China threatens sanctions against U.S. companies: Is this the future? | World Defense

China threatens sanctions against U.S. companies: Is this the future?

BLACKEAGLE

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China threatens sanctions against U.S. companies: Is this the future?

By Peter Harrell
January 26, 2016

Shipping containers piled up at a port in Qingdao, Shandong province December 10, 2013. REUTERS/China Daily

China’s recent threat to impose sanctions on U.S. defense companies that sell arms to Taiwan should come as no surprise to American officials or corporate executives: Washington has been issuing sanctions of these sorts for years. It was only a matter of time before U.S. competitors started copying its tactics.

Regardless of whether China follows through on its threat, Washington needs to be ready for a new normal in which the United States must defend against sanctions as well as impose them.

China is taking a page from the sanctions playbook Washington developed against Iran. Between 2010 and 2015, the United States effectively gave companies a choice: If they did prohibited business with Iran, like buying oil, they would get cut off from doing any business in the United States. Forced to choose between access to the world’s most important financial system and an Iranian market less than 1/30th the size, most companies stuck with Washington and avoided Tehran.

China’s threat mirrors this approach — trying to force U.S. companies to choose between defense sales to Taiwan and access to a Chinese economy that is nearly 20 times larger. While U.S. companies do not currently sell military equipment to China, many U.S. defense contractors do sell civilian passenger aircraft, aviation parts and other civilian equipment in China and could find their ability to continue those sales cut off by Beijing.


Shipping containers on a ship docked at a port in Rizhao, Shandong province, China, December 6, 2015. REUTERS/Stringer

For Beijing, this is a change in official position. China has long argued that only sanctions imposed by the United Nations Security Council are legitimate. Yet, Beijing has not strictly adhered to this policy. In 2012, for example, it unilaterally limited imports of fruit and vegetables from the Philippines in retaliation for a dispute over claims in the South China Sea.

But China’s public threat over Taiwan marks a major escalation in its apparent willingness to deploy sanctions of its own against U.S. companies engaging in business, particularly business that is expressly authorized by the Obama administration and publicly supported by many in Congress.

Chinese policymakers understand that their growing economic and financial clout makes sanctions threats more credible. China is a critical market for U.S. products from cars to computer chips, and companies like Wal-Mart, Apple, MasterCard and Starbucks are among the leading American firms that generate at least 10 percent of their business in China, according to data compiled last year by Factset Research.

Other countries, like Russia, have also begun to assess areas where they have economic leverage they can use against Washington and its allies.

There are several practical steps that the United States should take to respond to China’s threat or to prepare for when other countries threaten sanctions.


A worker walks in a shipping container area at the Port of Shanghai, April 10, 2012. REUTERS/Aly Song

First, U.S. officials need to begin systematically planning for sanctions defense. While Washington has strong analytic mechanisms to develop new sanctions against foreign targets, it does little to analyze U.S. sanctions vulnerabilities. This needs to change. Fast. The Treasury Department should, for a start, set up a defensive sanctions planning committee to research and report on U.S. sanctions vulnerabilities.

Second, Washington needs to make clear to Beijing that the U.S. government will support American companies threatened by sanctions. Senior U.S. officials should emphasize that Washington views China’s threat as unacceptable and that the United States will encourage American companies to participate in the deal with Taiwan despite the threat.

If China follows through and imposes sanctions, Washington needs to look at mechanisms to protest China’s action and to seek economic recourse for affected U.S. companies.

Third, companies need to do more to identify sanctions risks and to harden defenses against potential vulnerabilities. U.S. companies already engage in sophisticated analyses to ensure that far-flung events like earthquakes or other natural disasters do not disrupt global business. Companies should apply similar risk assessments and mitigation strategies toward potential sanctions by foreign governments.

Fourth, the United States needs to invest far more energy and diplomatic capital to build global standards defining when sanctions should and should not be used. There are currently few such standards — even among close U.S. allies like the European Union.

If Washington does not step up to shape such standards, China and other governments will likely try to do so. Developing standards about the use of sanctions will not, by itself, prevent China or other governments from misusing them. But just as global standards help constrain the misuse of military force by foreign governments, standards about the use of economic force will help Washington fight back against misuse.

Sanctions and other economic tools will likely play a central role in U.S. foreign policy in the years ahead. China’s threat brings home the need to recognize that the United States has its own vulnerabilities, and Washington should take steps to address them.
China threatens sanctions against U.S. companies: Is this the future?
 

Scorpion

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China owns the U.S market plus the debt. Im just wondering what will happen to the dollar value and U.S economy if oil producers stop accepting dollar as a currency for oil and when China asks for its money. The U.S will be doomed.
 

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I had noticed that China is slowly flexing its muscles to show the world of its hidden power. In the Spratlys, the artificial island that China had made is to assert its sovereignty there as if telling the world that the Spratlys belong to them. And now they are threatening a sanction to US companies that deal with Taiwan. That is plain bullying. I hope the western countries would fight back with their own sanction.
 

xTinx

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So China is trying to turn the tables on the United States? As if it doesn't have much at stake should the U.S. decide to sever ties with the country for good. The status quo is that while both countries hate each other, they're also heavily dependent on one another. Talk about irony.
 

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Both sides have a lot to lose should sanctions be imposed. While I wouldn't call it an empty threat I doubt that China would be too hasty to do something that would boomerang and hurt their economy. These public threats are only good for posturing. Nonetheless the U.S should also do as China wishes. They shouldn't sell weapons to Taiwan.
 

djdefense

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Yeah it's just posturing. China is "testing the waters" with the US and how far it can push or poke without getting called out.
 

vegito12

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China has power just that it has hidden it and now it is showing the power it has and will be interesting to see what it does to the USA and it can mean that it may decide to give to not give loans to the USA which can affect the economy and wonder what will happen later on in the coming weeks to months. I think that it will be interesting to see what happens later on and it will be interesting to see how the USA reacts to China doing this and hope to see the issues resolved between the two countries and they do need each other due to trade and business deals which help both countries which will help them grow. Many countries don't think that China has power and have been in doubt but now they will have to wake up and see what it can do and see the changes it can bring and has been advancing very quickly.
 

silentwarfare

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The US is smarter than China realizes, even though there is weight to their desire to place sanctions and copy the US in that way by placing them back. The US may decide not to sell any type of arms to Taiwan, but instead have another company become the provider of those arms on their behalf, such as India. India is one of the foremost exporters of arms in the world, even though they are peaceful compared to other countries with regard to war. Less warlike does not mean less business is done. They or other countries will gladly buy the weapons from US providers, and then resell them either as a representative to Taiwan or on their own. It would impossible for China to stop this process, because there are billions of people and every different country outside of the US who is willing to do this in their place.
 

UnslaadKrosis

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Both sides have a lot to lose should sanctions be imposed. While I wouldn't call it an empty threat I doubt that China would be too hasty to do something that would boomerang and hurt their economy. These public threats are only good for posturing. Nonetheless the U.S should also do as China wishes. They shouldn't sell weapons to Taiwan.
Nah, the country that will lose the most is the US. Almost everything that is 'American' is manufactured in China, as it has the world's largest cheap labour population. So if the sanctions come to effect, the US companies will go bankrupt, because of the simple fact that the average wage in the US is 25$ per hour, while that in China is about 10$ a day.

China, however, will survive. Because it owns the manufacturing plants of almost every country on Earth, and even if it loses the support of the US market (which is deeply in debt to the Chinese Govt.), it will thrive just fine.
 

Redheart

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I think the sanctions in a way would be good for Americans because those companies which moved overseas for cheap labor will be forced to relocate back home. Due to the higher cost of production though it will be much harder to sell American-made products overseas.
 

remnant

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This is a pointer to an evolving world order. The world is currently unipolar with the US being the sole superpower. China has overtly and covertly been trying to fill the void created by the demise of the Soviet Union. She has embarked on military modernization, a space programme and economic restructuring.
 

UnslaadKrosis

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This is a pointer to an evolving world order. The world is currently unipolar with the US being the sole superpower. China has overtly and covertly been trying to fill the void created by the demise of the Soviet Union. She has embarked on military modernization, a space programme and economic restructuring.
Come on, the US was never the sole superpower. Countries like China and Israel has already secured their place firmly as world powers. Then there's Russia, the old dog who has still not lost his strength and India, a fast emerging power that can rival any country, at least in its economy and military might. The US has the most well-funded military, true. But at the event of a full-scale war between nuclear capable countries, that military might will matter little, because a nuclear war will just leave destruction and death, with nobody left to celebrate victory.
 

Benoit W

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Hаhаhа

It's а соmрlеtеly mеаninglеss gеsturе bесаusе Сhinа is аlrеаdy fоrbiddеn frоm buying аrms frоm Wеstеrn соmраniеs bесаusе оf Tiеnаnmеn.

Еdit - Hоw dоеs this еvеn gеt dоwnvоtеd? Thе US рut аn аrms еmbаrgо оn Сhinа in 1989 аnd hаsn't liftеd thеm sinсе. Thе оnly rеlеvаnt соmраniеs thаt соuld bе аffесtеd wоuld bе sоmеthing likе Bоеing, аnd thеy surе аs hеll аrеn't gоing tо рrеvеnt thеmsеlvеs frоm buying рlаnеs.
 

joshposh

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For the futures sake of the USA, they should start moving manufacturing plants to Mexico. Cheap labor and cheaper transport would be achieved. The USA has created a monster that it cannot control and the only way to bring it back down to earth is to take back what we gave them. Cut off all trade agreements with them and move everything to Mexico or other Asian countries in the region.
 

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