The four years of “America First” foreign policy under the Trump administration was one of the more turbulent periods for many Wisconsin businesses having to navigate the challenges caused by ongoing trade tensions between the United States and China. These reached new heights and were further exacerbated by the COVID-19 pandemic. Despite the signing of the “phase one” trade deal in January 2020,¹ the two countries continue to maintain hundreds of billions of dollars’ worth of tariff on each other’s goods.

With the Biden administration in office starting in January 2021, one area of significant development on the trade front that Wisconsin businesses should  follow closely is the administration’s stated goal to pursue a human rights-centered foreign policy. This policy shift is important because U.S. foreign policy often drives U.S. trade policy.

Though at first glance, this shift seems to deviate significantly from President Trump’s America First policy, Biden’s human rights-centered policy ironically continues Trump’s tough approach to handling trade issues. Expectedly, this will result in intensified trade measures against not only trading partners but also individuals, entities, and countries the U.S. government believes are violating or have violated human rights. The potential consequence of these measures will affect Wisconsin trade not only from an exporting perspective but also from an importing perspective as products sourced from international suppliers are an invaluable addition to the manufacturing supply chain for many Wisconsin-made products. Because trade issues touch every facet of Wisconsin’s economic life, it is imperative for lawyers to follow the current administration’s policy closely: Not only are lawyers affected by its consequences, but their clients and potential clients are as well.

Policy Shift Signals and Sources of U.S. Trade Policy

Although the Biden administration has been in office almost six months, its trade policy is still developing. As a result, the most appropriate method for predicting how its human rights-centered trade policy will develop is to review official governmental reports outlining policies when such documents are published. Also helpful are public statements by President Biden and his leadership team and any applicable Congressional legislation, federal agency regulations, and executive orders. Combined, these give a strong indication of where things are headed policy wise.  Lawyers should pay particular attention to the following governmental reports and official statements, legislative initiatives, and agency recommendations and decisions.

Official Governmental Reports

The U.S. government, through the Office of the United States Trade Representative (USTR), publishes two seminal reports detailing its trade policy focus for the coming year: 1) The Trade Policy Agenda (TPA) report; and 2) The National Trade Estimate Report on Foreign Trade Barriers (NTE). Both provide official-policy-document perspectives on trade policy. 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 insight 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 provides a glimpse foreshadowing the U.S. government’s potential trade actions. The TPA report, released on March 1, 2021, contains a key policy theme found throughout the report about engagement through worker rights, human rights, and climate rights. Specifically, the report states that workers “will have a seat at the table” in the development of trade policies, with the Biden administration reviewing past trade policies to determine their effects on workers and unintended consequences relating therefrom. The report also states: “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.”²

Similarly, the NTE report published on March 31, 2021,³ in the 28 pages dedicated to China, spells out grievances against China’s trade barriers, saying, “USTR [will] continue to vigorously scrutinize foreign labor practices and to address substandard practices that impinge on labor obligations in U.S. free trade agreements (FTAs) and deny foreign workers their internationally recognized labor rights.” The report also notes the USTR is “scrutinizing foreign labor practices” affecting labor obligations in free trade agreements, with the USTR enhancing its monitoring and enforcement of environmental commitments under those agreements.⁴

Another recently released report, the 2020 Country Reports on Human Rights Practices (HRP), though typically not associated with foreign or trade policy, carries significantly more weight in the Biden administration than previously as demonstrated by the press statement accompanying its release, reaffirming the United States’ commitment to place human rights at the center of U.S. foreign policy again.⁵ Foreign aid from the United States to major recipient countries is a vital trade tool; these recipients are often targets of U.S. trade retaliation if they act in a manner inconsistent with U.S. foreign policy goals. The HRP contents describe in detail the status of human rights in 198 countries, cataloguing significant human rights abuses occurring in 2020. Predictably, particular attention was focused on China, and China’s human rights abuses were firmly condemned, including Xinjiang, where “genocide and crimes against humanity” were committed against the Uyghur population. The report also described arbitrary imprisonment, torture, forced labor, forced sterilization, and more.⁶

Statements Made by Governmental Officials

In addition to official governmental reports, statements made by a president and the president’s leadership team help to predict the administration’s foreign policy focus. Biden, during his presidential campaign, stated that human rights would form the cornerstone of his foreign policy agenda. As president, he continues to echo this foreign policy stance in many press statements, interviews, and his first address to a joint session of Congress.⁷

Statements from his leadership team reinforce this. The most pertinent office that develops U.S. trade policy is the USTR, now headed by Ambassador Katherine Tai. She stated: “[T]hrough unprecedented engagement, we will pursue policies that advance the interests of all Americans, support American innovation and promote broad, equitable growth by giving workers a seat at the table.”⁸

A human rights-centered foreign policy shift is important because U.S. foreign policy often drives U.S. trade policy.

Secretary of State Antony Blinken similarly outlined such a shift by the Biden administration through a myriad of interviews and press statements since his confirmation. In many statements, he endorsed former Secretary of State Mike Pompeo’s assessment that China was committing genocide in the Xinjiang region of China.⁹ Furthermore, in the press statement accompanying the HRP report, Blinken went on to say, “[s]tanding up for human rights everywhere is in America’s interests … and the Biden-Harris Administration will stand against human rights abuses wherever they occur, regardless of whether the perpetrators are adversaries or partners.”¹⁰

National Security Adviser Jake Sullivan also echoed President Biden’s human rights stand, stating the United States needed to speak with clarity and consistency on the issues of forced labor in China and saying the United States needed to be “prepared to act, as well to impose costs, for what China is doing in Xinjiang, what it’s doing in Hong Kong….”¹¹ And finally, the United States Agency for International Development, though not a cabinet-level agency historically, was elevated and its head will now be part of the White House National Security Council.

Legislative Initiatives

Two bills, both titled the Uyghur Forced Labor Prevention Act (UFLPA), have been introduced in the U.S. House of Representatives and Senate with significant bipartisan support. The House bill was introduced by Rep. James P. McGovern (D-MA), chair of the Congressional-Executive Commission on China and co-chair of the Tom Lantos Human Rights Commission, along with Chris Smith (R-NJ), Thomas R. Suozzi (D-NY), Vicky Hartzler (R-MO), Tom Malinowski (D-NJ), Mike Gallagher (R-WI), and Jennifer Wexton (D-VA).¹² The Senate bill was introduced by Bob Menendez (D-NJ) and ranking member Jim Risch (R-ID).¹³ If passed into law, the UFLPA will not only penalize Chinese officials for their involvement in alleged Uyghur forced labor practices but also might effectively ban all goods produced, in whole or in part, in the Xinjiang Uyghur Autonomous Region (XUAR) unless U.S. importers can prove that the goods were not made with forced labor.¹⁴

In its current draft, the UFLPA would mandate the following:

• Prohibit all imports from the XUAR unless the Commissioner of U.S. Customs & Border Protection certifies the goods being imported to the United States are not produced, either wholly or in part, with forced labor, with the commissioner submitting a report to Congress outlining such determination;

• Authorize the President to apply targeted sanctions on anyone responsible for the labor trafficking of Uyghurs and other Muslim ethnic minorities;

• Require financial disclosures from U.S. publicly traded businesses about engagement with Chinese companies and other entities engaged in mass surveillance, mass internment, forced labor, and other serious human rights abuses in the XUAR;

• Direct the Secretary of State to submit to Congress a public determination whether the practice of forced labor or other human rights abuses targeting Uyghurs and other Muslim minorities in the XUAR constitute crimes against humanity or genocide, plus develop a diplomatic strategy to address forced labor in the XUAR; and

• Require a strategy report from the Forced Labor Enforcement Task Force (established by the United States-Mexico-Canada Agreement Implementation Act) in addition to regular updates on the steps taken to enforce the import prohibition on goods made with forced labor from the XUAR.¹⁵

Recommendations on Forced Labor as Priority Trade Issue

The Commercial Customs Operations Advisory Committee (COAC), which advises the Secretaries of the Department of the Treasury and Department of Homeland Security on the Customs & Border Protection oversight of commercial operations and related Treasury and Homeland Security functions, also indicated that Customs & Border Protection intends to add forced labor to its list of priority trade issues.¹⁶

In March 2021, the COAC issued draft recommendations on how to “ensure a more holistic U.S. government-wide approach to addressing forced labor.”¹⁷ The COAC Forced Labor Working Group recommendations urged Customs & Border Protection to collaborate with other agencies and the private sector to develop objective metrics necessary to successfully combat forced labor practices.¹⁸ The current priority trade issues are the following:

• agriculture and quota;

• antidumping and countervailing duties;

• free trade agreements;

• import safety;

• intellectual property rights;

• revenue; and

• textiles and wearing apparel.¹⁹

Based on that report, Customs & Border Protection briefed the working group on its intent to add forced labor as a priority trade issue in the near future.²⁰

Enforcement Tools Available to the U.S. Government

Although the Biden administration has stated its intention to firmly stand up against human rights abuses wherever they occur, it has not specified which trade tools it intends to use if it concludes that certain entities, individuals, or countries have engaged in human rights violations or trade practices that may be impairing U.S. foreign policy goals.

Although the administration has not specified how it intends to enforce that policy, some of the trade actions taken by the administration since coming into office provide some guidance. Based on the series and nature of the actions carried out so far, it appears enforcement will likely be carried out either through Customs & Border Protection-issued withhold release orders or economic sanctions issued by the U.S. Treasury Department Office of Asset Control (OFAC) or through restrictions of certain U.S. origin technology exports to entities associated with the targeted human rights violators by the U.S. Commerce Department’s Bureau of Industry and Security.

Withhold Release Orders. From an import perspective, the U.S. government is aggressively acting to prohibit certain imports from China produced by forced labor. In fact, Customs & Border Protection recently stated enforcement of forced labor prohibitions will be a policy priority.²¹ Withhold release orders bar the release of goods when information “reasonably but not conclusively” indicates the merchandise was produced using forced labor. For example, in January 2021, Customs & Border Protection increased its pressure on China by issuing a broad-sweeping withhold release order on all cotton (20 percent of the global supply) and tomato products from the XUAR, including its downstream products.²²

More recently on March 29, 2021, Customs & Border Protection announced it had directed personnel at all U.S. ports of entry to begin seizing disposable gloves produced in Malaysia by Top Glove Corporation Bhd. Customs & Border Protection determined it had sufficient information to believe Top Glove used forced labor in the production of disposable gloves, with the withhold release order being issued accordingly.²³ This finding expanded a withhold release order issued in July 2020, based on reasonable, but not conclusive information that multiple forced-labor indicators were present in Top Glove’s production process, including debt bondage, excessive overtime, abusive working and living conditions, and retention of identity documents.²⁴

Beyond garment manufacturers, withhold release orders may likely be issued for other XUAR products such as sugar and polysilicon, a mineral essential to solar panels production, which is largely dominated by companies from the region.²⁵

Economic Sanctions. Though the Biden administration’s human rights-centered trade policy likely will use withhold release orders as its preferred method for punishing alleged human rights violations, other trade tools may also be used when appropriate, including economic and targeted sanctions. Economic sanctions are a powerful tool the U.S. government can use to pressure states or nonstate actors threatening U.S. interests to change their strategic policy decisions. Typically, these sanctions prohibit U.S. companies and people from almost all transactions with the sanctioned business sector, individuals, or entities within a geographical area.²⁶ In fact, since assuming office on Jan. 20, 2021, the Biden administration has issued many human rights-related sanctions against alleged human rights violators.

Examples of these economic sanctions include the following:

• establishing a new sanctions program following the military coup in Myanmar;²⁷

• sanctioning some Chinese-government officials because of activities in Hong Kong and XUAR;²⁸

• sanctioning some Russian-government officials for their involvement in the poisoning and subsequent imprisonment of Aleksei A. Navalny;²⁹

• sanctioning certain Saudi-government officials under the Global Magnitsky Human Rights sanctions program because of the murder of Washington Post columnist Jamal Khashoggi in 2018;³⁰ and

• revoking general licenses for nine state-owned Belarusian companies because of the government’s “flagrant” disregard for human rights.³¹

Export Restrictions of U.S. Origin Technology. Looking forward, export restrictions might be placed on U.S. origin “dual-use” technologies to individuals or entities the U.S. government determines are using them to violate human rights, though no such restrictions have yet been issued. The Biden administration can cite precedent for this enforcement tool to be deployed as appropriate. In fact, the most recent example of such use occurred at the end of the Trump administration when the Bureau of Industry and Security amended the Export Administration Regulations by adding 28 Chinese entities to the entity list. The bureau alleged these entities were implicated in “China’s campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups.”³²

Recommendations for Businesses

The Biden administration’s human rights-centered foreign policy will create significant challenges for many Wisconsin companies, large and small, that engage in international trade. As a result, businesses should remain vigilant and follow U.S. foreign policy closely, and likely closer than they did during the Trump administration. One such area that will likely see increased scrutiny under the current administration are transactions that could be deemed to have used forced labor in their supply chains. Thus, companies need to stay abreast of actions taken by the U.S. government to further that policy goal and the compliance requirements that naturally will ensue from those actions.

Sourcing. From a sourcing perspective, for example, a human rights-centered policy would place a high burden on Wisconsin companies to:

• Evaluate their entire supply chain,

• Consider shifting sourcing or production out of the XUAR and other areas of particular interest to the U.S. government, or

• Implement significant tracing and documentation policies to prove that goods were not produced with forced labor.

Exporting. From an export perspective, companies need to:

• Continuously review and update their export processes to ensure they do not inadvertently export without the necessary export licenses; and

• Monitor the U.S. government’s restricted parties’ lists, to ensure the companies do not inadvertently engage in transactions with sanctioned foreign individuals and entities.

Conclusion

If a company’s managers or staff become aware that it might be at risk of an enforcement action by a U.S. regulatory body, the company’s legal counsel should ensure that all necessary measures are taken to meet and exceed the measures required by the applicable regulatory agency. Such measures may include voluntary prior disclosures to that regulatory body.

» Cite this article: 94 Wis. Law. 24-29 (July/Aug 2021).

Endnotes

¹ United States-China Phase One Trade Agreement, https://ustr.gov/phase-one (last visited June 17, 2021).

² Off. of Pres. of U.S., 2021 Trade Policy Agenda and 2020 Annual Report (March 2021), https://tinyurl.com/28824fvz.

³ 2021 National Trade Estimate Report on Foreign Trade Barriers, https://ustr.gov/sites/default/files/files/reports/2021/2021NTE.pdf.

⁴ Id.

⁵ Secretary Antony J. Blinken On Release of the 2020 Country Reports on Human Rights Practices (March 30, 2021), www.state.gov/secretary-antony-j-blinken-on-release-of-the-2020-country-reports-on-human-rights-practices/ [hereinafter Blinken].

⁶ U.S. Dep’t of State, Custom Report Excerpts, www.state.gov/report/custom/8c27b44cff/ (last visited June 17, 2021).

⁷ C-Span, Presidential Economic Address (April 28, 2021), www.c-span.org/video/?511121-1/president-biden-addresses-joint-session-congress&live.

⁸ Off. of U.S. Trade Representative, Ambassador Tai’s Day One Message to USTR Staff (March 19, 2021), https://tinyurl.com/2khh8c8j.

⁹ U.S. Dep’t of State, A Foreign Policy for the American People (March 3, 2021), www.state.gov/a-foreign-policy-for-the-american-people/; Lisa Schlein, VOA, US Pledges to Champion Human Rights Worldwide (Feb. 24, 2021), www.voanews.com/usa/us-pledges-champion-human-rights-worldwide.

¹⁰ Blinken, supra note 5.

¹¹ www.ft.com/content/853c5e5c-f7dd-4231-b84d-a8f3cf1faa35. (Reading this article requires a subscription to the Financial Times.)

¹² Press Release, Jim McGovern, McGovern, Smith, Colleagues Re-Introduce the Bipartisan Uyghur Forced Labor Prevention Act (Feb. 18, 2021), https://mcgovern.house.gov/news/documentsingle.aspx?DocumentID=398673 [hereinafter McGovern Press Release].

¹³ Strategic Competition Act of 2021, S.1169, www.congress.gov/bill/117th-congress/senate-bill/1169/text.

¹⁴ https://mcgovern.house.gov/uploadedfiles/mcgove_005_xml.pdf.

¹⁵ McGovern Press Release, supra note 12.

¹⁶ Commercial Customs Operations Advisory Committee (COAC) Intelligent Enforcement Subcommittee, Forced Labor Working Group Recommendations (March 2021), www.cbp.gov/sites/default/files/assets/documents/2021-Mar/IE%20Forced%20Labor%20Recommendations%20PTI%20V8.pdf.

¹⁷ Id.

¹⁸ Id.

¹⁹ Id.

²⁰ Id.

²¹ David Lawder, U.S. Customs’ Top Trade Copy Retiring, Calls for More Resources (March 26, 2021), https://finance.yahoo.com/news/u-customs-top-trade-cop-195424649.html.

²² Press Release, U.S. Customs & Border Protection, CBP Issues Region-Wide Withold Release Order on Products Made by Slave Labor in Xinjiang (Jan. 13, 2021), www.cbp.gov/newsroom/national-media-release/cbp-issues-region-wide-withhold-release-order-products-made-slave.

²³ Press Release, U.S. Customs & Border Protection, CBP Issues Forced Labor Finding on Top Glove Corporation Bhd. (March 29, 2021), www.cbp.gov/newsroom/national-media-release/cbp-issues-forced-labor-finding-top-glove-corporation-bhd.

²⁴ Id.

²⁵ Ana Swanson & Brad Plumer, China’s Solar Dominance Presents Biden With an Ugly Dilemma , N.Y. Times (April 20, 2021).

²⁶ Press Release, U.S. Dep’t of Treas., Treasury Sanctions Chinese Entity and Officials Pursuant to Global Magnitsky Human Rights Accountability Act (July 9, 2020), https://home.treasury.gov/news/press-releases/sm1055.

²⁷ U.S. Dep’t of Treas., Burma-related Designations, Designation Update and Designation Removal; Global Magnitsky Designation Update; Counter Terrorism Designation Update; Issuance of Burma-Related General Licenses and Associated Frequently Asked Questions (March 25, 2021), https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20210325.

²⁸ U.S. Dep’t of Treas., Hong Kong-related Designations Updates (March 17, 2021), https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20210317.

²⁹ U.S. Dep’t of Treas., Issuance of Cyber-related General License and related FAQs; Cyber-related Designations Updates; Yemen-related Designations; Ukraine-/Russia-related Designations; Non-Proliferation Designations and Designations Updates (March 2, 2021), https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20210302.

³⁰ U.S. Dep’t of Treas., OFAC Recent Actions, https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions (last visited June 17, 2021).

³¹ U.S. Dep’t of Just., Revocation of the Authorization of Belarus General License 2G Due to Human Rights Violations and Abuses (April 19, 2021), www.state.gov/revocation-of-the-authorization-of-belarus-general-license-2g-due-to-human-rights-violations-and-abuses/.

³² Addition of Certain Entities to the Entity List, 84 Fed. Reg. 54,002 (Oct. 9, 2019).