U.S. Chamber Newsletter-International Policy Update (4/8)

President Biden on April 6 announced a sweeping new round of sanctions targeting Russia’s largest financial institution, Sberbank, and its largest private bank, Alfa Bank, as well as its state-owned enterprises. The U.S. also banned new investment in Russia and blocked Moscow from using funds in the U.S. to service its sovereign debt, making a default more likely.

These actions mark some of the most far-reaching actions to date since the announcement of sanctions targeting Russia’s Central Bank on February 28. The White House moves were made in conjunction with the G7 and EU. See the Chamber’s summary of previously issued U.S. sanctions.

With respect to the blocking sanctions imposed on Sberbank and Alfa Bank, the action will freeze their assets touching the U.S. financial system and bar U.S. persons from doing business with them. According to the White House, Sberbank holds nearly one-third of Russia’s banking sector assets while Alfa Bank is Russia’s largest privately-owned financial institution. Energy transactions appear to still be carved out.

Biden also noted that all new U.S. investment in Russia would be prohibited, building on a previous executive order issued last month. The announcement bans new investment in Russia by “U.S. persons wherever located.”

On Russia’s state-owned enterprises, the Treasury sanctioned Alrosa, the world’s largest diamond mining company, and United Shipbuilding Corporation (USC), which develops and constructs the majority of Russia’s warships.

The decision to bar the Russian government from making debt payments with funds subject to U.S. jurisdiction will likely have implications on how the country will use its dollar and euro reserves, a large share of which were frozen by sanctions on the Russian central bank. As a result, Russia moved closer to “technical default after foreign banks declined to process about $650 million of dollar payments on its bonds, forcing it to offer rubles instead. Neither of the securities involved allowed payment in rubles, according to bond documents. Both notes have a 30-day grace period,” Bloomberg reports.

See the full announcement here and a short analysis by Center for a New American Security sanctions expert Edward Fishman here.

Also in the past week, the Commerce Department’s Bureau of Industry and Security (BIS) issued orders “denying the export privileges of three Russian Airlines — Aeroflot, Azur Air, and Utair — due to ongoing export violations related to comprehensive export controls on Russia previously imposed by the Commerce Department.” The move will have severe implications for the ability of the companies to continue to operate internationally or domestically.

Across the Atlantic, the European Commission is advancing broad new sanctions on Russia, including a ban on imports of Russian coal, slashing the access of Russian road and shipping goods carriers into the bloc, targeting oligarchs and their families and blocking some machinery exports. The U.S. has already halted purchases of Russian oil. EU countries are also likely to enact other restrictions such as the leasing of airplanes and the import and export of products such as jet fuel, steel products, and luxury goods.

The EU has developed a variety of resources to help businesses and the public stay informed regarding its sanctions efforts, including 1. the EU Sanctions Map, a publicly available widely used tool to inform the public of existing sanctions, 2. the publication and update of the Consolidated List of Financial Sanctions, an almost instant alert tool informing the banking sector and compliance units across the world of new persons under asset freeze, 3. a list of FAQs, and 4. a hotline/feedback account (EC-RUSSIA-SANCTIONS@ec.europa.eu) for information and guidance on sanctions compliance.

Separately, the United Nations General Assembly on April 7 suspended Russia from the UN Human Rights Council for "gross and systematic violations and abuses of human rights" in Ukraine. The U.S.-led push garnered 93 votes in favor, while 24 countries voted no and 58 countries abstained. A two-thirds majority of those voting was required for the unprecedented expulsion. Moscow announced it could not be expelled because it was quitting, but Ukraine's U.N. Ambassador Sergiy Kyslytsya countered: “You do not submit your resignation after you are fired.”

The Chamber will continue to monitor developments and engage with the administration and Congress as these policies are implemented. For further information, please contact Senior Vice President for International Policy John Murphy (jmurphy@uschamber.com) or Director for International Policy Isabelle Icso (iicso@uschamber.com). On matters related to Ukraine’s humanitarian crisis, please contact U.S. Chamber of Commerce Foundation Senior Vice President Marc DeCourcey (mdecourcey@uschamber.com).

Congress Takes Up Russia PNTR, Energy Ban, Contracting Bills

Congress on April 6 passed the “Suspending Normal Trade Relations with Russia and Belarus Act,” clearing the way for increased tariffs on Russian and Belarusian imports, and a bill banning imports of Russian energy products, such as oil, gas, and coal. The bills also provide the president with authority to restore normal tariff treatment for Russia and Belarus, as well as resume trade in Russian energy products, subject to certain conditions and congressional disapproval.

The energy ban legislation codifies President Biden’s Executive Order on Russian energy products. In the wake of the EO, the Chamber argued for a comprehensive approach to enhanced energy security— for the United States and Europe — through increased domestic energy production in a blog post.

The Senate unanimously passed both pieces of legislation after resolving objections from senators over whether to combine the two bills and concerns with the House-passed amendments to the Global Magnitsky Act. The amended Global Magnitsky Act provisions were removed and replaced with a clean permanent authorization of current law. The House then re-passed the amended measures three weeks after they first took up the bills.

On a separate matter, the House Oversight Committee on April 6 favorably reported the “Federal Contracting for Peace and Security Act” on a voice vote. If enacted, the measure would apparently bar from federal contracting any company that has conducted business in Russia. Initial concerns were that it would possibly extend to companies with only residual operations in Russia, operations in sectors that the administration has chosen not to sanction, operations that are continuing under General Licenses issued by OFAC, or operations that may be scrutinized under the bill’s ambiguous exception for activities for “humanitarian purposes to meet basic human needs.” The Chamber engaged with a number of committee members to discuss industry concerns.

Industry made several suggestions throughout the compressed redline process. Some changes to the bill released last week include:

The “covered period” of aggression changed from Feb. 21 to 60 days after the bill is enacted;
The addition of a public comment process;
The addition of an advance notice process that requires written notice to contractors at least 15 days before initiation of termination proceedings;
The addition of a “good faith extension” provision that allows OMB to delay the initiation of termination proceedings in increments of 30 days; and
A narrowed scope to only apply to “prime” contractors and major subcontractors.

Chairwoman Carolyn Maloney (D-NY) contended that “taken together these changes mean that if company is making good faith effort to comply with the law, it will not be penalized.” The bill’s prospects in the full House, let alone the Senate, remain uncertain.

For further information, please contact Director for International Policy Isabelle Icso (iicso@uschamber.com).

107 Conferees Announced for Bipartisan Innovation Act

On April 7, House Speaker Nancy Pelosi (D-CA) and Minority Leader Kevin McCarthy (R-CA) announced House conferees to negotiate the final form of the “Bipartisan Innovation Act” based on the Senate-passed USICA and the House-passed America COMPETES bills. Pelosi and McCarthy appointed 50 and 31 lawmakers, respectively. Both lists include leaders from the committees on Science, Space, and Technology; Energy and Commerce; Foreign Affairs; Ways and Means; Agriculture; Armed Services; Education and Labor; Financial Services; Homeland Security; Judiciary; Natural Resources; Oversight and Reform; Small Business; Transportation and Infrastructure; and Veteran Affairs.

The Senate also announced its conferees, with Senate Majority Leader Chuck Schumer (D-NY) and Minority Leader Mitch McConnell (R-KY) each tapping 13 lawmakers (see the Democratic and Republican lists). Official votes on these conferees will occur when Congress returns from the Easter recess (April 9-24).

Leader McConnell once again endorsed the Senate-passed “United States Innovation and Competition Act (USICA)” over the House’s “America COMPETES Act” in his statement announcing the conferees:

“The Senate must now restore a product that reflects what passed this chamber with bipartisan support. This process will begin with multiple motions to instruct conferees. Without major concessions and changes from House Democrats, this legislation has no chance of becoming law.”

As shared earlier, the Chamber sent a letter to the full Congress on March 16 outlining the business community’s priorities for the legislation.

Senate Republicans reportedly had requested 50 Motion to Instruct votes in order for the Senate to move to conference. As of now, Republicans reportedly may be willing to accept 25 Motion to Instruct votes and are amenable to paring it down to 10. On that note, the Chamber joined a multi-association letter to the Senate urging senators to oppose a motion to instruct conferees which may be offered by Senator Sanders on the pending competitiveness legislation to place counterproductive conditions on the incentives to be established under the CHIPS for America Act. The letter asserts that Senator Sanders’s motion to instruct, if adopted, “would detract from the job creation, economic, and national security benefits of incentives funded under the CHIPS Act and diminish the overall incentive value of the program.”

As the conference gets underway, some critical Senate Republicans have made clear that they are prepared to “walk away” if there are substantial changes to the USICA bill and are adamant that a majority of House demands (e.g., the COMPETES Act’s trade title) be scrapped. That said, Republicans could still potentially accept a few “one-off” provisions for inclusion in the final bill.

The Chamber is engaged in efforts to shape the final bill as House and Senate lawmakers look to reconcile differences in their two versions. For further information, please contact Director for International Policy Isabelle Icso (iicso@uschamber.com).

U.S.-Bangladesh Business Council Celebrates 50 Years of Trade Ties

On April 5, the U.S.-Bangladesh Business Council hosted an in-person roundtable with Bangladesh Minister of Foreign Affairs Abul Kalam Abdul Momen to celebrate the first 50 years of U.S.-Bangladesh trade and commercial ties. Ahead of the event, the Chamber outlined in a blog post key areas for collaboration as Bangladesh works toward its goal of becoming a developed country by 2041. These areas include deepening energy and power cooperation, partnering on Digital Bangladesh 2.0, expanding financial inclusion and empowerment of women, supporting Bangladesh’s transition to a cashless society, and increasing trade on agriculture and agribusiness. The blog post reads in part:

“As Bangladesh’s middle class grows further and more people are lifted out of poverty as the country’s successful economic model has shown time and time again – its people are now more digitally connected with each other and with the rest of the world. It is time that our collective and collaborative attention focus on Bangladesh’s ambition to become a developed country by 2041, propelled by an “investment-driven” economic growth agenda in the decades to come. We look forward to building on our 50 years of friendship to deepen our collaboration and increase prosperity for both of our countries.”

For further information, please contact Director of the U.S.-Bangladesh Business Council Sid Mehra (smehra@uschamber.com).

State’s Don Lu Briefs Chamber on South Asia Visit

In a members-only event on March 30, the U.S.-India Business Council (USIBC) and U.S.-Bangladesh Business Council hosted Assistant Secretary of State Donald Lu for a readout of his recent trip to South Asia with Under Secretary of State Victoria Nuland. During the roundtable discussion with members, topics included the impact of Russia’s invasion of Ukraine on global supply chains, the logic and relevance of the Quad, and new opportunities for cooperation in defense and other strategic sectors.

Members also had the opportunity to discuss the nascent Indo-Pacific Economic Framework, which is being drafted by the Biden Administration as part of its overall Indo-Pacific Strategy. USIBC President Atul Keshap offered testimony on the framework to the House Foreign Affairs Committee on March 1, where he shared the Chamber’s recommendations and made the case for the framework to advance an ambitious trade agenda for the region.

For further information, please contact President of the U.S.-India Business Council Atul Keshap (akeshap@uschamber.com).

Chamber Charts Trade Goals for U.S. Manufacturers

In a blog post, U.S. Chamber Senior Vice President for International Policy John Murphy this week outlined a number of trade priorities for U.S. manufacturers. He wrote in part:

“American manufacturers are on a roll. In sharp contrast to the ‘we don’t make anything here’ refrain commonly heard in Washington, U.S. industrial production has risen by two-thirds in the past 30 years in inflation-adjusted terms. Manufacturing has bounced back from the pandemic recession and today employs 12.6 million Americans, with average earnings topping $30 per hour.

“Trade is essential to the success of U.S. manufacturers. American exports of manufactured goods surpassed $1.13 trillion in 2021, a sum representing nearly half the sector’s total output. In other words, nearly half of everything made in American factories is destined for consumers overseas. But there’s more to do to ensure that American manufacturers can secure the benefits of international trade and sharpen their global competitiveness.”

The piece lists several trade priorities for U.S. manufacturers, including:

Embracing a market-opening trade agenda, including new trade agreement negotiations with key markets such as the U.K., Kenya, and others, as well as a digital trade agreement;
Passing the long-delayed Miscellaneous Tariff Bill (MTB);
Providing tariff relief along the lines of the Section 301 tariff exclusion language in the Senate-approved USICA bill to restore past exclusions and create a new, transparent exclusion process;
Forestalling soaring metals prices and shortages stemming from the Russian invasion of Ukraine by providing relief from the Sec. 232 tariffs and quotas; and
Rejecting the ill-considered “Eliminating Global Market Distortions to Protect American Jobs Act” which would lead to a faster and broader application of AD/CVD tariffs at higher rates and without appropriate due process.

For further information, please contact Senior Vice President for International Policy John Murphy (jmurphy@uschamber.com).

Commentary

American Businesses See Challenges and Opportunities in the U.S.-Mexico Relationship

U.S. Chamber (March 2022) by Suzanne Clark

It’s time for a digital trade agreement

Fortune (March 2022) by Myron Brilliant

Son Haberler