Huawei. This will limit Huawei’s access to semiconductors made abroad from US software, designs, or equipment.There will be a delay in implementing the final rule for some transactions already in progress.
Commerce Secretary Wilbur Ross said it is necessary because, despite Huawei and affiliates being placed on the Entity List last year, Huawei has “stepped-up efforts to undermine these national security-based restrictions through an indigenization effort [that]… is still dependent on US technologies.”
Taiwan Semiconductor Manufacturing Company (TSMC), a main supplier to Huawei’s HiSilicon subsidiary, is understood to be a key target of the rule change. TSMC just announced this week plans to invest in a factory in Arizona. This is causing some unease among the company’s US rivals.
Beijing this week threatened that it will retaliate. According to Beijing’s mouthpiece, Global Times, countermeasures will be aimed at US companies such as Qualcomm, Cisco, and Apple.
US to limit China raising capital in US markets
In another long-anticipated move targeting China, it appears that the White House is moving ahead with plans to crimp Chinese companies’ access to US capital by barring the government’s Thrift Savings Plan retirement fund from investing in Chinese equities.
Also this week, the President again indicated he may bar Chinese companies from listing on US exchanges unless they meet stringent US transparency and disclosure rules.
Lighthizer’s re-shoring push
USTR Lighthizer published an op-ed in the May 11th New York Times titled, “The Era of Offshoring US Jobs is Over – The pandemic, and Trump’s trade policy, are accelerating a trend to bring manufacturing back to America.”
The onshoring push runs counter to warnings from economists and many in the business community that the pandemic-wracked economy can’t afford new moves that raise the cost of doing business by making it less efficient and less integrated internationally.
Lighthizer dismisses the importance of global supply chains to the profitability of US companies and even dismisses the importance of profitability itself, emphasizing instead the creation of US jobs and self-reliance. But most economists and business representatives have long pointed out that the efficiency gained through global supply chains not only boosts profits but also wages, generally creating higher paying jobs than are lost to offshoring.
Other Washington moves
Sen. Marco Rubio introduced on May 14th – with 66 co-sponsors from both parties – the Uyghur Human Rights Policy Act. It passed the Senate on the same day without dissent. It authorizes the President to use Magnitsky Act sanctions, originally aimed at Soviet Russia, to penalize Chinese officials found to violate Uyghur human rights. Since the House passed a similar bill last year (though it would have to vote again), it may soon land on the President’s desk.
Beijing was further angered when the FBI and Homeland Security Department issued a joint alert that Beijing-backed hackers are seeking to steal US research on COVID-19 vaccines and treatments. “These actors have been observed attempting to identify and illicitly obtain valuable intellectual property and public health data related to vaccines, treatments, and testing from networks and personnel affiliated with COVID-19-related research,” the alert stated.
Sen. Ted Cruz (R-TX) introduced a bill on May 12th aimed at ending US dependence on rare earth minerals from China. Cruz noted the threat that Beijing could cut off the US supply of these needed materials, and so “the Onshoring Rare Earths Act will help ensure China never has that opportunity by establishing a rare earth elements and critical minerals supply chain in the US.” The bill would require that the Defense Department obtain its rare earth supplies from US sources, give tax breaks for US companies to do so, and create programs to expand domestic rare earth production. The bill is yet another piece of legislation aimed at reducing US reliance on China.
WTO head unexpectedly retires
As though the Wuhan virus had not done enough to damage international trade, there was an unexpected development at the already wounded World Trade Organization (WTO). Director-General Roberto Azevedo announced that he will leave his position at the end of August, departing a year before his second four-year term ends. This, he said, “would allow members to select his successor in the coming months, without diverting political energy and attention from preparations for the 12th Ministerial Conference [MC12], which is set to be held in 2021.”
The selection of his successor is likely to be contentious.
The Director-General does not make or implement policy for the organization. That is done by consensus of the members, developed in individual WTO committees or negotiating rounds and finalized by the General Council or, if significant rules changes are involved, by trade ministers at Ministerial Conferences. Still, the WTO head can play a critical role in encouraging countries to find agreement. He also interacts closely with the heads of other international economic institutions as well as with member governments. He is a major global spokesman in the fight against protectionism.
Outlook dim for MC12
It is understood that MC12 is in trouble no matter what. It does not appear that the Appellate Body impasse will be resolved over the next year. Moreover, the key anticipated accomplishment, an agreement to discipline fisheries subsidies, is currently out of reach.
The process of selecting a new Director-General will pit the US against China. The US’s obstructive role over the past three years could spur some countries to side against its choice, but if the US is highly dissatisfied, it could carry out the President’s threat to withdraw.
Nevertheless, US Trade Representative Robert Lighthizer, in a brief statement, praised Azevedo “for his exemplary service” and for leading the WTO “with grace and a steady hand….In the coming months, the US looks forward to participating in the process of selecting a new Director-General.” In saying this, Lighthizer calmed fears that the US might hold up the Director-General selection in order to force its desired changes, as it has done in blocking selection of Appellate Body members.
A bipartisan minority wants to say “bye”
Some US politicians on both side of the aisle meanwhile seized the occasion of Azevedo’s retirement to call for the WTO to dissolve. According to the Wall Street Journal,
After news broke of Mr. Azevedo’s early departure, U.S. Sen. Josh Hawley (R., Mo.), a leading U.S. critic of the agency, tweeted: “Just turn the lights off as you go.” Mr. Hawley is author of a resolution in the Senate calling for a vote on whether the U.S. should withdraw from the WTO.” A similar resolution to withdraw the US from the WTO was introduced in the House on May 12th, by Reps. Peter DeFazio (D-OR) and Frank Pallone (D-NJ), who are, respectively, the chairmen of the Energy & Commerce Committee and Transportation & Infrastructure Committee.
The bill won’t go anywhere, and if it did, would leave the WTO to be taken over by China. That’s a losing policy. The Australian-initiated 116-nation coalition to investigate the origin of the coronavirus is more likely to be a winner.
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