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U.S. Chamber Newsletter-International Policy Update (2/25)
28 February 2022 Monday
U.S. Chamber of Commerce
International Policy Update
February 25, 2022
Chamber Condemns Invasion of Ukraine, White House Issues New Sanctions
Chamber Issues Recommendations for Indo-Pacific Economic Framework
Report Shows Intellectual Property Drives Economic Prosperity
White House Releases One-Year Supply Chain Review
Chamber Opposes EU’s Proposed Digital Markets Act
Chamber Highlights Concerns with Newly Proposed EU Data Act
Chamber Raises Concerns Over Canadian Digital Services Tax Act
Commentary
The Year in Trade: Diving into the 2021 Numbers
How Antitrust Legislation Threatens U.S. Competitiveness and National Security
Chamber Condemns Invasion of Ukraine, White House Issues New Sanctions
On February 24, U.S. Chamber President and CEO Suzanne Clark issued the following statement on Russia’s invasion of Ukraine:
“Russia’s invasion of Ukraine is a serious breach of international law, a violation of Ukraine’s sovereignty, and an affront to our steadfast belief in a world where democratic countries, following the rule of law and the free enterprise system, can be free and prosper.
“The business community will continue to support the Administration, Congress, and our allies to ensure a swift and meaningful response to Russia’s aggression.”
President Biden also issued a rebuke of Russia’s invasion of Ukraine and has imposed successive rounds of sanctions in response. He announced additional financial sanctions and new export controls to impose severe costs on Russia’s economy, specifically its financial system and access to advanced technology. These measures include:
- Severing the connection to the U.S. financial system for Russia banks representing nearly 80% of all banking assets in Russia, including Sberbank, the country’s largest bank;
- Full blocking sanctions on Russia’s second largest financial institution, VTB Bank (VTB), and three other major Russia financial institutions;
- New debt and equity restrictions on 13 of the most critical major Russian enterprises and entities;
- Additional full blocking sanctions on Russian elites and their family members; and
- Costs on Belarus for supporting a further invasion of Ukraine.
In another highly consequential move, the Department of Commerce published a new final rule on export controls applicable to Russia following the White House announcement. The rule aims to cut off Russia’s access to cutting-edge technology, primarily targeting the Russian defense, aviation, and maritime sectors. It imposes two new Foreign Direct Product (FDP) rules—a Russia-wide rule and a more extensive rule targeting Russian military end users—that restrict access to sensitive U.S. technologies produced in foreign countries using U.S.-origin software, technology, or equipment. It also imposes new license requirements, a review policy of denial to license applications for the in-country movement of certain products, and expands other restrictions on items subject to the export administration regulations. These restrictions took effect immediately on February 24.
For further details on these actions, see the White House announcement, the Department of the Treasury announcement, and a Department of Commerce fact sheet.
To recap earlier sanctions actions, President Biden on February 21 issued an executive order barring investment, trade and financial transactions in two breakaway regions in Eastern Ukraine — the so-called Donetsk and Luhansk People’s Republics — after Putin recognized them as independent states.
On February 22, Biden announced a first tranche of financial sanctions, which were aimed at blocking two Russian state-owned financial institutions (VEB and Promsvyazbank) as well as 42 of their subsidiaries from doing business in the U.S. The sanctions effectively cut them off from the U.S. financial system. Additional restrictions were also imposed on Russian sovereign debt as well as Kremlin-connected elites.
On February 23, Biden imposed sanctions on the company responsible for building Nord Stream 2 (Nord Stream AG) and its corporate officers. The administration made clear this was also part of the initial tranche. The move follows Germany’s decision earlier this week to halt the Nord Stream 2 pipeline project.
Another option still on the table includes cutting Russia out of the SWIFT financial system, which President Biden addressed in a press conference by saying that the current sanctions on their banks “are of equal consequence or maybe of more consequence” than that option. A range of analysts have argued that removing Russia from SWIFT could have unintended consequences. The administration could also target the energy sector, but those would likely result in repercussions across Europe due to its dependence on Russia oil and gas. Find the Chamber’s memo outlining these and other possibilities here.
Other nations are also rolling out sanctions packages in collaboration with the U.S. The European Union on February 23 finalized its initial sanctions package and later announced new measures. The United Kingdom and Canada announced similar initial packages.
The Chamber will continue to monitor developments and engage with the administration and Congress as these policies are implemented. For further information, please contact Director for International Policy Isabelle Icso (iicso@uschamber.com).
Chamber Issues Recommendations for Indo-Pacific Economic Framework
On February 23, the U.S. Chamber submitted business recommendations to the administration on its efforts to develop an Indo-Pacific Economic Framework (IPEF). The comments commend the Biden administration’s recognition of “the strategic importance of the Indo-Pacific to America’s global leadership and security” but argues in favor of re-joining the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which has entered into force and is attracting new applicants despite the U.S. withdrawal in 2017.
Even so, the Chamber encourages the administration to act quickly on IPEF. The document contends the administration should move swiftly, draw on trade disciplines the U.S. has developed and applied in other contexts, take advantage of IPEF’s flexible framework to achieve desired outcomes on different timetables, and engage with public and private stakeholders.
The Chamber outlines important elements that could be achieved through IPEF and highlights the following as points for inclusion in the new framework:
- Digital trade—To counter foreign trade barriers, IPEF should include an enforceable digital trade agreement that builds upon the high standards the U.S. has already negotiated in its agreements with Japan and in the U.S.-Mexico-Canada Agreement (USMCA);
- Customs administration and trade facilitation—The IPEF should expand on the WTO Trade Facilitation Agreement (TFA) and customs measures in U.S. FTAs to streamline procedures and ease logistical impediments to the free flow of goods and services;
- Good regulatory practices—The IPEF should explore opportunities for regulatory cooperation by incorporating and building upon provisions from the Good Regulatory Practices and Technical Barriers to Trade sections in USMCA and the recently concluded WTO Reference Paper on Services Domestic Regulation;
- Anticorruption—The IPEF should include measures to prevent and combat bribery and corruption, such as those found in the U.S. trade protocols with Brazil and Ecuador;
- Government procurement—The IPEF should include commitments on government procurement procedures, such as those in the USMCA, and increase funding for IPEF partners under the U.S. Trade and Development Agency’s Global Procurement Initiative;
- Health systems—The IPEF should include a health track for dialogue to strengthen health systems;
- Medical products—The IPEF should support tariff elimination on health products, reiterate commitments to refrain from export restrictions, and strengthen regulatory cooperation and capacity building;
- Infrastructure—The IPEF should include U.S. commitments to infrastructure development in the region, including the development and deployment of 5G. It should also include active coordination of research activities and dialogues to support supply chain diversification and domestic production capabilities;
- Sustainability—The IPEF should include near-term initiatives that support resource efficiency, low carbon energy projects, supply chain resiliency, and other sustainability goals;
- Energy transition and climate change mitigation—The IPEF should include regulatory alignment on clean energy technologies and other decarbonization efforts, cooperation on strategic minerals, and tariff elimination on a list of environmental goods;
- Intellectual property capacity building—The IPEF should incentivize global participation in ecosystems for innovation through IP capacity building;
- Technology standards—The IPEF should preserve a market-based approach to technology standards and establish common standards for procurement-based innovation; and
- Export controls—The IPEF should contain an agreed framework for member countries to consult on an ongoing basis on the commercial implications of the evolving export control regime for sensitive technologies.
On February 18, the Chamber also joined a multi-association letter urging the administration to develop an ambitious IPEF that seeks to “open markets, promote inclusive trade and economic growth, enable rules-based commerce, increase sustainability, and promote shared values and interests.”
The Chamber is meeting with administration officials engaged on this effort to convey these messages. For further information, please contact Senior Vice President for Asia Charles Freeman (cfreeman@uschamber.com).
Report Shows Intellectual Property Drives Economic Prosperity
On February 24, the U.S. Chamber of Commerce Global Innovation Policy Center (GIPC) released the tenth edition of the International IP Index, Compete for Tomorrow. The new report shows how intellectual property is a key driver of economic prosperity as the world emerges from the coronavirus pandemic.
The Index evaluates intellectual property rights across 55 global economies — from patent and copyright policies to commercialization of IP assets and ratification of International treaties. The United States earned the top score again in the 2022 edition, and 45 economies improved their overall score.
For ten years, the Index has evaluated the IP policies in global markets and helped economies chart a course towards a more innovative, competitive tomorrow. A decade’s worth of data shows that the global IP system has grown stronger as a result.
President and CEO of the Global Innovation Policy Center David Hirschmann stated:
“By making the right policy choices, governments can accelerate innovation economies. As the data makes clear, effective intellectual property systems encourage innovators and creators to embrace new ideas, take risks, and drive change.
"The Index also demonstrates how weakening intellectual property rights can undercut peoples' access to the latest technologies, breakthrough medicines and creative works across the world. Dangerous proposals to surrender IP protections, like those under consideration at WTO, risk making this a reality.”
Key findings from the Index include:
- The global IP environment has improved over the last decade, but challenges remain as many economies still receive low grades on their protection of intellectual property rights;
- New tools to combat infringement are leading to a decrease in online piracy;
- Over ten years, the global fight against fake goods hasn’t kept pace with the growth of counterfeits; and
- While IP-intensive goods and services were critical to the global response to the pandemic, some economies have proposed weakening the IP protections responsible for COVID-related innovation.
IP continues to be a massive economic driver for jobs and investment. According to the U.S. Department of Commerce, in the United States alone, IP supports over $6 trillion in GDP and more than 45 million jobs.
Read the executive summary here. To view the full report and the interactive map, visit www.uschamber.com/ipindex. For further information, please contact GIPC Senior Vice President Patrick Kilbride (pkilbride@uschamber.com).
White House Releases One-Year Supply Chain Review
On February 24, the Biden administration issued a series of long-awaited reports on the supply chains of six segments of the U.S. industrial base under the Executive Order (E.O.) 14017 “America’s Supply Chains.” The six reviews conducted by seven agencies outline multi-year strategies to address what the reports deem vulnerabilities and improve the resilience of their supply chains. The reports cover the following sectors: Defense, Public health and biological preparedness, Information and communications technology (ICT), Energy, Transportation, and Agricultural commodities and food products.
Senior Vice President for Cyber, Intelligence, and Supply Chain Security Policy Christopher Roberti issued the following statement regarding the administration’s release of the agency reports:
“Supply chain concerns continue to be top of mind for many U.S. businesses, and the U.S. Chamber welcomes the Biden administration's hard work and consultative approach to improve U.S. supply chain resiliency through today’s reports. We are reviewing the six industrial base reviews and look forward to continue working with officials to implement the priority actions that enjoy broad bipartisan support and address key issues with our supply chains.”
The administration also announced steps it will take based on the reports’ results to “build long-term resilience across critical supply chains and formally institutionalize supply chain resilience throughout the Federal government.” Among those steps, the White House will propose a new domestic manufacturing initiative through the Export-Import Bank to prioritize financing for environmentally beneficial, small business, and “transformational export area” transactions (e.g., semiconductors). The administration also plans to issue a new “Buy American” rule to allow the government to pay a premium price for select domestic-made goods.
Additional steps include providing support and resources to small manufacturers, hosting manufacturing roundtables to focus on “scaling innovating technologies,” fully establishing a Defense Production Act Investment Program that provides funding to build and expand critical health resources. It will also collaborate with like-minded trade partners to address challenges and bolster U.S. leadership in global supply chains.
The White House also released a “capstone report” entitled “Executive Order on Supply Chains: A Year of Action and Progress” that outlines actions the administration has taken to address supply chain vulnerabilities in key sectors. That report included items from the June 2021 reviews focused on four critical industries: (1) semiconductor manufacturing; (2) large capacity batteries; (3) critical minerals; and (4) pharmaceuticals. The Chamber played an active role in advocacy throughout the first 100-day review and submitted comments and policy recommendations on the reviews of strategic and critical minerals, high-capacity batteries, and semiconductors.
For further information, please contact Vice President for Supply Chain Policy John Drake (jdrake@uschamber.com) or Senior Vice President for International Policy John Murphy (jmurphy@uschamber.com).
Chamber Opposes EU’s Proposed Digital Markets Act
On February 23, the U.S. Chamber submitted a set of comments to the European Commission expressing concerns with and recommending adjustments to the European Union’s (EU) proposed Digital Markets Act (DMA). The Chamber asserts the DMA would disproportionately affect U.S.-based companies and risk hindering closer transatlantic coordination. The Chamber specifically addressed the EU’s “one-size-fits-all” approach to competition policy and platform regulation as well as the arbitrary thresholds that would be put in place under the DMA, undermining competition and incentives for growth. The Chamber urged further collaboration as the EU and the U.S. “face growing economic and geopolitical challenges from autocratic regimes that do not share our commitment to promoting market-based economic principles, the open exchange of information, and the rule of law.”
Parallel to concerns made by the Chamber, on February 23, House Representatives Suzan DelBene (D-WA) and Darin LaHood (R-IL) led 30 House members in a bipartisan letter urging the Biden administration to further intensify its engagement with the EU to prevent adoption of the DMA as currently drafted. The letter raises concerns about the discriminatory nature of the DMA and the unfair advantage it gives not only to European companies but to Chinese, Russian, and other foreign-owned firms. House Members wrote that the DMA comes from “a desire to restrict American companies’ access in Europe in order to prop up European companies,” but are hopeful the U.S. and EU can work toward adoption of rules that better represent their shared values.
For further information, please contact Senior Vice President for European Affairs Marjorie Chorlins (mchorlins@uschamber.com).
Chamber Highlights Concerns with Newly Proposed EU Data Act
On February 23, the European Commission introduced a proposal for a new Data Act that would set out new rules for cross-border data transfers for non-personal data, as well as institute new requirements for data sharing between businesses and governments, as well as between companies and their competitors. In response to the announcement, U.S. Chamber Senior Vice President for European Affairs Marjorie Chorlins issued the following statement:
“The U.S. Chamber acknowledges publication of the European Commission’s proposal for a new Data Act. We share the Commission’s desire to see a connected and competitive digital economy in Europe. However, we are concerned about potential new restrictions on cross-border data flows for non-personal, industrial data. We are also concerned about provisions that would mandate certain companies to share proprietary data with their competitors and with governments, without sufficient privacy safeguards. We support frameworks that encourage data sharing when it is in market participants’ mutual interests, but data sharing mandates such as what is envisaged in the Data Act will dissuade companies from investing in R&D or other critical activities in Europe. Finally, we have significant concerns about provisions which would limit companies’ ability to do business with or share data with companies deemed “gatekeepers” pursuant to the EU’s proposed Digital Markets Act.
Taken together, these provisions of the draft Data Act may unintentionally weaken Europe’s ability to compete in the digital marketplace globally. We look forward to a robust dialogue with policymakers as this proposal continues to develop.”
For further information, please contact Senior Vice President for European Affairs Marjorie Chorlins (mchorlins@uschamber.com).
Chamber Raises Concerns Over Canadian Digital Services Tax Act
On February 22, the U.S. Chamber of Commerce filed comments to the Canadian government outlining several concerns with the proposed Digital Services Tax Act. The Chamber highlighted three main areas of concern in its submission:
- DSTs pose a substantial risk to the economic recovery in Canada and globally given the outsized importance of digitization and the potential growth in global services trade’
- Canada’s DST proposal is discriminatory and violates obligations Canada has undertaken as a party to the WTO Agreement, USMCA, and the U.S.-Canada tax treaty; and
- Canada should comply with the commitment it made under the OECD/G20 Inclusive Framework to forgo any DST until the end of 2023 or the implementation of the Pillar One framework.
Separately, the Office of the U.S. Trade Representative warned Canada in comments that it would consider all tools at its disposal, including the Section 301 statute which was used against other nations’ DSTs, should Canada adopt the proposal. The agency instead urges Canada to focus its efforts on engaging constructively in the multilateral OECD negotiations rather than “undermining the ongoing negotiations.”
For further information, please contact Senior Vice President for International Policy John Murphy (jmurphy@uschamber.com).
Commentary
U.S. Chamber (February 22) by Mary Kate Carter
U.S. Chamber (February 15) by Sean Heather
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