Pages

Share This

Showing posts with label Washington. Show all posts
Showing posts with label Washington. Show all posts

Tuesday, June 17, 2014

China surpasses US as world's top corporate borrower; Will the IMF headquarters move to Beijing?

China surpasses US as world's top corporate borrower



The Chinese mainland has surpassed the US as the world's top corporate borrower, and higher debt risk in the world's second-largest economy may mean greater risk for the world, a report said on Monday.

However, Chinese economists noted that the debt risk in China's corporate sector is still well under control.

Nonfinancial corporate debt in the Chinese market was estimated at around $14.2 trillion by the end of 2013, overtaking the $13.1 trillion debt owed by the US corporations, a progress happening sooner than expected, said a report from the Standard & Poor's Ratings Services on Monday.

The report expects that by the end of 2018 debt needs of mainland companies will reach $23.9 trillion - around one-third of the almost $60 trillion of global refinancing and new debt needs.

"It [the mainland surpassing the US as the largest corporate borrower] is not surprising at all, as the [size of] mainland non-service sector has already surpassed that of the US," Tian Yun, an economist with the China Society of Macroeconomics under the National Development and Reform Commission, told the Global Times on Monday.

Cash flow and leverage at mainland corporations has worsened after 2009, and debt risks in the property and steel sectors remain a particular concern, the report said.

Private companies are facing more challenging financing conditions - highlighted by China's first corporate bond default case of Shanghai Chaori Solar Energy Science and Technology Co in March and another case of default of leading private steel maker Shanxi Haixin Iron and Steel Group.

"The capital market has been sluggish during the past few years, leading to the fast growth in corporate debts," Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, told the Global Times Monday.

Experts noted that the rapid growth in debt reflected some problems of the  Chinese economy, but the size of the debt is still in a safe range and will not cause major risks as the economy remains stable.

"The problems of the Chinese economy are institutional and structural," Tian said, "By addressing these issues, debt risks can be managed."

Tian further noted that most corporate debts in China are internal debts, thus debt problems in the country will have limited impact on the rest of the world.

The report also said a possible contraction in "shadowing banking" will be detrimental to businesses as general.

But Xu noted that China's tighter supervision of the "shadow banking" sector will make it more transparent and better-regulated, which will reduce the potential risks in the sector.


Local governments face massive debt repayment pressure

China's local governments are facing huge debt repayment pressure this year with 2.4 trillion yuan ($390 billion) of debts due in 2014, China Business News reported Monday.

From 2009 to 2013, China issued 94 local government bonds raising 850 billion yuan, the report said.

With another 400 billion yuan worth of bonds to be issued this year, the total financing since 2009 will reach 1.25 trillion yuan, according to the report.

However, the total local government debt is much higher than the amount raised through the bonds, the report said, noting that major debt came from bank loans.

Although the central government has stated several times that the overall debt risk is under control, the statistics from China's National Audit Office show that some local governments have a debt-asset ratio of more that 100 percent and are facing huge repayment pressure, the report said.

Market analysts hold the view that local governments may borrow new debts to pay for the old ones.

The central government allowed local authorities to raise funds since 2009 in the wake of the global financial crisis, while the central government also issued bonds and repaid debts on behalf of the local governments, a practice criticized by some as not conforming to market economy principles.

As the bond issuing backed by the central government is limited and could not fully meet the local needs, the local governments also turned to opaque financing channels including shadow banking activities, the report said.

Despite the big debt pileup, no local government default has so far taken place.

- By Liang Fei Source:Global Times Published: 2014-6-16 23:43:09 

Will the IMF headquarters move to Beijing?


The International Monetary Fund's headquarters may one day move from Washington to Beijing, aligning with China's growing influence in the world economy, the fund's managing director Christine Lagarde said early this month.

Attaching importance to China

Christine Lagarde made the statement at the London School of Economics and Political Science (LSE), saying that the IMF rules require that the institution should be headquartered in the country that is the biggest shareholder. This has always been the U.S. since the fund was formed.

"But the way things are going, I wouldn't be surprised if one of these days, the IMF was headquartered in Beijing," she said.

Lagarde remarked that the IMF had a good relationship with China, the world's second largest economy, and she praised the Chinese government's commitment to fighting corruption.

Lagarde added that she did not think the IMF should be controlled by Europeans in its first place. Since its establishment in 1945, the IMF headquarters has been headed by Europeans and located in Washington, while the World Bank has been headed by the Americans.

Not satisfied with the U.S.

Lagarde also pointed out that the U.S. government is an "outlier" among the G20 in refusing to approve IMF reform, and the IMF was trying to give emerging economies like China and Brazil a bigger voice through reform.

According to Lagarde, on the part of countries like China, Brazil, and India, there is frustration with the lack of progress in reforming the IMF by refusing to adopt the quota reform that would give emerging economies a bigger voice, a bigger vote, and a bigger share in the institution. “I share that frustration immensely,” she said.

She also claimed that the credibility and the importance of the IMF are closely related to proper representation among the membership. "We cannot have proper representation of the membership if China has a tiny share of quota and the voice, when it has grown to where it has grown," she said.

The IMF agreed to reform its management structure in 2010 so that emerging economies could play a bigger role, and made China the third largest member. The U.S. is the only member with control weight in the voting; meaning that any major reform must be approved by the United States.

Hello headquarters

Lagarde has no specific schedule for the headquarters' shift. However, this once again reminds China that there are few international organizations headquartered in its country, which is disproportionate to China's status as the world's second largest economy.

This article is edited and translated from 《IMF总部要搬北京?》,source:Beijing Youth Daily, author: Bu Xiaoming. (People's Daily Online)

Related:

Saturday, September 22, 2012

U.S. has responsibility to rein unruly allies for Asia-Pacific stability

WASHINGTON -- U.S. Defense Secretary Leon Panetta on Sunday began his three-nation Asia-Pacific tour, during which he will pay his first visit as Pentagon chief to China to deepen military ties, a visit overshadowed by rising tensions in the region.

To prevent the tense situation from further escalation, the U.S. government should take the responsibility to rein in its unruly allies in the region including Japan and the Philippines.

Washington should discourage Japan's provocations and rectify its own wrong position of applying the U.S.-Japan security treaty to China's Diaoyu Islands in the East China Sea. It also should warn Manila against making further provocations in the South China Sea, and urge it to return to the negotiating table.

When Panetta made remarks before reporters aboard ahead of his landing in Tokyo on Sunday evening, the first stop of his trip, the U.S. apparently was attempting to play a "detached" arbitrator of the territorial disputes, a role that hadn't been invited by any concerning parties.

Panetta said, "I am concerned that when these countries engage in provocations of one kind or another over these various islands, that it raises the possibility that a misjudgement on one side or the other could result in violence, and could result in conflict."

He even alarmed that provocations over the territorial disputes could blow up into a war unless governments exercised more restraint.


To be frank, the U.S. isn't qualified to behave as a judge for the disputes, because it hasn't played a constructive role in the process.

Instead, it shoulders certain historical responsibilities for the chronic disputes, and has, more or less, fanned relevant countries' provocative moves with its biased words or actions and added instability to the region.

Both Japan and the Philippines have been making reckless provocations against China this year in an attempt to obtain undeserved territorial gains in the East China Sea and South China Sea, emboldened by the U.S. "Pivot to Asia" policy, which has featured increased military deployment and involvement in the region.

In the past week, the world witnessed one of the most blatant acts of sabotaging Asian peace and stability by Japan, the staunchest ally of the U.S. in the region, with its completion of the so-called "nationalization" of the Diaoyu Islands that are inherently part of China's sovereign territory. China totally rejects Japan's act of theft, and is taking necessary steps to protect its sovereignty and territorial integrity.

On the dispute, Washington cannot shake off its responsibility for sowing the seeds of conflict. The U.S., through a backroom deal with Japan in 1971, transferred the administration of Ryukyu Islands (known as Okinawa today) and Diaoyu Islands, which were then under the U.S. trusteeship after World War II, to Japan. China has firmly opposed this deal from the very beginning.

Earlier this year, the Philippines, partially encouraged by U.S. support, also sparked a tense standoff with China in the South China Sea by sending a naval ship to harass Chinese fishermen operating legally in China's territorial waters around the Huangyan Islands.


Panetta's China visit, on the bright side, symbolizes the continuation of a good momentum in the U.S.-China relations, which feature regular high-level dialogues and exchanges of visit by senior political and military leaders.

The visit was reciprocal to the one paid by his Chinese counterpart Liang Guanglie to the Pentagon in May.

The visits have helped increase mutual understanding and advance the China-U.S. cooperation partnership and military-to-military ties.

On the other side, due to the current rising tensions in the Asia-Pacific region, the success of Panetta's visit will be judged by how he will reassure Beijing that Washington is willing to do more things conducive to regional peace and stability, which are now threatened by some of the U.S. allies.

The U.S. should understand that, if it continues to allow its allies to fish in troubled waters in the Asia Pacific and let the tensions spin out of control, no countries in the region can escape unscathed.

The U.S. must know better than other countries what it should do to benefit Asia-Pacific stability. 


By Zhi Linfei (Xinhua)

Related posts:

Who owns Diaoyu Islands?

Who owns the South China Sea islets in the eyes of the world?  

Wednesday, August 29, 2012

The US Pacific free trade deal that's anything but free?

The US's draft TPP deal may grant new patent privileges and restrict net freedom, but it's secret – unless you're a multinational CEO

Patent protection increases what patients pay for drugs in the United States by close to $270bn a year (1.8% of GDP). Photograph: Graham Turner for the Guardian

"Free trade" is a sacred mantra in Washington. If anything is labeled as being "free trade", then everyone in the Washington establishment is required to bow down and support it. Otherwise, they are excommunicated from the list of respectable people and exiled to the land of protectionist Neanderthals.

This is essential background to understanding what is going on with the Trans-Pacific Partnership Agreement (TPP), a pact that the United States is negotiating with Australia, Canada, Japan and eight other countries in the Pacific region. The agreement is packaged as a "free trade" agreement. This label will force all of the respectable types in Washington to support it.

In reality, the deal has almost nothing to do with trade: actual trade barriers between these countries are already very low. The TPP is an effort to use the holy grail of free trade to impose conditions and override domestic laws in a way that would be almost impossible if the proposed measures had to go through the normal legislative process. The expectation is that by lining up powerful corporate interests, the governments will be able to ram this new "free trade" pact through legislatures on a take-it-or-leave-it basis.

As with all these multilateral agreements, the intention is to spread its reach through time. That means that anything the original parties to the TPP accept is likely to be imposed later on other countries in the region, and quite likely, on the rest of the world.

Government secrets
 
At this point, it's not really possible to discuss the merits of the TPP since the governments are keeping the proposed text a secret from the public. Only the negotiators themselves and a select group of corporate partners have access to the actual document. The top executives at General Electric, Goldman Sachs, and Pfizer probably all have drafts of the relevant sections of the TPP. However, the members of the relevant congressional committees have not yet been told what is being negotiated.

A few items that have been leaked give us some insight as to the direction of this pact. One major focus is will be stronger protection for intellectual property. In the case of recorded music and movies, we might see provisions similar to those that were in the Stop Online Privacy Act (Sopa). This would make internet intermediaries like Google, Facebook and, indeed, anyone with a website into a copyright cop.

Since these measures were hugely unpopular, Sopa could probably never pass as a standalone piece of legislation. But tied into a larger pact and blessed with "free trade" holy water, the entertainment industry may be able to get what it wants.

The pharmaceutical industry is also likely to be a big gainer from this pact. It has decided that the stronger patent rules that it inserted in the 1995 WTO agreement don't go far enough. It wants stronger and longer patent protection and also increased use of "data exclusivity". This is a government-granted monopoly, often as long as 14 years, that prohibits generic competitors from entering a market based on another company's test results that show a drug to be safe and effective.

Note that stronger copyright and patent protection, along with data exclusivity, is the opposite of free trade. They involve increased government intervention in the market; they restrict competition and lead to higher prices for consumers.

In fact, the costs associated with copyright and patent protection dwarf the costs associated with the tariffs or quotas that usually concern free traders. While the latter rarely raise the price of a product by more than 20-30%, patent protection for prescription drugs can allow drugs to sell for hundreds, or even thousands, of dollars per prescription when they would sell for $5-10 as a generic in a free market.

Patent protection

Patent protection increases what patients pay for drugs in the United States by close to $270bn a year (1.8% of GDP). In addition to making drugs unaffordable to people who need them, the economic costs implied by this market distortion are enormous.

There are many other provisions in this pact that are likely to be similarly controversial. The rules it creates would override domestic laws on the environment, workplace safety, and investment. Of course, it's not really possible to talk about the details because there are no publicly available drafts.

In principle, the TPP is exactly the sort of issue that should feature prominently in the fall elections. Voters should have a chance to decide if they want to vote for candidates who support raising the price of drugs for people in the United States and the rest of the world, or making us all into unpaid copyright cops. But there is no text and no discussion in the campaigns – and that is exactly how the corporations who stand to gain want it.

There is one way to spoil their fun. Just Foreign Policy is offering a reward, now up to $21,100, to WikiLeaks if it publishes a draft copy of the pact. People could add to the reward fund, or if in a position to do so, make a copy of the draft agreement available to the world.

Our political leaders will say that they are worried about the TPP text getting in the hands of terrorists, but we know the truth: they are afraid of a public debate. So if the free market works, we will get to see the draft of the agreement.

Sunday, August 12, 2012

US threat: superpower gun barrels pivot east

As US election fever sizzles, pressure mounts to spread the militarist mindset deeper and wider.

African agenda: Clinton (right) visiting a clinic in a suburb of Cape Town. — Reuters

THE heavy-duty globetrotting of Hillary Clinton as US Secretary of State was bound to take in Africa sooner or later. Now it has done so with as much gusto and relish as a new colonial carve-up of the continent.

This was the “dark continent” before it was “discovered” by the white man, before the African could succumb to Western maladies from various illnesses to the “structural adjustments” imposed by Western-controlled multilateral lending agencies.

And Africa today is the continent that Washington sees China moving into. How could the world’s sole superpower let that go unchallenged, particularly when the moves come from the world’s fastest rising power?

China is seeking natural resources for its growth, scouring the earth from South America to Africa and anywhere else with potential. The US, coming from behind in Africa, wants to get even and then pip China at the post.

Just what that means in real policy terms, or how that can benefit US interests, would have to be determined later.

So Clinton goes to nine countries in 11 days, posing with Nelson Mandela in South Africa and holding hands around campfires and singing Kumbaya from Benin, Ghana, Kenya and Malawi to Nigeria, Senegal, South Sudan and Uganda.

All of it made for good diplomacy and even better feel-good US news copy. However, some analysts observe that the US just does not have the funds to fulfil its African pledges.

Predictably, Washington denied this was in competition with China over Africa. And like all such official denials, it was as good an unofficial confirmation as any.

Clinton’s African agenda was formally based on the White House white paper “US Strategy Toward Sub-Saharan Africa” produced just weeks before. This policy document aims to strengthen democracy, boost growth, promote peace and security, and encourage development.

Clinton asserted that the US had had a long history in Africa (before China), and it had been there for all the right and good reasons. But whether China is in the picture or not, US policymakers have a problem in credibly claiming both altruism and a long history in Africa.

Such claims of early US engagements typically neglect mentioning the slave trade from the late 15th century. This notorious denial of human rights through massive human trafficking involved the kidnap of countless African men in their prime over centuries by Europeans who sold them to Americans, setting back African development for generations.

Abraham Lincoln reputedly fought a civil war to end slavery only in the 19th century. That showed how embedded slavery had become in the New World, requiring a civil war to abolish.

Yet even this stain on Western history was predated by several decades by Admiral Zheng He’s three voyages to Africa in the early 15th century. These were Chinese trading missions that came to barter goods, not to extract vital human resources in a criminal fashion.

Later, Ronald Reagan’s administration infamously did business with the international pariah state of apartheid South Africa, while branding Mandela a terrorist leader. When questioned, Reagan called it “constructive engagement” to excuse his collaboration with a racist Pretoria.

Other US experiences elsewhere in Africa resulted in gross corruption and denial of human rights. From Rwanda and Somalia through Zaire (Democratic Republic of Congo), Equatorial Guinea and Ethiopia to Egypt and Libya today, the positive gains are not as rosy as they have been advertised.

More lately, the Obama administration overturned 10 years of hard work internationally by abruptly dumping a global arms trade treaty at the United Nations. Both legal and illegal arms and munitions supplies have devastated the developing world, notably Africa, which continues to lose thousands of lives and more than US$18bil (RM56bil) a year through armed conflict.

Clinton’s asides on China’s African presence come amid general criticism of Beijing’s modus operandi when doing business in Africa. China stands accused of not placing conditions on its African hosts before proceeding to deal with them.

To those intent on demonising China, however, Beijing can never win: it will be condemned whatever it does or does not do. If China were to impose political conditions on business deals, those who now complain it is not doing so will again be the first to complain.

There is a historical record for reference: once, an ideologically rampant China offered inducements to factions in developing countries to support their domestic communist movements.

Beijing has wisely refrained from such preconditions. Should China still offer such inducements, if only to make its own Communist Party or government look good?

Would it really be better if China exerted pressure on its trading partners or investment destinations to do what it considers important for its own values and objectives? To do so would be China’s equivalent of imposing US conditions on the developing world.

Some countries have also been guilty of offering “aid programmes” that hire their nationals as expatriates in the country supposedly aided. In contrast, China is said to hire African nationals for work on infrastructure projects it builds in Africa.

This provides local employment, while the infrastructure once built will remain in those countries to produce a multiplier effect for development through improved transportation for trade, investment, tourism and the distribution of educational opportunities and healthcare facilities.

Unlike the US variety, Chinese aid, trade and investment come with no strings attached, no crippling IMF or World Bank conditions, no military industrial complex supplying weapons to one side or the other, and no promises or threats of destabilisation, subversion, invasion, occupation, war or “regime change”. And Western critics pick on Beijing for that.

African analysts cite these as reasons why Africans will welcome China’s presence more than a competing US presence. China’s business deals come without the extra baggage of self-righteous preachiness and ideologically loaded value judgments.

Like the rest of the Third World, Africa may want to get as much as possible from both China and the US. So, in practice, it will not be a question of one suitor or the other.

But if Africa on its own is such a compelling case for renewed US interest, with China not a factor at all as officially claimed, why did Washington take so long to get interested? US policymakers must know that the official narrative of a rising Africa is not quite accurate.

To a degree, the Obama-Clinton act over Africa has also resulted from Mitt Romney’s presidential challenge. A leading US specialist on China, Prof David Shambaugh, finds that the Romney campaign is building a foreign policy team based largely on George W. Bush advisers.

This team sees China as a “global competitor” over Africa, and which despite some diplomatic platitudes in the preface, is relying heavily on greater military power. Lethal fallout may yet land in other regions from a superpower tottering in West Asia through teetering in South Asia on the way to Obama’s “pivot” in East Asia.

US presidential campaigns traditionally focus on domestic issues, but China and Africa are now generating a buzz among Americans online. Obama may also win a second term, but Romney’s influence on the campaign trail and Republican pressure in Congress may yet set the tone for US-China relations to come, to impact inevitably on East Asia as a whole.

Behind The Headlines By Bunn Nagara The Star

Related posts/Articles:

Global arms market hits post-Cold War high point Aug 09, 2012
U.S. intervention not conducive to Asia-Pacific stability Jul 15, 2012
US Military Strategy to Asia: Poke a Stick In China's Eye Jan 22, 2012
New US defense policy challenges trust; China in US ...Jan 07, 2012
The role that the US plays in Asia: Containment of China! Nov 27, 2011
US naval fleet to shift towards Pacific by 2020 Jun 03, 2012
China's warns US of Confrontation over South China Sea Apr 23, 2012
Pentagon planning Cold War against China - AirSea Battle concept! Nov 22, 2011

Tuesday, May 1, 2012

Dangers of U.S. Export Control Law & the Cybersecurity Market

Andrew Bigart

This article examines the export controls applicable to the field of cybersecurity, an increasingly global industry in which U.S. companies sell their products and services to multinational companies, U.S. agencies with overseas operations, and even foreign governments, when permitted. The cybersecurity market – both public and private – hit $60 billion in 2011 and is expected to increase steadily over the next several years. Indeed, cybersecurity is one of the few defense “growth” areas to buck recent U.S. budget cuts.

As U.S. companies continue to expand in the market, however, so too does the risk of non-compliance with the confusing web of U.S. laws and regulations that govern export-related activities. U.S. law places the burden of complying with export controls and economic sanctions squarely on U.S. companies and their officers and employees. The cybersecurity industry is no exception, and may be particularly vulnerable to government scrutiny given the strategic need to protect U.S. technological advantages, critical infrastructure, and access to confidential information. In this regard, violating U.S. export laws can result in criminal law enforcement actions, jail time, and significant fines and penalties, including debarment from federal contracting.

U.S. Export Controls

The U.S. government maintains a complex set of regulations that govern the export of goods – including technology, software, and technical data – to foreign countries and specified foreign entities and individuals.

The State Department’s Directorate of Defense Trade Controls (DDTC) regulates the export of defense articles, related technical data, and defense services listed on the United States Munitions List (USML) through the International Traffic in Arms Regulations (ITAR). All manufacturers, exporters, and brokers of defense articles, related technical data and defense services are required to register with DDTC. Registration with DDTC is a prerequisite to applying for export licenses.

The Department of Commerce’s Bureau of Industry and Security (BIS) regulates anything that is not listed on the USML, including the export of commercial and dual-use commodities, software, and technology through the Export Administration Regulations (EAR). Both DDTC and BIS regulate exports depending on an item’s technical characteristics, destination, end-user, and end-use. In this regard, cybersecurity products and services present a challenge because the exports may contain a mixture of different software, encryption functions, and controlled technical information.

Finally, although not the focus of this article, it’s import to note that the Department of Treasury’s Office of Foreign Assets Control (OFAC) enforces trade embargoes and economic sanctions against specific countries (Cuba, Iran, North Korea – you get the picture) and individuals and entities (terrorists, narcotics traffickers and other bad guys). OFAC publishes the names of these ne’er-do-wells in the “Specially Designated Nationals” or “SDN” list. (BIS also maintains several lists of prohibited persons). Together, the Commerce and State export controls and OFAC sanctions programs are designed to protect U.S. foreign policy interests and to prevent U.S. persons from doing business with the wrong types of customers.

Classifying Cybersecurity Products and Services for Export Purposes

Whether an export license or other authorization is required for the export of a cybersecurity product is a fact-specific determination that includes a review of the items or services being exported, the destination, end-user and end-use. Given the complexity in classifying cybersecurity-related items, many companies request commodity jurisdiction determinations from the export agencies for guidance on whether their products are properly classified under the DDTC or BIS frameworks. These determinations, which are published, in part, by DDTC and BIS, highlight the breadth of USML and EAR classifications that potentially cover cybersecurity products and software. For example, DDTC has advised that a company’s “Customizable USB thumb drive that conducts targeted searches of digital assets for critical files” is classified under the USML section XI, which covers military electronics, as are certain military-grade GPS and cryptography products.

On the other hand, data manipulation software that uses Security Socket Layer (SSL) encryption usually qualifies for BIS’s “Mass Market Encryption” exception for items classified under Export Control Classification Numbers 5A992 and 5D992. This exception allows certain “publicly available” software to be exported to most countries without a license if the exporter registers with BIS by obtaining an Encryption Registration Number.

Moreover, both DDTC and BIS regulations define an export as including the disclosure (orally or visually) of technical information or software to a foreign person. Thus, a “deemed export” takes place when technology or software is released to foreign a person or national for visual inspection (such as reading technical specifications, plans, blueprints, etc.); when technology is exchanged orally with a foreign person or national; or when technology is made available by practice or application to a foreign person or nationals under the guidance of persons with knowledge of the technology. Depending on the nature of the technology and the country to which the technology is disclosed, releasing technology to a foreign person or national may require an export license (or in the case of ITAR possibly a Technical Assistance Agreement, depending on the individual circumstances).

Why Should The Cybersecurity Industry Care?

As the importance of cybersecurity has grown from a national defense perspective, so too has the U.S. government’s focus on regulating the export of sensitive technology. A number of recent U.S. government enforcement actions involve U.S. persons selling software, encryption products, and other cybersecurity related information abroad:
  • In 2010, a resident of China was sentenced by a federal court to serve 96 months in prison for his efforts to obtain sensitive encryption, communications, and global positioning system equipment without a DDTC license.
  • In 2009, a U.S. national working for Technical Integration Group was sentenced to six years in prison and paid $1.1 million for exporting mobile telecommunications equipment containing encryption properties to Iraq, in violation of the then U.S. embargo on Iraq.
  • In 2008, two companies paid administrative penalties to settle BIS allegations that the companies exported U.S.-origin engineering software to Iran and to companies on the BIS Entity List without the required licenses.
  • In 2002, Neopoint Inc. paid a $95,000 civil penalty to settle charges that it unlawfully exported 128-bit encryption software to South Korea.
The consequences for non-compliance with U.S. laws overseas are severe and can include large monetary fines per violation for businesses, and similar monetary fines and imprisonment for individuals. On top of that, in cases of significant violations, the consequences can include a denial of future export privileges and federal contract debarment, which is particular onerous for cybersecurity companies dependent primarily on business from U.S. government contracts.

What Can My Company Do To Minimize Risk When Selling Abroad?

The first step in minimizing export-related risk is to understand the nature of your business and potential customers, including the who, what, and where of every export transaction. The U.S. government expects companies that export to inform themselves of the facts of any export transaction and exercise reasonable care in complying with applicable U.S. export requirements. This process requires companies to determine the appropriate export classifications for their products and services. If any of your products or services falls under the USML, then you must register with DDTC as a manufacturer, exporter, or brokerer.

The next step is to develop a compliance plan that is tailored to your company’s specific export needs. A compliance plan should address, at a minimum, the following:
  • Overview of applicable laws;
  • A list of prohibited activities and employee responsibilities;
  • Regular compliance training for employees;
  • Required checking of all business partners and customers against OFAC’s SDN list on a transactional basis;
  • Rigorous internal financial and audit controls to monitor export and FCPA compliance; and
  • Required due diligence on all agents or independent contractors and required written contracts with export, economic sanctions, and FCPA prohibitions and certifications.
Finally, under U.S. law, exporters that become aware of – or should be aware of – “red flags” are required to resolve them before proceeding with a transaction. Monitoring the activities of your business partners overseas is particularly important because the conscious avoidance of knowledge of wrong doing is not a defense. Typical red flags include:
  • Transactions with incomplete information regarding end users, country of origin or destination;
  • Exportation of products that do not not fit the buyer’s line of business;
  • Unusual contract terms, payments in cash, or requests for high commissions;
  • Direct or indirect payments to government officials or their families or payments to persons outside the normal scope of a transaction;
  • Payment for travel, lodging, or business expenses or extravagant gifts or entertaining of government officials or their families; and
  • Consultants who are connected with a foreign government or political party.
What if a Potential Violation Arises?

Unfortunately, for some companies the legal risks of doing business abroad are not apparent until something goes wrong. If you discover questionable business practices regarding your export-related activities, stop the conduct in question immediately and report the activities to your company’s compliance officer. If your company finds itself in such a position, consider the option of a voluntary disclosure. Each of the agencies discussed above – Commerce, State, and OFAC – maintain procedures that encourage companies to self-report violations under certain circumstances. Although these programs do not allow companies to evade liability completely, they do offer reduced penalties and other incentives.

Conclusion

There is no doubt that the export market for cybersecurity products and services remains an attractive and growing market for U.S. exporters. Before taking the leap overseas, however, take the time to review and understand your company’s responsibilities under U.S. export control and economic sanctions. An ounce of prevention in this regard goes a long way in keeping your business profitable and out of trouble.

Eric Savitz, Forbes Staff  -  Guest post written By Andrew Bigart
Andrew Bigart is an associate with Venable LLP, a Washington-based law firm.
Newscribe : get free news in real time   

Related posts:
 Washington seeks to extend hegemony to trade

Friday, February 24, 2012

Singapore ‘warns’ US on China bashing

Realism as S’pore ‘warns’ US

Behind The Headlines By Bunn Nagara

The city state has begun to adjust to emerging regional realities while pivoting on its pragmatic impulses, as always, while steering a steady course between China and the US.

SINGAPORE’S political positions are nothing if not coolly calculated and calibrated. They are specially so when expressed in formal statements at high-level meetings.

In Foreign Minister K. Shanmugam’s keynote address to the CSIS (Center for Strategic and International Studies) gathering in Washington recently, US media reported him as “warning” the US against China-bashing rhetoric.



Words about containing China, particularly in the populist mood of a US election year, would he said cause a “new and intended reality for the region.” It was not the first time Shanmugam had said so, having previously cautioned against the futility of containing a rising China.

However, these statements do mark a shift from previous Singapore policies on the US and China. As a small country overwhelmingly dependent on international trade, finance and therefore regional stability, an unwritten rule for Singapore has long been to avoid making waves while sidling up to the largest kid on the block.

Neither the region’s pecking order nor Singapore’s guiding principles have changed, only the emerging realities on the ground. The wherewithal for continued US pre-eminence has largely flattened out without having yet declined, while China’s stature and substance continue to rise.

The Obama administration has lately pledged to boost the US regional presence, but the extent, duration and consistency of doing so are unclear. China, meanwhile, has no need to risk overstretching itself in East Asia because it is in the region’s centre.

At one level, Singapore’s latest statement confirms a shift from former Minister Mentor Lee Kuan Yew’s pro-US slant following his retirement last May. For half a century, Lee had championed an alliance with the US over other powers like China, lately much of it because of a rising China.

At a more substantive level, Shanmugam’s statement well indicates Singapore’s new and belated efforts to woo an ascendant China. In seeming different now, Singapore is merely reaffirming its standard pragmatism based on an acute sense of self-preservation.

For the region, Singapore’s new tack may be surprising at first but not unwelcome. It simply expressed the obvious when that needed expressing, even if in doing so it made Singapore look more pro-active than its neighbours in acknowledging China’s burgeoning gravitas.

Singapore’s advice to Washington also came on the eve of Chinese vice-president (and prospective president) Xi Jinping’s state visit. The timing had apparently turned up the volume of Shanmugam’s statement to US lawmakers and their constituents.

Like everyone else, the US had long perceived Singapore as a feisty independent state averse to China’s dominance, following its early struggle against ethnic Chinese leftists and then its break-up with Malaysia, while retaining a largely ethnic Chinese population.

Today, Singapore’s “new look” policy is effectively not only for Washington’s benefit or just to showcase a contemporary Singapore to China. It also serves as an oblique reminder to Beijing that any hostile US rhetoric now would be mere campaign posturing and therefore undeserving of a like reaction.

After all, China is also getting set for a leadership change, a time when new directions may be set in ways likely to appease the populace. Its decade-long leadership is more than twice as enduring as a US presidential term and its policy direction could be several times as significant as the US equivalent.

Still, news reports implying how tiny Singapore had “warned” the world’s sole superpower might have seemed strong, if not strange. It is a measure of Singapore’s new posture that far from denying such reports, Shanmugam proceeded to expand on his comments.

He noted with approval how Chinese media widely reported his comments approvingly. Singapore media were also not shy in lingering over the issue.

The Straits Times noted that “a power transition is under way” in the region. Singapore-based Channel News Asia noted how well Shanmugam’s remarks had played in China.

Nonetheless, many US Netizens were not as hospitable to the comments. Among the more common responses was the defensive argument that US rhetoric against China was free speech and so warranted no warning or censure.

Another common reaction was to despise China and its unfolding development even more. A zero-sum mentality prevailed on US-China relations, aggravated by a pervasive sense of a declining US economy in free fall.

The third common reaction among Americans commenting online was to attack the messenger. Thus Shanmugam was criticised for acknowledging China’s success and daring to warn the US over it.

Singapore’s revised articulation of regional realities does not surprise any serious onlooker in Asia. Its concerns are self-evident, its priorities apparent, and its assessment of the region timely.

A contrast comes with the Philippines, where rival claims with China over offshore territory has come to define their relationship. This amounts to allowing marginal interests to determine larger substantive ones: yet again, pragmatism distinguishes Singapore’s policies from the Philippines’.

Even so, Singapore’s recent assessment of regional realities sums up Asean’s understanding of them. What Washington will make of it, if anything, is anybody’s guess.

Republicans are particularly anxious to parade their conservative values, such as by defending US prerogatives, paramountcy and exceptionalism. This has encouraged emotive responses from Americans “in America’s interest.”

Democrats can only respond defensively by trying to match or pre-empt the Republicans’ US-centric aggressiveness. However much the Obama White House may prefer a more mature and measured response, it must also know that is far less likely to “sell”.

Thus Shanmugam’s counsel to Washington comes full circle. He spoke as he did because of the circumstances of the time, and it is those circumstances that now make him an easy target in the US.

As Americans brace for a presidential election in November, all parties can be just as prickly over any foreign reminders that the US needs to behave better. And it is practically a given that enraged US Netizens disconnected from reality will be given a better hearing in Washington than even the most thoughtful of allies in Asia.

Related posts:

Singapore warns US on anti-China rhetoric!
US Military Strategy to Asia: Poke a Stick In China's Eye 

Friday, February 17, 2012

US-China heralded a new 'great power relationship'

China seeks ‘great power relationship’ with U.S. but warns against meddling in Tibet, Taiwan

Jewel Samad/AFP/Getty Images
Jewel Samad/AFP/Getty Images

China's Vice President Xi Jinping: “China welcomes the United States playing a constructive role in promoting the peace, stability and prosperity of the Asia-Pacific region, and at the same time we hope the U.S. side will truly respect the interests and concerns of countries in the region, including China.”hare

By Chris Buckley and Doug Palmer

WASHINGTON – China’s Vice President Xi Jinping on Wednesday offered deeper co-operation with the United States on trade and hot spots like North Korea and Iran, but warned Washington to heed Beijing’s demands on Tibet, Taiwan and other contentious issues.

“Sino-U.S. relations stand at a new historic starting point,” China’s expected next leader told U.S. business groups after meetings on Tuesday with President Barack Obama and other top U.S. officials.

China and the United States should strive to create “a new type of great power relationship for the 21st century,” Xi said.

But he said the two powers also had to “strive to avoid misunderstandings and avert misjudgments” and should “truly respect each other’s core interests and major concerns.”

Xi’s visit to United States this week presents a chance for him to boost his international standing before his expected promotion to head of China’s communist party later this year and president of the world’s most populous nation in 2013.

Even as Xi continued his U.S. visit, Obama, at a campaign-style stop in Milwaukee, took aim at China’s trade practices, saying he will not stand idly by when American’s competitors “don’t play by the rules.” “I directed my administration to create a Trade Enforcement Unit with one job: investigating unfair trade practices in countries like China,” Obama told factory workers.

Xi met with House of Representatives Speaker John Boehner and Senate Majority Harry Reid on Wednesday morning and after his speech was headed to Iowa for the next leg of his trip, which finishes later this week in Los Angeles.

Xi addressed a number of sore spots in the U.S.-China relationship, including Beijing’s currency policy.

Many U.S. lawmakers complain the yuan is significantly undervalued, giving Chinese companies an unfair price advantage that helped lift the U.S. trade deficit with China to a record US$295.5-billion in 2011.

Xi said currency reforms already taken by Beijing helped boost U.S. exports to China to more than US$100-billion in 2011 and has significantly reduced China’s overall trade surplus.

“China has become the United States’ fastest growing export market,” Xi said. “The trade surplus as a proportion of GDP has been falling from over 7% to 2%, at a level internationally recognized as reasonable.”

U.S. Treasury Secretary Geithner acknowledged on Wednesday that Beijing is gradually letting its currency rise, but not fast enough to please the United States.

“We think they have some ways to go, we would like them to move more quickly,” he told a congressional panel.



SHARED CHALLENGES

Xi is poised to become China’s next leader following a decade in which it has risen to become the world’s second largest economy while the United States has fought two wars and endured the deepest and longest recession since the Great Depression that sapped its resources.

“The world is currently undergoing profound changes, and China and the United States face shared challenges and shared responsibilities in international affairs,” Xi said.

“We should further use bilateral and multilateral mechanisms to enhance coordination between China and the United States on hotspots, including developments on the Korean peninsula and the Iran nuclear issue,” he said.

At the same time, he urged Washington not to support movements in Taiwan and Tibet for independence.

China deems the self-ruled island of Taiwan to be an illegitimate breakaway from mainland rule since 1949, and has warned that the island must accept eventual reunification.

In recent years, tensions between the two sides of the Taiwan Strait have eased as economic flows have grown. But Beijing remains wary of U.S. involvement in the issue, which it calls an internal affair.

In early 2010, the Obama administrations decision to move forward with proposed arms sales to Taiwan triggered vehement criticism from Beijing, including warnings of sanctions against U.S. companies involved in the sales. Those warnings petered out, but Xi made clear that Taiwan remains an acute concern for Beijing’s dealings with Washington.

Tensions over Chinese control of Tibet have flared in past months when a succession of protests and self-immolations have exposed volatile discontent. Chinese officials have repeatedly blamed those tensions on separatists or supporters of the Dalai Lama, the exiled Buddhist leader of the region.

Xi also acknowledged the Obama administration’s recent “pivot” toward Asia, but warned it not to push too far.

“China welcomes the United States playing a constructive role in promoting the peace, stability and prosperity of the Asia-Pacific region, and at the same time we hope the U.S. side will truly respect the interests and concerns of countries in the region, including China.”

© Thomson Reuters 2012

Xi sees new 'starting point' for US-China ties

By Andrew Beatty (AFP) 

WASHINGTON — Chinese heir apparent Xi Jinping heralded "a new historical starting point" for ties with the United States, wooing US business leaders with a glimpse of a more cooperative future.

Speaking during a lavish ballroom luncheon with the upper crust of corporate America, Vice President Xi described deeper Sino-American ties as an "unstoppable river that keeps surging ahead."

Glossing over the tumultuous twists and turns in 30 years of Cold War-dominated relations, Xi said interests had become ever-more intertwined. "It is a course that cannot be stopped or reversed," he said.

Xi welcomed Washington's interest in the Asia Pacific region, and said cooperation was needed on a range of challenges from North Korea to Iran, so long as China's interests are also respected.

Xi is on his maiden visit to the United States as a top official, a trip many hope will help close a chapter in relations characterized by mistrust and mudslinging, particularly in the commercial sphere.

As the tectonic plates of global trade have shifted in recent decades, China and the United States -- the world's two largest economies -- have frequently collided, jutted and bumped against each other, sometimes to damaging effect for both.

With Xi widely tipped to lead China from 2013 and Obama in a November re-election battle, the visit is being seen as a dress rehearsal for the next generation of US-China relations.

During the trip, Xi has worked US constituencies key to the bilateral ties: official Washington, corporate leaders and, in Iowa, a return to small-town America which he visited more than two decades ago.

His stops in Washington have included the White House, the Pentagon, the State Department, Congress and the US-China Business Council.

Throughout his trip Xi has received the trappings of a state visit -- even if he is only head of state in waiting.

In a broad-ranging speech that was short on specifics Wednesday, Xi told business leaders that increased understanding, mutual respect for core interests, trade and cooperation in international affairs should form the basis for relations.

"Over the past 33 years since the establishment of diplomatic ties, the friendship between our two peoples has deepened, mutually beneficial cooperation has expanded and our interests have become increasingly interconnected," he said.

At the luncheon Xi was introduced by former US secretary of state Henry Kissinger whose secret trip to China in 1971 paved the way for the normalization of relations between Washington and Beijing.

The pair were flanked by a cadre of Chinese Communist Party officials, as well as executives from Coca Cola, Chevron, ConocoPhillips, Dow Chemical, DuPont, Procter & Gamble and Estee Lauder.

Coca Cola CEO Muhtar Kent expressed the cautious optimism felt in the US business community about future ties with China.

He described Xi's visit as "another important milestone toward building an enduring and constructive relationship between our two nations."

The Chinese vice president largely steered clear of specific policy pronouncements, but stressed the mutual benefits of trade, pointing out that 47 of 50 US states had seen their exports with China grow in the last decade.

Despite deepening ties, many Americans and their lawmakers angrily accuse Beijing of not playing by the rules.

They accuse China of keeping the value of its currency unfairly low to fuel inexpensive exports, which have catalyzed China's headlong dash toward becoming an economic superpower.

From June 2010, Beijing has allowed the yuan to rise 8.5 percent against the dollar, in part because of domestic inflation pressures -- making the yuan an increasingly dubious scapegoat for lopsided trade.

In the last decade, trade between the two countries has increased over 275 percent and is now worth half a trillion dollars a year.

But Chinese exports still make up 80 percent of bilateral trade, despite China joining the World Trade Organization a decade ago, leading to accusations of protectionism from US industry.

Xi, repeating a long standing gripe, said the US would need to reform its own trade restrictions on exports to China in order to right that imbalance.

"It is very important for addressing the China-US trade imbalance that the United States adjusts its economic policies and structure, including removing various restrictions on exports to China, in particular easing control on civilian high-tech exports to China as soon as possible," he said.

China has often blamed the US deficit on Washington's own rules on exporting sensitive equipment that could be adapted for military or intelligence use.

Copyright © 2012 AFP. All rights reserved