New law to combat forced labor in China sparks enforcement debate

“President Joe Biden..signed a bill to curb forced labor in China that U.S. business groups and trade experts warn will inflict unnecessary pain on U.S. firms and punish legitimately employed Uyghur Muslims in China’s Xinjiang region.
The Uyghur Forced Labor Prevention Act, which was approved after more than a year’s delay, is designed to insulate U.S. companies and consumers from complicity in forced labor practices in Xinjiang. The U.S. government has concluded that the practices are among abusive state policies targeting Uyghurs that constitute genocide.

But industry groups and trade lawyers say the law’s strict compliance standards coupled with problematic Customs and Border Protection enforcement will harm both U.S. business interests and Uyghur Muslims.”

““If you’re a company who is manufacturing in that area, you’re going to need to prove that slaves didn’t make it. The presumption is on you,” Rubio said after the bill’s Dec. 16 Senate passage.”

“Assertions of the law’s stringent compliance standards are no exaggeration. It imposes a presumption of guilt in terms of forced labor links to any Xinjiang-sourced imports — predominately agricultural and chemical products — and obligates importers to provide documentation that proves its Xinjiang supply chains are not tied to forced labor.

The experience of solar and apparel companies from previous forced labor enforcement actions by Customs and Border Protection suggest that the new law’s compliance standards will be “practically impossible” to meet, said former CBP trade lawyer Richard Mojica.”

“Mojica and other trade lawyers say the law’s compliance requirements will most seriously impact small- and medium-sized U.S. firms that lack in-house expertise to reliably map complex overseas supply chains.”

Crackdown on China’s treatment of Muslim minority headed to Biden’s desk

“The Uyghur Forced Labor Prevention Act effectively bans all imports from China’s Xinjiang region, where the U.S. government has said that the Chinese Communist Party is perpetrating a genocide against the religious minority, including slave labor, forced sterilizations and concentration camps. Under the terms of the bill, companies that produce goods in Xinjiang can be granted an exception if they show proof that those products are not made using forced labor.

“Many companies have already taken steps to clean up their supply chains,” Rubio said. “For those who have not done that, they’ll no longer be able to continue to make Americans — every one of us, frankly — unwitting accomplices in the atrocities, in the genocide that’s being committed by the Chinese Communist Party.””

Stop The Steel: Biden Is Replacing Trump’s Tariffs With Import Quotas

“The Biden administration has reached a deal with the European Union to withdraw tariffs imposed by President Donald Trump on European-made steel. Unfortunately, the agreement likely won’t translate into lower costs for American manufacturers and consumers.
That’s because the Biden administration is replacing Trump’s tariffs with a new form of protectionism that will continue to artificially inflate the cost of steel imported from Europe. Instead of charging 25 percent tariffs on all steel imports, as Trump did, Biden’s deal includes a so-called “tariff-rate quota” that will allow 3.3 million metric tons of steel to be imported annually without tariffs. Once that threshold is met, the 25 percent tariffs will apply to subsequent imports. For reference, the U.S. imported nearly 5 million metric tons of steel from Europe in 2017—the last full year before Trump’s tariffs caused imports to fall sharply.”

Tariffs on Chinese Imports Have Accomplished Approximately Nothing

“At the core of former President Donald Trump’s aggressive trade policies was a relatively simple—perhaps overly simplified—promise: Tariffs on Chinese-made products would drive manufacturers out of China.

“Many tariffed companies will be leaving China for Vietnam and other such countries in Asia,” Trump claimed in May 2019, about a year after his tariffs were first imposed. “China wants to make a deal so badly. Thousands of companies are leaving because of the Tariffs,” he tweeted a few months later, suggesting that the outflow was already underway. “If you want certainty, bring your plants back to America,” Robert Lighthizer, Trump’s U.S. trade representative, lightly threatened in a New York Times op-ed in May 2020, as the trade war’s second anniversary arrived.

But the tariffs failed to achieve that primary policy aim, according to a new paper published by researchers at the University of Kansas and the University of California, Irvine. Roughly 11 percent of multinational companies exited China in 2019, the first full year in which tariffs were in place—a significant increase from previous years. But the overall number of multinational firms operating in China actually increased during that same year, as foreign investment continued to flow into China even as the trade war ratcheted up costs.

In fact, the number of U.S.-based multinationals in China actually increased from 16,141 in 2017 to 16,536 in 2019. Non-U.S. companies were more likely to exit China during 2019 despite not being subjected to Trump’s tariffs.

“We estimate that less than 1 percent of the increase in U.S. firm exits during this period was due to U.S. tariffs. And U.S. firms were no more likely to divest than firms from Europe or Asia,” researchers Jiakun Jack Zhang and Samantha Vortherms wrote in The Washington Post this week.”

“Trump is no longer running U.S. trade policy, but his failed tariffs on Chinese imports are still in force. Lighthizer’s replacement in the Biden administration, U.S. Trade Representative Katherine Tai, has said the tariffs provide “leverage” over China.

But that perspective is no more grounded in reality than Trump’s promises that his tariffs would cause companies to flee China. American consumers are bearing nearly 93 percent of the costs of the tariffs applied to Chinese goods, according to a recent report from Moody’s Investors Service. How is this giving the White House leverage over China?”

More Than 53,000 American Companies Sought Exemptions From Trump’s China Tariffs. Almost All Were Denied.

“The bureaucratic process established by the Trump administration to determine which American companies should be exempted from paying tariffs on imports from China is a black box of “inconsistencies” and poorly documented decision-making, according to a new audit.

In a report published last week, the Government Accountability Office (GAO) cast a critical eye on the so-called “tariff exclusion process” created in 2018 as part of the Trump administration’s efforts to slap tariffs on a wide range of imports from China. The process, overseen by the Office of the U.S. Trade Representative, allowed American businesses to appeal to the federal government for permission to not pay tariffs if they could demonstrate that a given product was not available from other sources, or if a business faced “severe economic harm” due to the tariffs.

Between 2018 and 2020, American businesses submitted more than 53,000 exclusion requests. The vast majority—87 percent—were denied, and most of the denials were on the grounds that the company failed to demonstrate sufficient economic harm to the Office of the U.S. Trade Representative, the GAO found.

In other words, federal bureaucrats reviewed tens of thousands of statements from companies pointing out how the Trump administration’s tariffs would cause economic harm—because, yes, Americans paid for the tariffs—then discarded most of those requests because the harms were not “severe” enough.

What’s even worse is that there’s very little in the way of objectivity or due process afforded to companies that had their exclusion requests denied. Soon after the tariffs were imposed, members of Congress warned that the exclusion process lacked “basic due process and procedural fairness” and that it could be “abused for anticompetitive purposes.” As Reason previously reported, business owners have complained that simply getting a decision one way or the other can take months. And there is no way to appeal the rulings.

The new GAO report confirms some of those concerns.”

“tariffs are always about protecting certain industries, and protecting certain industries always invites influence-peddling.”

‘Lay out the strategy’: Corporate America grows impatient on Biden’s China trade review

“American companies were glad to see Biden review Trump’s trade policies toward China, but eight months later, they have seen little change on tariffs or other issues bedeviling their business in the world’s second-largest economy.”

The Trade Embargo Allows Cuba’s Regime To Blame the U.S. for Communism’s Failings

“Despite being in place since 1962, the trade embargo has plainly failed to accomplish its primary goal of toppling Cuba’s regime. If anything, the policy has likely bolstered the regime by allowing the communist government to blame the U.S. for its own economic problems, as Cuban President Miguel Díaz-Canel did on Sunday. The trade embargo has contributed to the Cuban government’s impoverishing of millions of Cubans while limiting Americans’ economic freedom, too. That it remains in place nearly three decades after the fall of the Soviet Union shows that America’s foreign policy towards Cuba has failed to learn the primary lesson of the end of the Cold War: Economic freedom is the best weapon to aim at communism.”

“Cuba’s government is authoritarian, but there should be no mincing of words about this. Communism is what broke Cuba. The authoritarianism on display is merely the natural evolution of communist regimes—a pattern of economic and political repression that has been tragically repeated in too many corners of the world during the past century.
Biden’s statement is right to conflate the lack of economic freedom with long-running political repression in Cuba. That’s exactly why America’s trade embargo is such a backward strategy, one that assumes economic and political freedom aren’t fundamentally linked.

Look at what happened when the Obama administration loosened some of the rules banning Americans from traveling to Cuba as part of an effort to reestablish diplomatic relations. Even with the trade embargo still in place, that slight policy change helped create a boomlet of entrepreneurship amid then-Cuban President Raul Castro’s thawing of tight state control over private businesses on the island.”

“Since taking over as Cuba’s president in 2018, Díaz-Canel has cracked down on Cuba’s private sector. Former President Donald Trump helped him smother the nascent economic reforms by reversing some of Obama’s attempts to normalize U.S.-Cuba relations and by slapping new economic sanctions on Cuba just before leaving office in January.

Advocates for maintaining the embargo against Cuba argue that increased trade and tourism would enrich and strengthen the communist regime while failing to aid most Cubans. This was basically Trump’s approach—one that reflects longstanding hardline conservative views about how to handle the communist state just 90 miles from the Florida coast. “There is zero reason to delude ourselves into believing that ‘engagement’ will get the tyrants in Havana to change their ways,” Sen. Marco Rubio (R–Fla.) wrote in January.

This is a clever misdirection. Where is the evidence that disengagement is working? The embargo has been in place for nearly six decades. How much longer should we wait? How much longer should the people of Cuba have to wait?”

“As the people of Cuba strive to cast off their communist oppressors, the United States can do more than simply offer words of support. Undoing Trump’s restrictions on the remittances that many Cuban Americans send to their families still trapped under the communist regime would be a great place to start.

If Biden were to reinstate Obama’s travel and economic policies toward Cuba and call on Congress to end the failed trade embargo, it would be unlikely to immediately change the reality on the ground in Havana. But it would signal to the Cuban people—and to the country’s potential future leaders in the event of a full-scale toppling of the regime—that the United States is prepared to let trade and tourism serve as vital economic and political lifelines for the island’s long-suffering residents. And it would remove one excuse the Cuban government routinely uses to dismiss the failings of communism.”

The Trade War Drove American Automaking Jobs to China as Tariffs Stalled U.S. Exports

“China had become the second-largest export market for American-made cars by 2017, the last full year before Trump’s trade war began. After a series of tit-for-tat tariff increases between the U.S. and China, however, American automotive exports to China fell by more than one-third. Higher tariffs on imported car parts from China raised costs for automakers in America, while China’s retaliatory tariffs on American-made cars hiked prices and reduced demand in China.

To avoid those costs and to evade increased uncertainty, some carmakers began shifting their supply chains—but not in the direction the White House was hoping.

BMW, for example, shifted much of the production of its X3 sport-utility vehicle from Spartanburg, South Carolina, to China after reporting that tariffs had cut the company’s American profits by about $338 million in 2018. The higher costs imposed by the trade war caused Tesla to announce that it was “accelerating construction” of a new plant in Shanghai.

Overall, the number of American automating jobs peaked in September 2018, shortly after Trump’s trade war began, and then declined during 2019 and 2020.

The signing of the “phase one” trade deal with China did little to stop or reverse those shifts. Even though China pledged to increase its purchases of American-made vehicles and car parts as part of the agreement, exports are still lagging well behind their pre-trade war totals, according to the PIIE report.”

“Trump believed that hiking tariffs would reduce America’s imports from China, allowing the gap between the value of those imports and the value of America’s exports to fall. What he failed to grasp, however, is that many of those imports—especially when it comes to manufactured goods—are materials necessary for making the items that American companies end up exporting back to China: like cars.

Higher costs imposed on imports ended up slowing American exports—and thus the trade deficit actually grew. Meanwhile, companies could avoid the cost of Trump’s tariffs by shifting production out of the United States, and some chose to do that.

Biden, so far, seems unwilling to remove Trump’s tariffs. By announcing a misguided “Buy American” policy for government procurement, Biden is also expanding on some of the Trump administration’s protectionist manufacturing policies.

If the past few years are any indication, all Biden will likely accomplish by this is to further erode America’s industrial base by trading away automaking jobs in exchange for the appearance of “toughness.””