But Biden administration does Putin a big favor
The May 17th to May 23rd, 2021 roundup of major trade developments, with L.C.
The bipartisan package of China-centered and tech-focused legislation promised by Senate Majority Leader Chuck Schumer (D-NY) is moving ahead on Capitol Hill, although the details of the final bill are yet to emerge. Nonetheless, Schumer still hopes for a Senate vote this month. After that, the Senate bill will be reconciled in conference committee with the House version. That bill is moving through the House Science Committee and is quite different from the Senate package. That means that final legislation won’t be ready for the president to sign in the immediate future.
The package is widely welcomed for forcing attention on what the US government should do to counteract China’s unfair, abusive, and threatening actions. As Schumer said, “We have the opportunity now to set our country on a path to out-innovate, out-produce, and out-compete the world in emerging industries of the 21st Century – with profound consequences for our economic and national security.”
Some concerns over bill
Based on such openly-expressed China-angst, the legislation has already been denounced by Beijing. It is sure to further anger China while motivating it to step up its drive to become less dependent on the US and the West for technology, as well as to intensify its efforts to use its economic might to pressure other countries into its camp. In fact, the potential to push China further in this direction is one of the criticisms of the package. It is likely to provoke some pushback from other US trading partners who don’t want to be forced to “choose” between the US – their strategic and overall preferred partner – and China, their largest trading partner.
Republicans, especially in the House, are concerned about the cost and its inclusion of special interest “pork.” Progressive Democrats expressed concern that the package is too belligerently and openly anti-China, which could be counterproductive and stoke anti-Asian bias.
Another objection to the legislation is that it pushes the government’s R&D efforts toward applied research and the development of technology instead of basic research. Some, mainly outside Congress, argue that the government shouldn’t become more involved at all in directing R&D. They say the private sector is doing a good job on its own, with the US still the world leader in innovation and basic discoveries. The private sector just needs the government to lift regulatory burdens (including on immigration), further ease taxes on research and investment, and trim the budget deficit to make private investment more attractive. But these objections aren’t likely to derail the Schumer package, given that there is broad bipartisan support for dealing with the threat from China.
Key elements of the act are: strengthening Custom and Borders Protection efforts to enforce the ban on imports made with forced labor; “provide modernized trade enforcement tools to [the US Trade Representative] to address anti-competitive digital trade and censorship practices like China’s Great Firewall, including by requiring USTR to identify trading partners that disrupt digital trade…”
European Parliament halts EU-China trade deal in landslide vote
On May 20th the EU Parliament, with support from all major factions, voted to freeze ratification Comprehensive Agreement on Investment (CAI) between the EU and China that was almost finalized late last year.
There had been suspicion all along within Europe that the EU hadn’t wrung real commitments from Beijing to improve its human/labor rights situation, which Brussels had made a requirement for closing the deal. Then, in March, Members of European Parliament were angered not only by the continuing abuses in Xinjiang and Hong Kong but by China’s retaliatory sanctions aimed at MEPs after Europe joined the US, UK, and Canada and others in slapping various sanctions on China. In retaliation, China sanctioned 10 European individuals, including five MEPs, and four entities, including the Parliament’s subcommittee on human rights. In going after politicians, China targeted those affiliated with the Inter-Parliamentary Alliance, including members from most of the main EU party blocs.
The sanctioning of MEPs angered so many parliamentarians at the time that it was understood that CAI ratification might be jeopardized. – and now it has come under serious threat as the vote was 599-30 to suspend any further consideration of ratification unless and until the sanctions are removed.
The resolution is expected to create some difficulties for European companies operating in China and seems to be stepping ahead of the European Commission and many member governments, especially Germany and France, who have been skittish about provoking Beijing’s anger because of the potential commercial ramifications.
Effort to isolate US backfires
Parliament’s resolution calls the Chinese sanctions “an attack against the EU and its Parliament as a whole, the heart of European democracy and values, as well as an attack against freedom of research” that “lack any legal justification, are entirely unsubstantiated and arbitrary and target the criticism of such human rights violations.”
China’s effort to use the CAI as a wedge to divide the US from the EU wound up instead creating a wedge between the EU and China. A Green Party MEP explained China’s miscalculation: “Chinese leaders believe they have studied the West enough” but “are failing because they have become so arrogant.” A Social Democrat Bundestag member told reporters that “Any new German government after the September elections will come with a more robust and more assertive policy toward China” and so “there is a huge potential for a joint approach by the US and the EU.”
Olympic threat?
Pressure builds for boycotting the Beijing Winter 2022 Olympics. Should the US or any other countries be involved in such action, it would have serious economic as well as strategic implications as China would respond with a heavy hand. The situation is fluid and messy, as corporate sponsors are increasingly concerned that they might be targeted for their support of the Beijing games – while if they pull out, they probably won’t be able to operate at all in China – while some athletes themselves are mulling a boycott. A significant boycott or on-site protest would be a serious blow to China’s prestige and it would be certain to penalize those responsible.
US administration makes Europe a tax haven
The Treasury Department said on May 20th that the US is proposing for the world a minimum corporate tax rate of 15%. That’s down from the 21% the US had been suggesting, reportedly in part because low-tax countries like Ireland (current rate 12.5%) objected. White House National Security Adviser Jake Sullivan tweeted, “The world is closer than ever before to a global minimum tax. Great to hear the positive reception to our proposal and thanks to @SecYellen and our partners all around the world for their work on this. This is what it look like to lead the world and end the race to the bottom.”
Many observers questioned why the national security adviser should be cheering this on, and also pointed out that referring to a “global minimum tax” is both confusing and objectionable – confusing since what is being worked on is agreement on a minimum that individual governments will be asked to follow in setting their national tax rate (not a tax set or collected globally) and objectionable because anything that veers in the direction of a “global tax” appears to be an affront to national sovereignty of the sort that Americans tend to be wary of.
Biden: Russian pipeline, Da!; US pipeline, Nyet!
In a move that surprised many and upset quite a few, the Biden administration said on May 18th that it will waive the sanctions relating to construction of the Nord Stream 2 pipeline to carry Russian gas to Germany. The targeted company, Nord Stream 2 AG, was found by the State Department to have engaged in sanctionable conduct but will nonetheless escape the sanctions. Reportedly, the concern is that sanctions wouldn’t halt construction but would harm relations with Germany. There was immediately criticism of the waiver from members of Congress and what remains of the US press that is not in the tank for the Biden administration. An opinion piece by the editorial board of the Wall Street Journal was captioned “Biden’s Gift to Putin on Nord Stream 2: He treats a Russian gas pipeline better than he does the Keystone XL in America.” It continued:
The decision suggests Mr. Biden doesn’t want to blow up his relationship with the German government, which strongly supports the pipeline. But this gets it backward. The project generates bipartisan opposition in the U.S., and in April the European Parliament called for it to be stopped. Germans have the responsibility to avoid damaging relations with Washington and the rest of the Continent.
Leave a Reply