by Andrew C. Adair, J.D. 

1. U.S. Weighs Reaction to Chinese National Security Law  

The Chinese Parliament formally adopted a new national-security law for Hong Kong, meant to  hasten the demise of Hong Kong’s independent legal and economic system. Hong Kong currently has an independent judiciary and its citizens enjoy Western-style freedom of speech, press, and assembly — rights that are guaranteed through 2047 under the Sino-British declaration. Thus the new Chinese law, in a sense, amounts to an premature annexation of Hong Kong, reminiscent of Russia’s annexation of Crimea in 2014. The United States released a joint statement with the United Kingdom, Canada, and Australia, expressing deep concern and accusing China of violating the terms of the Sino-British declaration. The U.S. Department of State has also certified that the United States no longer views Hong Kong as politically autonomous from China.

President Trump promised a U.S. response on the Hong Kong question “before the end of the week” (i.e. today). The Trump Administration could simply suspend the special status that the United States has extended to Hong Kong since its 1997 handover from Great Britain to Beijing. But this would ultimately punish Hong Kong more than China, so would likely be done only as a last resort. A less severe sanction: the White House could revoke Hong Kong’s status, but only for trade purposes. In such a scenario, exports from Hong Kong to the United States would then be subject to the same tariffs as exports from mainland China. The actual response will likely be even more limited. Joe Biden’s presidential campaign also weighed in, stating that as president he would “fully enforce” sanctions on appropriate actors, including “officials, financial institutions, companies, and individuals.” As China has now become a central theme of the 2020 presidential campaign, both Biden and Trump will continue to paint the other as “soft” on China. 

Senators Pat Toomey (R-Pennsylvania) and Chris Van Hollen (D-Maryland) have also written a new bill in response to the Hong Kong crisis: the bill would specifically target Chinese banks that enable the anti-democracy crackdown in Hong Kong — potentially impacting “most if not all major Chinese banks.” It’s not clear yet how quickly that bill could move. 

2. Other U.S.-China Developments 

The Hong Kong issue occurs among a raft of other U.S.-China developments since we published our last newsletter: 

• The Trump Administration has released an updated China Strategy document — reminiscent of the E.U.’s publication last year calling China a “systemic rival.”

• Congress finished its work on the Uyghur Human Rights Policy Act of 2020, which President Trump will likely sign into law soon. The House passed the bill this week by a vote of 413-1. The bill requires the Trump Administration to identify and then sanction Chinese officials responsible for human-rights violations against Muslim minorities in the Xinjiang region. 

• The U.S. Senate passed unanimously a bill that would subject Chinese companies listed on American stock exchanges to the same audit standards as American and other non-U.S. companies. The House must now also act on the bill in order for it to become law. The sponsor of the House bill, Rep. Brad Sherman (D-California) expects the House to act this summer. 

• A judge in Canada ruled that Huawei’s CFO Meng Wanzhou will remain under arrest in Vancouver, which means that she could still be extradited to the United States to stand trial in New York. In response to the ruling, the Chinese government called Canada “an accomplice to United States efforts to bring down Huawei and Chinese high-tech companies.”  

• The Trump Administration plans to rescind visas to some 3,000 Chinese graduate students who have ties to Chinese military schools (of roughly 360,000 Chinese students in total inside the United States). Some members of Congress are seeking to restrict all Chinese students who wish to study in scientific and technical fields. 

3. Developments in the Transatlantic Arena   

• Boeing / Airbus. As both the United States and the European Union await a decision of the WTO allowing the E.U. to impose tariffs on the U.S., Sabine Weyand (the E.U. Director General for Trade) yesterday projected “a few more difficult months ahead of us” before a settlement can be reached. Under this scenario, the next shuffling of tariffs required by U.S. law (called “carousel retaliation”), set to occur on August 12, could impact yet more German exporters before the case can be resolved. The U.S. Trade Representative has announced a new process to allow impacted companies to submit comments on the carousel process, before June 9. The tariffs impact more than Airbus and its suppliers; a new study confirms that more than one-third of the impacted German products come from outside of the aviation industry. 

• U.S. Mission in Germany. Richard Grenell has left his position as U.S. Ambassador to Germany and will join Donald Trump’s reelection campaign. Robin Quinville will serve as the top U.S. diplomat in Berlin until the U.S. Senate confirms a new ambassador. Despite Grenell’s rocky relations with official Berlin, Wolfgang Ischinger (former German Ambassador to the United States and chairman of the Munich Security Conference) expressed regret over Grenell’s departure — mainly as it marks reduced access for Germany to the Trump Administration. Ischinger correctly notes that the position will be now vacant for at least a year or more. In addition, John Ratcliffe has become the Director of National Intelligence — a position that Grenell held for 90 days in a temporary capacity. 

• Nord Stream 2. As two Russian vessels now look poised to finish building the Nord Stream 2 pipeline, U.S Senators are considering trying to broaden the scope of existing sanctions in order to try to block it. In order for this to happen, a provision would probably need to be attached to a much larger bill soon (e.g. the Covid-19 “Phase 4” rescue bill) in order to have any chance of success. 

• Iran / JCPOA. The Trump Administration has announced that it will end waivers for European firms’ cooperation with the Iranian civilian nuclear program, effective in 60 days. 

• G7 Leaders Summit. The U.S. National Security Advisor Robert O’Brien has said that other world leaders have provided a “great response” to the idea of holding the G7 Leaders’ Summit next month in person, in Washington. One issue will be whether the United States lifts its travel restrictions for Europeans in the coming weeks; at the moment, the United States is only adding travel restrictions (e.g. from Brazil) — and not removing them. We believe that the event will ultimately be held digitally, and not in person.   

4. U.S. House Begins Allowing Voting by Proxy

For the first time in its 231-year history, the U.S. House of Representatives held its first ever votes by proxy. More than 70 House members (out of 435) who were not in Washington this week voted through a colleague, thanks to rule changes that the House established due to the Covid-19 pandemic. The Minority Leader Kevin McCarthy (R-California) has filed a lawsuit against Speaker Nancy Pelosi (D-California), asking the court to declare the new rules unconstitutional. In general, however, the courts will not intervene in the internal affairs of the House and Senate, unless one of the chambers violates a clearly established provision in the U.S. Constitution.