“America Competes Act" takes $52 billion swipe at China business, EU launches WTO complaint against Beijing over Lithuania & CCP infighting at all time high, expert says -- #China Boss #news 1.31.22
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“America Competes Act” takes $52 billion swipe at China business
Barron's associate editor Reshma Kapadia hit on a weighty nuance of the recently proposed $52 billion “America Competes Act” that is currently being debated in U.S. Congress.
Kapadia, Barron’s:
It calls for a “whole-of-government screening process for outbound investments and the offshoring of critical capacities and supply chains.”
… A move to screen outbound investments would mark a break from traditional U.S. foreign economic policy and make the U.S. one of just a few advanced economies with such a regime, [a recent Rhodium report] says. It could hurt the global competitiveness of U.S. companies in the targeted industries, as well as the attractiveness of the U.S. as an investment destination for global companies, the Rhodium analysts wrote.It could also push China to retaliate and push forward with a blacklist officials have mentioned when U.S.-China tensions have flared, as well further intensify efforts to bolster its self-reliance.
While details are still not clear, such a blacklist could put restrictions on U.S. companies’ operations or sales in China. The market never reacts well to battles over tariffs and trade, and a move toward restricting outbound investment could intensify angst about deglobalizaton and the challenges that could pose for global companies and investors’ portfolios.
Emphasis added.
But CNN's Phil Mattingly homed in on bipartisan support for “the core of the bill” which is a $52 billion “federal investment” in semiconductor development and manufacturing aimed at “reshap[ing] the U.S. posture” for “a strident technological rivalry with China.” A Democrat lawmaker Mattingly interviewed called the bill “[t]he sweetest of political sweet spots" for the Biden Administration, and a Republican “compared the measure to a ‘Sputnik moment’” for its potential to be “broadly transformational,” he said.
Mattingly, CNN:
"It's China, it's national security, it's inflation, it's manufacturing, it's bipartisan," one Democratic lawmaker who has pushed to move the bill for several months told CNN. "Beyond the policy necessity, it's the sweetest of political sweet spots."
…Sen. Todd Young, the Indiana Republican who has spearheaded the effort and successfully shepherded the measure through the Senate along with Schumer, the lead Democratic author, has compared the measure to a "Sputnik moment."
In the place of the Soviet Union's technological advancements of last century, Young has pointed to China's vast investment in research and technology driving the US public and private sector response.
Nevertheless, Politico's Gavin Bade had some thoughts on why the “long-awaited bill” will likely spark “a flurry of corporate lobbying and intense negotiations with the Senate over final legislative language.”
Tariff reform: One provision sure to spark discord is a bill from Ways and Means trade chief Earl Blumenauer (D-Ore.) that would end the so-called de minimis provision for low-value packages that arrive in the U.S. from non-market economies like China. That could increase duties on hundreds of millions of packages each year, even after House lawmakers removed a provision that would have ended duty-free treatment for goods subject to Section 232 national security tariffs or Section 301 duties imposed due to trade law violations.
Outbound investment screening: The House will also include a contentious provision to set up a government screening protocol for American investments in unfriendly nations like China. That bill, the National Critical Capabilities Defense Act, was left out of the Senate bill after a last-minute lobbying blitz from the Chamber of Commerce gave some senators cold feet.
Kapadia also thought that "the odds of [the bill's] passage" without further tweaking were "low, given that a similar measure was defeated in the Senate."
For Reshma Kapadia’s analysis in Barron’s, House's China Bill Calls for Scrutiny of U.S. Investments There. It Could Be a Big Deal., click here. For Phil Mattingly’s report on CNN, Biden builds toward a much-needed bipartisan Capitol Hill victory -- on China, click here. For Gavin Bade’s coverage of the bill in Politico, House China bill includes aggressive trade provisions, click here.
Law and International Xi
EU launches WTO case against China over blockade of Lithuanian goods, US and Australian also seek to join
European Commissioner for Trade Valdis Dombrovskis on Thursday announced to reporters that the EU had filed a case against China at the World Trade Organization for its "de facto ban on exports from Lithuania in a dispute over Taiwan," Financial Times reported.
The Commission explained the legal basis for its WTO claim, as well as “background” of the dispute, in a press release and a tweet the same day:
The EU has today launched a case at the World Trade Organization (WTO) against the People's Republic of China over its discriminatory trade practices against Lithuania, which are also hitting other exports from the EU's Single Market. These actions, which appear to be discriminatory and illegal under WTO rules, are harming exporters both in Lithuania and elsewhere in the EU, as they also target products with Lithuanian content exported from other EU countries. As attempts to resolve this bilaterally have failed, the EU has resorted to initiating dispute settlement proceedings against China. The WTO consultations initiated today are the first step in this process.
Euractiv reporters called “[t]he move by Brussels … a further deterioration in ties between China and the bloc.” They also noted that the U.S. has indicated its plans to join the complaint “to push back on the PRC’s coercive economic and diplomatic behavior.”
Euractiv:
Washington will work with its allies “to push back on the PRC’s coercive economic and diplomatic behavior”, US Trade Representative spokesperson Adam Hodge said in a statement, using the acronym for the People’s Republic of China.
. . . After weeks of investigating, the commission said it had built up a trove of evidence of Chinese restrictions.
These included “a refusal to clear Lithuanian goods through customs, rejection of import applications from Lithuania, and pressuring EU companies operating out of other EU member states to remove Lithuanian inputs from their supply chains”.
Reports have said firms in Germany, Finland and Sweden have been pressured to cut off Lithuania from their supply chains.
Emphasis added.
In an update Saturday morning, Reuters reported that Australia also seeks “to join WTO talks on China-EU trade row."
Reuters:
Thursday's EU challenge accuses China of discriminatory trade practices against Lithuania, saying they threatened the integrity of the single market.
"Australia has a substantial interest in the issues raised in the dispute brought by the European Union against China ... and will request to join these consultations," Trade Minister Dan Tehan said in a statement.
For the rest of FT’s update, Brussels challenges China at WTO over block on Lithuania imports, click here. For the European Commission’s press release, EU refers China to the WTO following its trade restrictions on Lithuania, click here.
For Euractiv’s report, EU launches WTO case against China over Lithuania row, click here. For Reuters’ update, Australia seeks to join WTO talks on China-EU trade row, click here.
Geopolitics
France excludes China from next month’s Indo-Pacific forum in Paris
France has excluded China from a meeting of 30 foreign ministers from the Indo-Pacific region that will take place next month in Paris, Politico reported. Japan, India and South Korea, as well as the island nations of Comoros and Micronesia are among the countries that have been invited to participate in discussions on the EU’s “Global Gateway” initiative Brussels is promoting as an alternative to Beijing’s Belt and Road, Politico’s Stuart Lau said.
The “snub,” as Lau called it, comes as President Emmanuel Macron has been sending “mixed messaging on China.”
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