With the new Biden Administration’s trade policy taking shape, one area of significant importance for businesses to pay attention to is the administration’s stated goal of pursuing a “human rights” focused foreign policy.
This is of particular importance, because U.S. foreign policy goals often drive U.S. trade policy, and a human rights-centered foreign policy signals an intensifying of trade measures against entities, individuals, business sectors, and countries that the U.S. government believe are acting against U.S. foreign policy goals.
One such area that will likely see an increased scrutiny by the U.S. government are transactions that could be deemed to have utilized force labor in their supply chains.
Sources of U.S. Trade Policy
The following are a few sources to keep up-to-date on U.S. trade policy:
Trade Policy Agenda Report
Typically, the U.S. government via the United States Trade Representative (USTR) annually publishes two seminal reports detailing its trade policy focus for the coming year: The National Trade Estimate Report on Foreign Trade Barriers (NTE), and the Trade Policy Agenda (TPA) report.
Whereas the NTE addresses the status of foreign trade and investment barriers to U.S. exports around the world, the TPA reports on progress and problems from the previous year, and lays out U.S. policy focus and agenda for the coming year.
These reports provide a window into the U.S. government’s views and priorities with respect to its trade policies moving forward and its trade relationship with its major trading partners, and sheds light on the government’s potential trade actions against them.
A key policy theme found throughout the March 1, 2021, TPA report relates to engagement through a worker-rights, human-rights, and climate-rights lens. Specifically, the report states that workers “will have a seat at the table” in the development of trade policies, and that the Biden Administration will review past trade policies for their impacts on, and unintended consequences for, workers. The report also goes on to state “the administration’s trade team will work with allies to achieve commitments to fight forced labor and to increase transparency and accountability in global supply chains.”
Statements Made by Government Officials
Like the TPA reports, statements made by the president and government officials who head key cabinet positions related to trade policy development are also important. President Biden during his campaign stated that human rights would form the corner stone of his foreign policy agenda, and as president he has continued to echo this foreign policy stance.
With regard to statements made by government officials, the most important is from Ambassador Katherine Tai of the USTR: “Through unprecedented engagement, we will pursue policies that advances the interests of all Americans, support American innovation and promote broad, equitable growth by giving workers a seat at the table.”
Anthony Blinken, new secretary of state, repeated an assessment by former Secretary of Mike Pompeo that China was committing genocide in Xinjiang. Similarly, National Security Adviser Jake Sullivan also endorsed that stance, stating the U.S. needed to speak with clarity and consistency on the issues of force labor in China. Sullivan further stated that the U.S. needs to be “prepared to act, as well to impose costs, for what China is doing in Xinjiang, what it’s doing in Hong Kong.”
With regard to USAID, although typically not a cabinet-level position, it has now been elevated to a cabinet-level position under the Biden Administration, and will now be part of the national Security Council. Furthermore, while the office is typically not associated with international trade, it is important to note that U.S. foreign aid to major recipient countries is an important trade tool, as these recipients are often targets of U.S. trade retaliations if they act in a manner inconsistent with U.S. foreign policy goals.
The Commercial Customs Operations Advisory Committee Recommendations on Forced Labor as Priority Trade Issue
From an enforcement perspective, the Commercial Customs Operations Advisory Committee (COAC) of the U.S. Customs and Border Protection (CBP) has indicated that CBP intends to add forced labor to its list of priority trade issues.
In March 2021, the COAC issued draft recommendations on how to “ensure a more holistic U.S. government-wide approach to addressing forced labor.” The COAC Forced Labor Working Group (FLWG) recommendations urge CBP to collaborate with other agencies and the private sector to develop objective metrics for success in combating forced labor. The current Priority Trade Issues identified are:
- agriculture and quota;
- antidumping and countervailing duties;
- free trade agreements;
- import safety;
- intellectual property rights;
- revenue; and
- textiles and wearing apparel.
Based on the report, CBP briefed the FLWG on its intent to add forced labor as a Priority Trade Issue in the near future.
Similarly, in the U.S. Congress, two bills – both titled the Uyghur Forced Labor Prevention Act (UFLPA) (HR 1155 and S 65) – have been reintroduced in Congress, and may effectively ban all goods produced in whole or in part in the Xinjiang Uyghur Autonomous Region (XUAR), unless importers can prove that the goods were not made with forced labor. The bills will have more time to gain traction, as they have been introduced at the beginning of the current congressional term.
If passed, these bills will grant CBP with the authority for a regionwide Withhold Release Order (WRO), enabling it to detain all products from the XUAR.
Withhold Release Orders
The U.S. government is aggressively taking actions to prohibit certain imports from China that it alleges may have been produced by forced labor.
In fact, CBP stated recently that it is making enforcement of forced labor a policy priority, as it is authorized to withhold release of goods when information “reasonably but not conclusively” indicates that the merchandise was produced using forced labor. For example, in January 2021, CBP increased its pressure on goods from Xingjian Uyghurs Autonomous Region (XUAR) through the issuance of a broad-sweeping WRO on all cotton and tomato products from the region, including its downstream products.
Although the Biden Administration’s human rights-centered trade policy will likely focus on U.S. Customs’ tools as a preferred method for enforcing alleged force labor violations, other trade tools may also be used when appropriate. Such tools include economic sanctions – often used by governments to alter the strategic decisions of states or nonstate actors.
U.S. sanctions prohibit U.S. citizens from engaging in almost all transactions with the sanctioned business sector, individuals, or entities within the sanctioned geographical areas. In fact, since January, the Biden Administration has issued a whole host of human rights-related sanctions against alleged human rights violators. These economic sanctions range from establishing a new sanctions program following the military coup in Myanmar, and against Chinese government officials regarding Hong Kong and XUAR, Russian government officials for their alleged poisoning and subsequent imprisonment of Aleksei A. Navalny, and certain Saudi government officials under the Global Magnitsky Human Rights sanctions program due to their murder of Washington Post columnist Jamal Khashoggi in 2018.
Conclusion: Action Steps
The Biden Administration’s human rights-centered foreign policy will create significant challenges to companies that engage in international trade. As a result, these companies need to stay abreast of actions taken by the U.S. government in furtherance of this policy, and the compliance impact, if any, the policy may have on their businesses.
From a sourcing perspective for example, the policy would place a high burden on companies to:
- evaluate their entire supply chain;
- consider shifting sourcing or production out of the XUAR and other particular areas of interest to the U.S. government; or
- implement significant tracing and documentation policies to prove that goods were not produced with forced labor.
Ngosong Fonkem is co-author of Trade Crash: A Primer on Surviving and Thriving in Pandemics & Global Trade Disruption.
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This article was originally published on the State Bar of Wisconsin’s Business Law Blog. Visit the State Bar sections or the Business Law Section webpages to learn more about the benefits of section membership.