Congress and the President find themselves in bipartisan unanimity in approving measures opposing China.
The weekly trade report with L.C.
On July 14th President Trump ended Hong Kong’s special status as a customs territory separate from mainland China. This followed China’s imposition of the Hong Kong Security Law and the US Secretary of State’s determination that Hong Kong is no longer sufficiently autonomous to warrant special treatment.
The Administration last week also took other measures to penalize China. On July 14th, President Trump signed into law the Hong Kong Autonomy Act, legislation that passed Congress without dissent. It targets individuals deemed “primary offenders” of Hong Kong autonomy and entities and banks that deal with them, subjecting all to US sanctions. Banks have a year to unwind relations with these individuals.
China retaliated on the same day by slapping sanctions on Lockheed Martin for its US-government-approved missile sale to Taiwan. China denounced the sale as a violation of the “One-China” agreement. Nevertheless, the Phase One US-China trade deal remains in effect, despite the worsening bilateral relations and skepticism that China will be able to meet its purchase commitments.
China’s South China Sea claims repudiated
The Administration took another major action affecting relations with China when Secretary of State Mike Pompeo released a statement on July 13th formally rejecting most of Beijing’s territorial claims to the South China Sea. For the first time, the US called China’s actions in the region illegal. “We are,” he said, “making clear: Beijing’s claims to offshore resources across most of the South China Sea are completely unlawful, as is its campaign of bullying to control them.” The US will uphold international law and reject claims that control of disputed islets gives China jurisdiction over farther-out resources, he said. “The world will not allow Beijing to treat the South China Sea as its maritime empire…. America stands with out Southeast Asian allies… in protecting their sovereign rights to offshore resources.”
Neither Pompeo nor other US officials have so far indicated what actions the US plans to take, though it has stepped up US naval presence in the region. The US, however, needs to be certain it is in a military position in the region to successfully deter China. This was not the case when the US challenged Japan just prior to the outbreak of WWII.
Philippines backing expanded
The US hadn’t previously declared China’s actions illegal. But it had voiced support for the 2016 ruling by the Permanent Court of Arbitration that sided with the Philippines against China’s claim to territory within its nine-dash line.
The toughening was welcomed by both parties on Capitol Hill. The Democratic and Republican leaders of the House Foreign Affairs and Senate Foreign Relations committees released a joint statement supporting the Administration’s declaration that China’s territorial claims are unlawful.
Condemnation of China’s bullying isn’t just a matter of US bipartisanship. It has become international. Right after the release of the US statement, Philippines officials, on the 4th anniversary of the tribunal’s decision, called for Beijing to comply. Ambassadors to the US from Malaysia, Indonesia, Brunei, Thailand, the Philippines, Myanmar, Cambodia and Vietnam sent a message thanking the administration for expressing support for the ruling that the UN Convention on the Law of the Sea 1982 should apply in the South China Sea.
Senkaku backing reaffirmed
Pompeo told reporters, “We will support countries all across the world who recognize that China has violated their legal territorial claims… or maritime claims.” According to the Japanese press, a State Department spokesman confirmed that this also applies to Japan. “The US recognizes Japan’s administrative control of the Senkaku Islands,” he said, if not total sovereignty. Under the US-Japan Security Treaty, the US will defend that control if challenged.
One US move that had been under consideration but that has reportedly been dropped: to break Hong Kong’s dollar peg and kick it off the SWIFT global financial payments system. The contemplated move was severely criticized.
Sanctions on Chinese tech companies
The State Department announced on July 15th that it has imposed new restrictions on visas for employees of Chinese tech companies, singling out Huawei as a “human rights abuser.” The announcement said: “Telecommunications companies around the world should consider themselves on notice: If they are doing business with Huawei, they are doing business with human rights abusers.” Also this week, the UK made its Huawei ban official. It will eliminate all Huawei equipment from all its networks by the end of 2027.
The Trump administration is reportedly considering a sweeping ban on travel to the US by members of the Chinese Communist Party and their families. Depending on how broadly it applied, it could affect up to 20% of the Chinese population, including many people who have family members in the US. The proposal has been criticized as counterproductive and dumb.
The administration is also considering banning certain Chinese online/social media platforms led by TikTok and WeChat for posing security risks through their appropriation of data on US nationals. India has already banned 59 Chinese apps.
Separately this week, Attorney General Bill Barr, in a Michigan speech, warned US companies not to let themselves be used by China. Certain companies including Google, Microsoft, and Apple, he declared, are “pawns of Chinese influence.” US companies, he charged, are too dependent on imports from China and willing to collaborate with the Chinese Communist Party.
US applies to WTO to punish Chinese farm subsidies
The US submitted to the WTO on July 16th a notification that it will seek authorization to retaliate against China for its failure to abide by the ruling against the domestic support it provides certain agricultural producers. Beijing hadn’t appealed the panel decision that sided with Washington and had said that it would comply. But the US says the time for compliance has passed.
The case involved China’s “market price support” agricultural subsidies which exceeded the country’s allowable limit on trade-distorting subsidies. The subsidies spurred overproduction and thus global price suppression of rice, wheat, and corn.
Despite its many recent anti-Chinese measures, the administration has come under criticism for having let matters drift for too long in the Pacific.
L.C. reports on trade matters for business as well as Founders Broadsheet.
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