Congress is writing bills to discourage China from attacking Taiwan and to make the US economy less dependent on Chinese manufactures.
The weekly trade report with L.C
Sen. Cory Gardner (R-CO), chairman of the Senate Foreign Relations East Asia subcommittee, announced on July 29th that he has written to US Trade Representative Robert Lighthizer calling on him to “immediately initiate meaningful negotiations between the US and Taiwan on a comprehensive Bilateral Trade Agreement (BTA),” according to a press release from his office. In his letter, Gardner writes:
On October 29, 2019, the US Senate unanimously passed… the Taipei International Protection & Enhancement Initiative (TAIPEI) Act, which calls on the Administration to ‘engage in bilateral trade negotiations with Taiwan, with the goal of entering into a free trade agreement’…. On November 19, 2019 … President Tsai Ing-wen formally endorsed the US-Taiwan BTA [bilateral trade agreement]…. Unfortunately… there has been no substantive progress on bilateral trade negotiations. I look forward to your reply and to working with you to make the US-Taiwan BTA a reality in the 116th Congress.”
Taiwan Invasion Prevention Act
On the House side, Rep. Ted Yoho (R-FL), ranking Republican on the House Foreign Affairs Asia subcommittee, announced on July 29th that he has introduced the Taiwan Invasion Prevention Act, a warning to Beijing not to move against or threaten Taiwan militarily. The bill would authorize the US government to respond with force to any attack on the island and would also require that Beijing engage in peaceful negotiations with Taipei. Yoho said it is intended to “clarify and strengthen the [US] commitment to defend Taiwan in the event of an armed attack. The US policy of strategic ambiguity… initially implemented to avoid provoking Beijing to attack Taiwan and encourage peaceful relations, has clearly failed.” A day earlier, Yoho said publicly, “We’re going to stand with any country that is a democracy, that stands up for liberty and freedom and human rights. If China chooses to cross that line, there will be consequences. This is not our choice. This is China’s choice. They cannot do what they did to Hong Kong to Taiwan.” Yoho has long called for a more hands-on policy toward Taiwan. He is a China hawk, though he also opposed the US joining the TPP under Obama.
Congress more active in China policy
Much of the US-China activity has been taking place on Capitol Hill. Among recent new legislation is a wide-ranging bill aimed at setting a comprehensive strategy for dealing with China. It was introduced in the Senate on July 23rd by four Republicans on the Foreign Relations Committee – Chairman Jim Risch (R-ID), Asia Subcommittee Chairman Cory Gardner (R-CO), Mitt Romney (R-UT), and Todd Young (R-IN). The objective of the STRATEGIC Act (for ‘‘Strengthening Trade, Regional Alliances, Technology, and Economic and Geo-political Initiatives concerning China’’) is “To advance a policy for managed strategic competition” with China.
The long legislation – the bill runs 160 pages – seeks to craft a more fine-tuned approach than President Trump’s blunt focus on tariffs, threats, and tough rhetoric. Title II of the act discusses and addresses China’s discriminatory economic practices – its industrial policy, IP violations (including by infiltration of universities), unfair subsidies, forced tech transfer, predatory practices of state-operated enterprises, its onerous “social credit” system. It calls for organizing the US government as well as corporations to better detect and respond to problems and to develop ways to work with allies to reining in China’s abuses and push for tech dominance. It sets out ways to intensify US investment in critical innovative technology, including through creating a tech coalition with allied countries to take the lead on setting international standards. The bill also seeks to strengthen US influence in international organizations and in the Asia-Pacific, including the South China Sea.
Democratic Party support on key bills is uncertain
Although the bill doesn’t have Democratic co-sponsors, Foreign Relations Committee ranking Democrat Sen. Bob Menendez (D-NJ) told a committee hearing last week that he is planning to release a similar bill soon, noting that there is bipartisan agreement regarding the need to better compete with China. But Senator Menendez should be pressed as to why he is not supporting Senator Risch’s bill, especially given the limited legislative time left this year.
Another bill that was reported out of the Senate Judiciary Committee on July 30th would allow Americans to sue China for its malfeasance in facilitating COVID-19 to spread abroad. The Civil Justice for Victims of China-Originated Viral Infectious Diseases Act would amend the Foreign Sovereign Immunity Act that prohibits Americans from suing foreign governments in US courts. That act was previously amended, with little opposition, to enable lawsuits charging foreign governments with terrorism.
The new amendment is more controversial and likely won’t be enacted. The committee vote was partisan, and even if it passed the Senate, it probably wouldn’t move in the House. Opposition to the bill comes from those concerned it could set a precedent for the US government being sued abroad. Democrats allege that it is an effort to deflect attention from the President’s missteps as the pandemic broke out in the US. But do Democrats wish to exonerate China’s leadership for what it knowingly and culpably did? There have already been a few lawsuits filed against China in US courts, but they are likely to be dismissed.
Tik Tok
Meanwhile, a new controversy is emerging around the Chinese-owned and built software application Tik Tok, which is a runaway success with American teenagers. The Trump administration is rightly concerned about Chinese government collection of personal data on Americans, whether through Chinese software or hardware. Tik Tok has been pressured to sell the company’s American operations and data to an American company, with Microsoft reportedly close to making the acquisition. China is enraged that one of its first international software success stories is being expropriated by the US. But China has only itself to blame itself. It has been similarly expropriating the intellectual property of US tech companies and preventing them from competing in China. Furthermore, its spying and intelligence gathering through technical means is a serious national security threat to the US and other non-Chinese companies.
The software company Zoom, which has been has been as popular among business users as Tik Tok has been with teenagers, has also come under US scrutiny. Although US-owned, its software and encryption is created by developers in China.
Buy American
There also continues to be much activity around Buy American-style legislative initiatives aimed at cutting reliance on imports for medical and other critical products. The next bill to provide pandemic financial relief, which is being crafted amid controversy in Congress, is set to have several amendments including the House’s “American PPE [personal protective equipment] Supply China Integrity Act.” It requires the federal PPE stockpile to be compiled exclusively from US-made goods. The Senate meanwhile is advancing the “US Made Act of 2020” to encourage US semiconductor production, as well as the “American Mineral Security Act.” These measures have bipartisan support, and Democratic presidential candidate Joe Biden’s policy platform contains many similar measures.
Nonetheless, there is domestic opposition, including from economists, a number of whom recently warned that forcing too much self-reliance would be counterproductive, especially since much of the material in US stockpiles is primarily made in North America and Europe rather than China. Forcing it all to be made in the US would be costly, inefficient, and unfriendly to allies.
Kodak
The President announced another re-shoring initiative on August 28th — by unveiling an “understanding” with Eastman Kodak Co. in which the US International Development Finance Corp. will provide the company with a $765 million loan to set up a new division to produce pharmaceutical components. Using the Defense Production Act, this is the first initiative undertaken under the President’s Buy American executive order. The move rescues a flailing company. The order provoked immediate controversy centering on charges of insider trading and questions over the choice of a company that, while being involved in the chemicals sector, has never produced medical-related ingredients.
Reshoring
The Bringing Back American Jobs Through Intellectual Property Repatriation Act is specifically intended to re-shore intellectual property (IP). It would enable companies to repatriate, without tax consequences, IP developed and held abroad.
Another bill introduced on July 28th – the No Funds to China Military Act – was introduced by Sen. Martha McSally (R-AZ). It would ban the purchase by the federal government of products and services from companies that are on the Defense Department’s list of Communist Chinese Military Companies.
Meanwhile, Magnitsky sanctions – targeting human rights abusers – were imposed by the State and Treasury departments on CCP-controlled Xinjiang Production & Construction Corp. and three of its officers for involvement in abuses in Xinjiang.
Chinese pushback
China, for its part, is trying to put the US on the defensive in the trade arena, by accusing Washington of being a non-market economy and therefore not justified in accusing China of such practices. On July 17th, China’s Commerce Ministry announced that in a preliminary anti-dumping (AD) determination, it had found that the US government, through its subsidies and incentives to the shale oil industry, creates “non-market conditions” that distort the market in the energy sector. It therefore is imposing preliminary AD duties of 254.4% and 267.4% on propanol from Dow Chemical and Oxea Corporation. Some press accounts suggest that this action may become a template for China imposing unfair trade duties on other US exports.
Leave a Reply