Post-Election Analysis 2020: Trade
Read Ahead: Reshoring Supply Chains | Trade Remedies | Future Trade Agreements | USMCA Implementation | Future of the World Trade Organization | US-China Trade War | Export Controls/Sanctions Policy Related to China | Export Controls/Sanctions Policy Related to Emerging Technologies | Future of Sanctions Programs
President-elect Biden will de-emphasize trade as he prioritizes domestic economic recovery from the pandemic early in his presidency. One area where President-elect Biden can work with the 117th Congress is to create incentives to bolster US manufacturing, including encouraging companies to reshore or move manufacturing from abroad back to the United States, especially for coronavirus pandemic-related goods, such as personal protective equipment (PPE) and the pharmaceutical supply chain. Reshoring efforts also could extend to the production of critical goods, like semiconductors, deemed critical to national security.
Domestically, President-elect Biden will face several trade-related decisions during his first days in office. First, President-elect Biden will have to decide the fate of President Trump's Section 301 tariffs on $360 billion worth of Chinese goods and the Section 232 "national security" tariffs and quotas on steel and aluminum imports. In addition, President-elect Biden will have to decide whether to move forward with several investigations initiated by President Trump, including: (1) three Section 232 investigations covering power transformers and certain power transformer components, mobile cranes, and vanadium; (2) a Section 201"safeguard" investigation on blueberry imports; (3) two Section 301 investigations targeting Vietnam; and (4) the suspended Section 301 action related to France's digital services tax and an ongoing Section 301 investigation into multiple other countries' digital services taxes. President-elect Biden also must decide how to handle additional calls by domestic manufacturers to limit import competition, particularly in light of the economic fallout from the COVID-19 pandemic. A quick reversal of existing Section 301 and 232 measures is unlikely, but the Biden Administration may be open to more transparent exclusion processes. The Biden Administration will favor traditional and targeted trade remedy proceedings such as antidumping and countervailing duty (AD/CVD) proceedings, and, potentially, Section 201 "safeguard" investigations, over the broad application of new Section 232 and 301 measures.
Internationally, President-elect Biden will reengage with those US allies alienated by President Trump's unilateral trade policies and attempt to build coalitions to address unfair trade practices. President-elect Biden is unlikely to rely on combative rhetoric to conduct his trade policies, and we expect the Biden Administration to be significantly less transactional than the Trump Administration. However, similar to the Trump Administration, President-elect Biden will continue to be tough on China. President Trump's tariffs will likely stay in place in the near term, while the Biden Administration works with allies to find long-term collective solutions to combat the "China problem." Like the Trump Administration, the Biden Administration is anticipated to use export controls and sanctions prominently to address national security concerns, albeit in concert with US allies whenever possible.
Reshoring Supply Chains
The COVID-19 pandemic revealed significant vulnerabilities in US reliance on global supply chains that prioritize costs reduction and just-in-time production. In response, efforts to reshore supply chains—particularly for PPE, medical supplies (including pharmaceuticals), and food production—is increasingly popular among members of Congress on both sides of the aisle.
President-elect Biden pledged during his campaign to initiate a 100-day supply chain review to identify national security risks and ask Congress to enact a "mandatory quadrennial Critical Supply Chain Review" to assess vulnerabilities. He also promised to "make Buy American real" by: (1) tightening domestic content rules; (2) cracking down on waivers to Buy American requirements; (3) ending false advertising on "Made in America" products; (4) extending Buy American requirements to other forms of government assistance, such as research and development; (5) strengthening and enforcing Buy America requirements used in federal transportation and infrastructure projects; and (6) fully enforcing the Jones Act, which mandates only US-flag vessels can carry cargo between US ports. In addition, President-elect Biden may expand the use of Defense Production Act (DPA) authority beyond emergency preparedness to direct the federal government's purchasing power to support manufacturing capacity for products designated as critical to US national security. He will likely repeal President Trump's Executive Order 13922, which delegated authority under Title III of the DPA to the United States International Development Finance Corporation (DFC) to lend to companies for the domestic production of critical pandemic supplies—a move Democrats panned as antithetical to the DFC's mission of aiding low-income countries.
Senate Republicans may limit President-elect Biden's agenda, but he will receive bipartisan support for and achieve many items on his reshoring and "Buy America" agenda. Some of the proposals floated by the Biden campaign that may gain traction in the 117th Congress include a mandatory quadrennial review of our critical supply chain and a targeted 10 percent advanceable "Made in America" tax credit to encourage the production of critical goods, like semiconductors, in the United States.
President-elect Biden faces several trade remedy-related decisions during his first days in office. While he will likely defer taking any action on President Trump's Section 301 tariffs on $360 billion worth of Chinese goods and Section 232 "national security" tariffs and quotas on steel and aluminum imports, he will be required to address: (1) three pending Section 232 investigations covering power transformers and certain power transformer components, mobile cranes, and vanadium; (2) a Section 201 "safeguard" investigation on blueberry imports; (3) two Section 301 investigations targeting Vietnam; and (4) the suspended Section 301 action on related to France's digital services tax and an ongoing Section 301 investigation in to multiple other countries' digital services taxes.
President-elect Biden also must decide how to handle additional calls by domestic manufacturers to limit import competition, particularly considering the economic fallout from the COVID-19 pandemic. The Biden Administration will favor traditional and targeted trade remedy proceedings such as AD/CVD proceedings, and, potentially, Section 201 "safeguard" investigations. The new administration's use of Section 301 measures is likely to be more judicious and multilateral than the Trump Administration's Section 301 actions. While President-elect Biden may elect to move forward with action on cranes, vanadium, and transformers pursuant to the Section 232 investigations initiated by the Trump Administration, his use of Section 232 is expected to be limited.
During the campaign, President-elect Biden criticized President Trump's broad use of Section 232 and Section 301 tariffs. Nevertheless, President-elect Biden did not commit to revoking these measures immediately, possibly because they are popular in battleground states. For example, the Biden campaign indicated it intended to "review" the Trump Administration's Section 301 tariffs but did not commit to outright repeal. Likewise, President-elect Biden and his surrogates criticized the imposition of Section 232 measures on allies but have not expressed a clear intent to revoke them. This apparent reluctance indicates President-elect Biden may not be willing to spend political capital on quickly reversing these measures in the near term.
While President-elect Biden may not revoke the Trump Administration's tariffs in the near term, he is unlikely to endorse broad application of Section 232, or imposition of Section 301 tariffs without first engaging in World Trade Organization (WTO) dispute resolution or targeted investigations by the United States Trade Representative (USTR). Rather, the Biden Administration will return emphasis to AD/CVD measures, aimed at countering the effects of unfairly traded imports. The Trump Administration continued a trend of increasingly aggressive AD/CVD enforcement that began during the Obama Administration. This included technical amendments to the AD/CVD statute and regulations, providing the Commerce Department with more flexibility to calculate higher AD/CVD duty rates, and a new unit dedicated to self-initiating AD/CVD cases. These efforts at strengthening AD/CVD enforcement have garnered broad bipartisan support, and the Biden Administration is likely to continue this trend.
One area where the Biden Administration may use tariffs is to advance the president-elect's climate change priorities. The Biden campaign proposed imposing a carbon border adjustment fee to punish countries that fail to meet their environmental obligations and the Paris Agreement climate goals. The Biden Administration also may choose to make trade policy reforms early in his presidency to increase transparency and even-handedness in US trade policy.
Finally, domestic manufacturers may pursue safeguard measures to combat surges of imports that cause them serious injury. The safeguard law gives the president broad discretion to impose trade restrictions on imports found by the International Trade Commission (ITC) to injure domestic producers, without the need to demonstrate imports are unfairly traded. While safeguards are meant to be an extraordinary remedy used sparingly (and indeed had not been used in more than 17 years prior to the Trump Administration), the use of safeguards returned to favor in the current administration. The Trump Administration imposed safeguard measures on imports of washing machines and solar panels, and launched an investigation covering blueberries that is currently pending before the ITC. As imports increase in the economic recovery, domestic manufacturers (or labor unions) may be inclined to seek safeguard protections for other industries. The Biden Administration is unlikely to oppose these proceedings but may be sensitive to the adverse effects of imposing safeguard restrictions on consumers when the imports are not alleged to be unfairly traded. President-elect Biden also may be sensitive to prior adverse WTO decisions covering previous safeguard measures and the diplomatic costs of imposing tariffs or quotas on imports that are not alleged to be unfairly traded.
Future Trade Agreements
President Trump's perception that trade deficits indicate an abuse by foreign trading partners informed his approach to trade negotiations. As a result, the Trump Administration's policy preferred bilateral "mini-deals" and updates to existing bilateral pacts, instead of comprehensive deals, multilateral negotiations, or multilateral cooperation. These deals often involved quid pro quo solutions aimed at increasing US exports or lowering trade deficits. To achieve his goals, President Trump relied on imposing new tariffs to gain leverage with negotiating partners.
In contrast to President Trump's approach, President-elect Biden may attempt to address unfair trade practices through multilateral collaboration. President-elect Biden also will be significantly less transactional than the Trump Administration. However, the current political environment will make it difficult for the Biden Administration to unwind President Trump's tariffs in the near term. Instead, President-elect Biden may keep tariffs in place while his administration works with allies to find long-term collective solutions to combat unfair trade practices.
President-elect Biden also indicated he does not intend to enter into any new trade deals prior to undertaking substantial domestic investment. As a result, the new administration is unlikely to launch bilateral free trade agreement negotiations with new countries. However, the Biden Administration may seek to conclude negotiations with the United Kingdom. While he is unlikely to use tariffs to gain leverage in negotiations, President-elect Biden may have his own conditions for a deal, including respecting the Good Friday Agreement. In addition, President-elect Biden plans to include environmental and labor groups in free trade agreement negotiations, which also could increase the complexity of these negotiations.
Congressionally, there may a unique opportunity to impose limits on the presidential authority to unilaterally impose Section 232 tariffs. Several bipartisan bills were introduced during the 116th Congress, including the Trade Security Act (S. 365) and the Bicameral Congressional Trade Authority Act (S. 287). Given President-elect Biden's history in Congress, he may recognize the need to balance the president's authority to impose Section 232 tariffs.
Separately, Trade Promotion Authority (TPA), through which Congress defines negotiating objectives for trade agreements and creates a process for Congress to consider agreements without amendment, expires on June 30, 2021. While President-elect Biden said he would not pursue trade deals during his first year in office, his administration may pursue a TPA renewal in 2021 should negotiations with the United Kingdom remain pending after April 1, 2021. While an attempt at TPA reauthorization could become contentious, as it was in 2015 when TPA was last renewed, the US-UK trade deal has bipartisan support which may motivate interest in pursuing a short TPA reauthorization. Aside from a trade deal with the United Kingdom, a split Congress, with opposing priorities in a TPA renewal, may result in a TPA lapse in 2021. Historically, there was a multi-year lapse twice out of the four times TPA has been reauthorized (1994 to 2002 and 2007 to 2015).
Congress ratified the United States-Mexico-Canada Agreement (USMCA) in December 2019 with a strong bipartisan vote. The original USMCA, as signed by the parties in November 2018, initially faced opposition from Democrats in the House who had just won the majority, citing the lack of enforceable labor and environmental provisions. However, after months of negotiations between the House Democrats and USTR, the three countries agreed on a revised USMCA that garnered support from both sides of the aisle, as well as the AFL-CIO, the largest federation of labor unions in the United States.
The revisions included high-standard environmental provisions and strong labor enforcement provisions. Following pressure from the House Democrats, a provision that provided a ten-year protection period for biologic drugs also was removed. In addition to the revised provisions, the USMCA significantly overhauled the automotive rules of origin by requiring stricter North American manufacturing requirements for cars and trucks to be eligible for duty free import under USMCA. The new agreement contains stricter rules for determining whether goods are eligible for favorable treatment, including increased regional value content requirements and consideration of new factors such as labor value content and the percentage of North American origin steel and aluminum purchased by a company.
President-elect Biden will focus on the implementation of the USMCA, in particular the new Facility-Specific Rapid Response Labor Mechanism (Labor Mechanism) and the automotive rules of origin. The Labor Mechanism is used to remedy the denial of rights of free association and collective bargaining at a "covered facility" in a "priority sector" by offering opportunities for remediation as well as tailored penalties. The Labor Mechanism exists as a bilateral agreement between the United States and Mexico and will predominantly be used to scrutinize possible denials of rights in Mexican covered facilities.
Although the USMCA entered into force in July 2020, open questions remain regarding the automotive rules of origin. Full implementation of these rules is expected to be a challenge, especially if automotive producers elect not to come into compliance with the complex new USMCA rules, and instead pay the 2.5 percent duties.
President-elect Biden supported the USMCA based on the labor unions' endorsement of the agreement, which implies he also would support actively using the Labor Mechanism. While the Labor Mechanism has yet to be tested, unions and progressive Democrats are likely to push President-elect Biden to be aggressive in its use and may force his hand by filing petitions pursuant to the Labor Mechanism rules. The AFL-CIO's endorsement was key in the USMCA passage, and the union has been vocal about its concerns with Mexico's ability to enforce the new labor laws. AFL-CIO announced its plans to file a labor case against Mexico under the Labor Mechanism, though it has yet to do so. The Biden Administration, however, may be hesitant to act under the Labor Mechanism for two reasons. First, it may antagonize Mexico at a time when he is attempting to rebuild international coalitions on broader trade and foreign policy issues, and second, with Republicans maintaining the majority in the Senate, the Biden Administration may attempt to take a more business-friendly approach under the agreement.
Future of the World Trade Organization
President Trump tried to force changes to the WTO by crippling the dispute settlement system at the heart of the institution. While President-elect Biden may seek a more multilateral and consensus-based path to WTO reform, there is broad agreement in the US political system that significant reforms of the WTO are needed to address issues including: (1) the role of the WTO Appellate Body in dispute resolution; (2) WTO rules addressing China's state-led economy and the broader problems of state-owned enterprises, over-capacity, and subsidies; and (3) the WTO's failure to deliver multilateral negotiations since its founding. These negotiations have been deemed necessary to modernize the WTO framework and address key outstanding issues.
President-elect Biden emphasized during the campaign he would prioritize bringing the United States back to the table within multilateral institutions like the WTO. Biden has not, however, indicated how (or when) he will seek to strengthen and restore the WTO and the rules-based global trading system. Nevertheless, Biden and his trade policy team will attempt to reassert US leadership in the organization and build consensus for reforms. Their first chance at reengagement may come soon after inauguration as the WTO members seek to complete the Director General selection process, which was thrown in to uncertainty last month when the United States blocked the selection of a candidate that had otherwise gained widespread support from WTO member states.
Another early test may come with respect to the WTO Appellate Body. The Trump Administration effectively paralyzed the WTO dispute settlement system by blocking the appointment of new judges in an attempt to force other WTO members to address perceived judicial activism and overreach by the Appellate Body. The United States has been successful in nearly all the disputes it has brought before the WTO. However, US government antagonism is spurred by its limited success in defending against challenges to US AD/CVD measures challenged by other WTO members. The Biden Administration will attempt to take action to restore the dispute settlement system functionality. The strong political support for AD/CVD laws in the United States, however, means US desire to reform the Appellate Body is unlikely to change with the new administration. Like President Trump and President Obama before him, President-elect Biden will continue to be critical of Appellate Body practices and decision-making. President-elect Biden, however, may reject the Trump Administration proposals to do away with or severely restrict the Appellate Body's authority, in favor of consensus-based reform that preserves the dispute settlement system.
There is a growing consensus among WTO members that the WTO, as currently structured, is incapable of addressing China's rapidly growing, state-led economy by failing to adequately address subsidies, state-owned enterprises, over-capacity in key sectors such as steel and aluminum, state-sponsored IP theft, and forced technology transfer. While the Trump Administration pointed to the "China problem" as a failure of the WTO system and a reason to shift toward nationalist trade policies, the Biden Administration is likely to shift focus toward building consensus for reforms among allies. However, the fundamental complaints about China and the WTO are not expected to change with the new administration.
At the WTO, the Biden Administration is likely to continue the Trump Administration's push for an agreement on digital trade. The Biden Administration also may build on the Trump Administration's progress in trilateral discussions with trade ministers from the EU and Japan, which resulted in a joint statement proposing subsidies reform and pledging continued cooperation towards WTO rules to end forced technology transfer and strengthen rules around digital trade issues. The Biden Administration will seek negotiations to improve labor and environmental protections within the WTO framework.
US-China Trade War
Much like his predecessor, President-elect Biden is expected to pursue a "tough on China" agenda when it comes to trade. Where he will differ most significantly from President Trump is through his approach. President-elect Biden argued the United States must "write the rules of the road for the world or China [will]" and promised his trade focus would be on "rallying our friends both in Asia and Europe in setting the rules for the 21st century and joining us to get tough on China and its trade and technology abuses." President-elect Biden may rely heavily on multilateral cooperation and trade agreements to curb China's trade practices rather than the unilateral approach favored by the Trump Administration.
Separately, President-elect Biden committed to reevaluating the Section 301 tariffs imposed on Chinese products and may abandon some aspects of the Phase One trade deal negotiated by the Trump Administration. However, the current political environment will make it difficult for the Biden Administration to unwind President Trump's tariffs in the near term. Instead, President-elect Biden is expected to focus on increasing American competitiveness and bringing back critical supply chains to the United States to revive American manufacturing jobs and reduce dependency on China for the production of critical goods. He also has promised to crack down on companies labeling products as being "Made in America" even if they are largely produced in China. His "Buy American" vision will dominate his domestic agenda and shape the administration's approach to trade with China in the near term.
This focus is likely to receive bipartisan support in Congress. China's role in the supply chain of critical goods has long concerned Congress, with the coronavirus pandemic only underscoring China's growing dominance in the production of medical supplies and pharmaceuticals. This issue will remain a priority for the 117th Congress as the US continues to battle the health and economic effects of COVID-19. Senate Republicans have made the reshoring of PPE a hallmark of their legislative agenda since the onset of the coronavirus pandemic, and House Democrats have pushed for improvements to the medical supply chain that would reduce US dependency on China for PPE and other medical equipment. This shared interest in reshoring manufacturing to the US provides an opportunity where the parties may reach consensus.
Export Controls/Sanctions Policy Related to China
President-elect Biden prefers a multilateral approach to trade and foreign policy. Unlike the Trump Administration, the Biden Administration may not expand additional export controls unilaterally or use them as a tool of foreign policy to the same extent. It is unlikely, however, that he rolls back existing national security-related trade restrictions on China. Instead, he may adopt a more flexible policy of licensing transactions that would otherwise be prohibited under these authorities, rather than insisting on outright prohibitions. For example, restrictions on social media apps that raise a purported national security risk may take the form of mitigation agreements rather than outright prohibitions. President-elect Biden also is much more likely to work with allies to coordinate an effort to rebalance the global supply chain and to limit the proliferation of Chinese technology where it is deemed a security risk. Overall, many of the Trump Administration's efforts in this area, while more far-reaching than previous approaches, are supported by national security career professors and members of Congress from both parties. Thus, significant change is unlikely with respect to export controls on China.
President-elect Biden expressed support for sanctions and criticized the Trump Administration for not going far enough in some circumstances. He promised economic sanctions if China tries to interfere with US citizens, companies, and institutions' exercise of their First Amendment rights. As with export controls, President-elect Biden will work with allies to impose multilateral sanctions when possible. For example, the Trump Administration sanctions on Chinese persons and entities for alleged involvement in human rights abuses against the Chinese Uighur ethnic minority are supported by many of President-elect Biden's core constituencies and such sanctions will continue. Unlike President Trump, however, President-elect Biden may seek multilateral sanctions on China related to these issues, similar to President Obama's imposition of sanctions on Russia for the Crimea annexation in partnership with many European countries and the European Union.
Export controls and economic sanctions were central to the Trump Administration's foreign policy against China. In the wake of the coronavirus pandemic and continually escalating trade tensions with China, the administration used existing export control and sanctions authorities—and unilaterally expanded those authorities in a number of significant ways—to curb the proliferation of Chinese technology and limit Chinese advances in emerging technology. The Trump Administration also led an aggressive sanctions agenda to penalize Chinese companies over American national security concerns, human rights violations in the Xinjiang region, and US foreign policy interests. President Trump also expanded, by executive order, the Commerce Secretary's oversight authority over transactions that involve unspecified information technologies that may raise a national security risk, which the president later used to ban certain transactions with the Chinese owners of two popular social media apps. Together, these coercive economic tools aimed to curb the Chinese technology sector, hinder what the US government characterized as China's fusion of civilian technology with military purposes, and restrict the use by China of US emerging and foundational technologies.
For example, the Trump Administration aggressively targeted major Chinese technology company Huawei with export restrictions, going so far as to expand the scope of US export controls to restrict the ability for Huawei's supply chain to continue supplying the company in compliance with US law. President Trump also expanded the so-called "military end use rule" under US export controls in a way that significantly raised the compliance costs of selling even basic, consumer grade software, electronics, and other civilian commodities to Chinese companies that may have any relationship to the Chinese military or related entities.
While the administration made export controls and national security-oriented restrictions a mainstream trade tool, these actions were largely consistent with the same bipartisan consensus in Congress that led to the passage of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) and the Export Control Reform Act of 2018 (ECRA). Both laws reflect growing concern among both Congress and the executive branch that foreign investment from strategic rivals, including China in particular, is targeted at capturing access and control over advanced technologies being developed by US businesses.
The Trump Administration declared a national emergency on the information and communications supply chain security and further expanded US oversight of foreign direct investment by issuing Executive Order 13873 (the Information and Communications Technology and Services (ICTS) Executive Order), which granted the Commerce Secretary the authority to prohibit acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service subject to US jurisdiction that poses an undue risk to the US critical infrastructure, digital economy, or national security of the United States. President Trump expanded this national emergency through two parallel executive orders—Executive Orders 13942 and 13943—to prohibit transactions with the owners of two social media apps. This expansion of authority reflects the Trump Administration's preference for targeted export controls as a coercive tool over sanctions for dealings with China. President Trump issued a similar executive order targeting supply of electrical grid infrastructure from China but has yet to impose restrictions related to this order.
For much of his administration, President Trump shied away from imposing sanctions against China as he sought to strike a trade deal with Beijing. But as tensions between the countries increased amid the coronavirus pandemic, the Trump Administration turned to sanctions to address a Chinese security law imposed on Hong Kong, human rights abuses in Tibet and Xinjiang, and Chinese efforts to build islands in the South China Sea.
In short, while President-elect Biden may not continue to deploy these authorities as aggressively as his predecessor, he is unlikely to roll them back. Congressional frustration with President Trump's reluctance to use sanctions against China for much of his presidency will result in additional legislative efforts to curb China's behavior during the next four years.
Export Controls/Sanctions Policy Related to Emerging Technologies
A cornerstone of President Trump's first-term economic policy was revitalizing American manufacturing to spur economic growth and strengthen the US defense industrial base. Melding economic and national security policy, the Trump Administration saw emerging domestic industries as providing a steady stream of employment in the future and as a safeguard against foreign dependence on critical technologies. Congress shared a similar outlook and passed the Export Control Reform Act (ECRA) in 2018 to curb access to cutting edge US technology. The administration also sought to regulate emerging technologies by other means.
President-elect Biden will continue developing controls for "emerging technologies." Since Congress passed ECRA, and controls for "emerging" and "foundational" technologies have yet to be implemented, Congress may focus on ECRA implementation in the 117th Congress. Congress may focus on enhanced reporting on the pace of ECRA implementation and details on how licensing reforms are being utilized by the Commerce Department's Bureau on Industry and Security (BIS).
Determining what technologies should be regulated under ECRA has taken longer than anticipated. Within the Trump Administration, a divide persisted between those who favor comprehensive export controls—especially when it comes to technological collaboration with China—and those who favor narrowly tailored controls to prevent harming American businesses' ability to compete internationally. The Biden Administration will continue these efforts as required by ECRA and will face similar tensions between industry and security interests.
Despite the Trump Administration's ECRA implementation hurdles, the Biden Administration will seek to continue developing controls for "emerging technologies." In January 2020, BIS issued export restrictions pursuant to an Export Administration Regulations safeguard provision for artificial intelligence software designed to analyze satellite images. In May 2020, BIS issued an interim final rule to restrict the supply of certain non-US items derived from US technology or software to Huawei. These new restrictions come after BIS added Huawei and 114 of its non-US affiliates to the BIS Entity List. In July 2020, BIS published a notice of inquiry seeking comments on the development of new export controls on "surveillance systems and other items of human rights concern." BIS also imposed new export controls on trade with China and Hong Kong. Separately, the administration used criminal indictments based on trade secret theft to control emerging technologies.
Future of Sanctions Programs
Like other recent administrations, the Trump Administration used sanctions prominently to conduct foreign policy. President Trump not only rolled back sanctions relief that President Obama implemented in an effort to normalize relations with Cuba and as part of a diplomatic effort to halt the Iranian nuclear program, President Trump aggressively pursued significant new sanctions against Iran and Venezuela, while also using the Global Magnitsky Sanctions program, which targets individual human rights violators, against individuals in China and elsewhere. The Biden Administration is expected to continue pressure on China regarding human rights issues but likely will seek a more multilateral approach to dealing with Iran and Venezuela.
In addition, the Biden Administration will continue the policy, started under the Trump Administration, of making its sanctions policy more public. For example, Secretary of State Mike Pompeo laid out a set of demands for Iran to receive sanctions relief at a Heritage Foundation event in 2018. When the Trump Administration sanctioned Venezuela's Manuel Ricardo Cristopher Figuera in 2019, the Treasury Department issued a press release outlining demands for his removal from the sanctions lists.
Aside from a few isolated instances, under the Trump Administration, the United States' increased use of sanctions has not resulted in achieving discernable policy goals. After withdrawing from the Iran nuclear deal and re-imposing sanctions on Iran, Iran has not met any of the administration's demands to obtain relief. The United Nations (U.N.) Security Council also rejected the administration's demand that U.N. sanctions be re-imposed on Iran for violating the nuclear deal. Similarly, despite increasing sanctions against Venezuela since 2017 in response to the authoritarian leadership of Nicolas Maduro, Maduro remains in power. The United States also failed to sway change in Russia, in part because President Trump undercut sanctions by praising Vladimir Putin.
In contrast, President-elect Biden vowed to rebalance the United States' sanctions policy to safeguard the American financial system. President-elect Biden, who believes sanctions are an effective way to advance national security objectives when used strategically, will use sanctions with caution and in concert with allies whenever possible. President-elect Biden criticized President Trump's Iran policy as a race to war and said he would rejoin the Iran trade deal and prioritize nuclear diplomacy, de-escalation, and regional dialogue. Similarly, President-elect Biden is not expected to expand President Trump's sanctions on Venezuela, but rather focus on working with allies to support democracy through diplomacy. Regarding Russia, President-elect Biden promised to work with US allies to confront Russia.
In general, President-elect Biden is unlikely to roll back many sanctions implemented by President Trump, but he is expected to seek to reduce Iran sanctions in exchange for new de-escalation commitments. He may return to President Obama's Cuba policy, reducing many sanctions on Cuba that President Trump had re-imposed. In addition, President-elect Biden will likely re-suspend Title III of the Helms-Burton Act, which has led to a few dozen lawsuits against companies that do busines in Cuba for "trafficking" in confiscated Cuban property. Reversing US policy on Cuba may be the most significant change in export controls and sanctions policy.
In Congress, there is bipartisan support for targeted sanctions against China, Iran, Venezuela, and Russia. Congress will continue passing sanctions bills which purport to impose new sanctions in advance of foreign policy and human rights goals but that, in reality, authorize the president to impose such sanctions at the president's discretion. Such phantom sanctions bills have become routine and have not in themselves resulted in an expansion of sanctions beyond those already consistent with the president's own sanctions agenda.
*Grace Kim contributed to this Advisory. Ms. Kim is a graduate of Brooklyn Law School and is employed at Arnold & Porter's Washington, DC office. Ms. Kim is not admitted to the practice of law in Washington, DC.
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© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.