<table><tbody><tr><td class="nl-social-wrapper"><a href="#" class="fb-xfbml-parse-ignore" target="popup" onclick="window.open('https://www.facebook.com/sharer/sharer.php?u=https://www.chinadebate.com/newsletter/the-middle-east-has-its-oil-china-has-rare-earths-deng-xiaoping&amp;src=sdkpreparse','popup','width=500,height=700'); return false;"><i class="fa fa-facebook"></i></a><a href="https://twitter.com/intent/tweet/?text=&url=https://www.chinadebate.com/newsletter/the-middle-east-has-its-oil-china-has-rare-earths-deng-xiaoping&hashtags=China&via=chinadebate" target="_blank" ><i class="fa fa-twitter"></i></a><a href="#" onclick="window.open('http://www.linkedin.com/shareArticle?mini=true&url=https://www.chinadebate.com/newsletter/the-middle-east-has-its-oil-china-has-rare-earths-deng-xiaoping','', '_blank, width=500, height=500, resizable=yes, scrollbars=yes'); return false;"><i class="fa fa-linkedin"></i></a><a class="mail-popup" href="mailto:?Subject=There is oil in the Middle East, and China has rare earths.&body=China's rare earth resources account for 80% of the world's known reserves, and its status is extremely important compared with oil in the Middle East. Strategically, we must do a good job of rare earths Deng Xiao Ping 1992%0D%0Ahttps://www.chinadebate.com/newsletter/the-middle-east-has-its-oil-china-has-rare-earths-deng-xiaoping"><img style="display:inline-block; width:86px;vertical-align:top;" alt="Mail to friends" src="https://assets.website-files.com/5a3e922cf6b9a40001bc2d6b/5d09c1b206d04cfe18120e3c_Forward%20mail.png"></a></td></tr></tbody></table>

I. THE LAW AND THE PROTESTS
1. The trade war is paralyzing business decision making.

<tr><td><table class="multi-block"><tbody><tr><td class="embed-responsive embed-responsive-16by9"><iframe class="embed-responsive-item" src="https://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=7000082551"></iframe></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption">Steve Okun | McLarty Associates</p><p class="excerpt">‘There has never been greater anxiety in the business community when it comes to U.S. China relations than right now.’</p><p><strong>&lsquo;There has never</strong> been greater anxiety in the business community when it comes to U.S. China relations than right now,&rsquo; says <a href="https://maglobal.com/team/steven-okun/" target="_blank"><strong>Steve Okun</strong></a> of McLarty Associates in a <a href="https://youtu.be/fuOnaK61k7I" target="_blank">CNBC video interview</a>.</p><ul><li><strong>&lsquo;There&rsquo;s a better</strong> than 50/50 chance the next 300 billion in tariffs are going to come.&rsquo;</li><li><strong>&lsquo;But the trade war</strong> is expanding beyond tariffs now, and businesses are caught in the crossfire.&rsquo;</li><li><strong>&lsquo;It&rsquo;s paralyzing decision making</strong> until the business gets a better understanding of what's going to happen from both sides.&rsquo;</li><li><strong>And &lsquo;there isn't going</strong> to be clarity anytime soon.&rsquo;</li></ul><p><strong>&lsquo;It used to be,</strong>&ldquo;Well, we're going to take our supply chain outside of China.&rdquo;</p><ul><li><strong>&lsquo;But then when</strong> the president decides to put tariffs on Mexico - that's not a supply chain that's going be safe to move to out of China.&rsquo;</li><li><strong>&lsquo;And you potentially have tariffs</strong> coming on auto and auto parts out of the EU in Japan.&rsquo;</li><li><strong>&lsquo;So businesses</strong> are paralyzed because they don't know where to go: do you stay in China? Do you go outside of China?&rsquo;</li></ul><p><strong>&lsquo;What&rsquo;s even worse now</strong> is you have to worry about whether you're going to be hit by the U.S. for doing business with Huawei and potentially other companies, or</p><p>you're going to be considered unreliable by the Chinese.&rsquo;</p><ul><li><strong>And perhaps </strong>be put on a Chinese blacklist of &ldquo;unreliable&rdquo; companies.</li></ul><p><strong>&lsquo;You've always had</strong> that pressure between both China and U.S.&rsquo;</p><ul><li><strong>&lsquo;Now companies have to figure out</strong> how to do business with both China and the U.S.&rsquo;</li><li><strong>&lsquo;And you can't pick</strong> - China is not an option: China's essential, businesses have to be there.&rsquo;</li><li><strong>&lsquo;Now the question is: </strong>not how do you choose, but how are you going to balance?&rsquo;</li></ul></td></tr>

2. Impact of tariffs on U.S. businesses in China: AmCham China chairman

<table class="nl_card"><tbody><tr><td><table class="multi-block"><tbody><tr><td class="embed-responsive embed-responsive-16by9"><iframe class="embed-responsive-item" src="https://player.cnbc.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=7000083339"></iframe></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption">Tim Stratford | AmCham China chairman</p><p class="excerpt">‘The overwhelming feeling among the business community in China is one of uncertainty,’</p><p><strong>On the same theme</strong> as Steve Okun is AmCham China chairman Tim Stratford with analysis from an on-the-ground in China in a <a href="https://youtu.be/Kozyfk-z0Gw" target="_blank">CNBC video interview</a>.</p><ul><li><strong>You can read</strong> the key findings of the AmCham survey Tim mentions in the last item here, number 6.</li></ul><p><strong>Q: &lsquo;What is the status</strong> of being an American company in China right now.&rsquo;</p><p><strong>A: &lsquo;The overwhelming feeling</strong> among the business community in China is one of uncertainty,&rsquo; says AmCham China chairman Tim Stratford.</p><ul><li><strong>'It's not so clear</strong> that the two sides can come to an agreement.&rsquo;</li><li><strong>&lsquo;Even if they do come</strong> to an agreement, it's not so clear that they could implement it very smoothly.&rsquo;</li><li><strong>&lsquo;And even</strong> if they can implement it smoothly, it's not so clear that there might not be some other actions in the bilateral relationship that would still undermine the environment for doing business in China.&rsquo;</li></ul><p><strong>&lsquo;We conducted</strong> a survey together with the Shanghai AmCham two or three weeks ago.&rsquo; [The <strong>key findings</strong> from the survey, published May 22, are in the item below.]</p><ul><li><strong>&lsquo;We found that 40%</strong> of our companies are either moving some manufacturing outside of China, or they're considering doing so.&rsquo;</li><li><strong>Note: </strong>In a similar AmCham survey&nbsp;last September, only 30% said they were considering partial relocation.</li><li><strong>&lsquo;They're looking to do </strong>at least some change so that they aren't as susceptible to things that might continue to unfold in the bilateral relationship that would affect their business.&rsquo;</li><li><strong>&lsquo;Risk mitigation</strong> is very much on people's minds.&rsquo;</li></ul><p><strong>&lsquo;And we have other issues</strong> in the bilateral relationship that flow into the economic relationship.&rsquo;</p><ul><li><strong>&lsquo;The Huawei matter</strong> - Huawei been putting it on put on the entity list - is a great example of that. That puts a lot of uncertainty into supply chains.&rsquo;</li><li><strong>&lsquo;There's also concern</strong> that China has also come up with their own list of &ldquo;unreliable entities,&rdquo; and we don't yet know how that's going to unfold.&rsquo;</li><li><strong>&lsquo;It's hard to see how in a short period of time</strong> the U.S. and the Chinese governments will develop so much trust and so much understanding on how to deal with these issues that these risks will go away anytime soon</li></ul><p><strong>Q: &lsquo;What</strong><strong>is the </strong>&ldquo;In China for China&rdquo; policy that your report talks about?&rsquo;</p><p><strong>A: &lsquo;&ldquo;In China for China&rdquo;</strong> has been an approach that American and other foreign companies have taken for a long time.&rsquo;</p><ul><li><strong>&lsquo;I used to work</strong> in the auto industry, and automakers liked to manufacture and supply the manufacturing base in countries where they do business.&rsquo; because they can be a more efficient and more responsive to domestic needs.&rsquo;</li><li><strong>&lsquo;The Chinese market</strong> is big enough that it merits very careful thought from a company of what's the most efficient way to supply that market.&rsquo;</li><li><strong>&lsquo;To the extent</strong> that that's your strategy, you're somewhat immune from tariffs and other things that each country may be imposing on each other.&rsquo;</li></ul><p><strong>&lsquo;But what we're also concerned about</strong> now is that if you're sitting in China, and you don't really hear a full articulation of what the U.S. interests are, it's very easy for people here to get the feeling that China is simply being targeted by the United States - that the U.S. government's objective is to contain China's technological and economic development.&rsquo;</p><ul><li><strong>&lsquo;The U.S., candidly,</strong> hasn't done a great job of rebutting that message by articulating a comprehensive strategy that explains what it's doing and at the same time holds out an olive branch for the kinds of things that are very constructive between the two countries.&rsquo;</li></ul><p><strong>Based on the survey,</strong> the <a href="https://www.scmp.com/business/companies/article/3011259/us-china-trade-war-hurting-american-companies-china-tariffs-cut" target="_blank">South China Morning Post</a> created a chart of where U.S. companies are thinking of relocating outside China:</p><img style="width:100%" src="https://listly-temp.s3.amazonaws.com/871952_US-China%20trade%20war%20'hurting%20American%20_business.png" alt="CHINADebate"></td></tr></tbody></table>

3. ‘The Middle East has its oil, China has rare earths.’ Deng Xiaoping

<table class="nl_card"><tbody><tr><td><table class="multi-block"><tbody><tr><td class="bg-holder"><a href="https://nationalinterest.org/blog/buzz/china%E2%80%99s-rare-earth-dominance-how-usable-weapon-61307" target="_blank"><img style="width:100%" src="https://nationalinterest.org/sites/default/files/styles/desktop__1486_x_614/public/main_images/C20%20%281%29.jpg?itok=2oEoyWct" alt="CHINADebate"></a></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption">National Interest</p><p class="excerpt">“There is oil in the Middle East, and China has rare earths. China's rare earth resources account for 80% of the world's known reserves, and its status is extremely important compared with oil in the Middle East. Strategically, we must do a good job of rare earths." Deng Xiao Ping, 1992</p><p><strong>&lsquo;A China National Radio&rsquo;s website&nbsp;</strong>shows a photo&nbsp;of &ldquo;Deng noting in a speech he made January 1992 during his Southern Tour,</p><ul><li><strong>&ldquo;The Middle East has its oil,</strong> China has rare earths&rdquo; &ldquo;中东有石油, 中国有稀土.&rsquo;&rdquo;</li><li><strong>Today, &lsquo;Chinese sources</strong> increasingly discuss the potential for weaponizing the Middle Kingdom&rsquo;s major mineral advantage&rsquo; in the trade war, writes <strong>Andrew Erickson</strong>, professor at the Naval War College andvisiting scholar&nbsp;at the Harvard Fairbank Center for Chinese Studies, and <strong>Gabe Collins </strong>of Rice University, in <a href="https://nationalinterest.org/blog/buzz/china%E2%80%99s-rare-earth-dominance-how-usable-weapon-61307" target="_blank">&lsquo;China&rsquo;s Rare Earth Dominance: How Usable a Weapon?&rsquo;</a></li></ul><p><strong>&lsquo;So exactly</strong> what options does China have for potentially weaponizing its rare earth (REE) advantage?&rsquo;</p><ul><li><strong>&lsquo;In theory,</strong> Chinese mineral might is fearsome as Beijing is the world&rsquo;s leading REE producer.&rsquo;</li><li><strong>&lsquo;Despite global consumers&rsquo; attempts</strong> to diversify supply sources, PRC suppliers remain the dominant players&mdash;particularly in the area of processing ores into actual usable materials.&rsquo;</li></ul><p><strong>&lsquo;Now, Beijing appears</strong> to be pressing this advantage, while Washington seeks to mitigate risks.&rsquo;</p><ul><li><strong>&lsquo;China has already&nbsp;raised tariffs</strong>from 10 percent to 25 percent on REE ores that MP Materials, the sole American REE producer, sends to China for processing.&rsquo;</li><li><strong>&lsquo;Meanwhile,</strong> Washington has left REEs off the list of its next set of prospective tariffs covering roughly $300 billion in Chinese goods.&rsquo;</li></ul><p><strong>&lsquo;So far, however,</strong> this is still an initial posturing. How has Beijing wielded REEs as a tool of geoeconomic influence in the past, and how might it do so today?&rsquo;</p><ul><li><strong>&lsquo;The extant signature example</strong> came in the fall of 2010 when the Chinese government restricted exports of rare earths to Japan.&rsquo;</li><li><strong>&lsquo;Thisfollowed Tokyo&rsquo;s detention</strong>&nbsp;of a Chinese fishing boat captain after he collided with two Japan Coast Guard vessels near the disputed Senkaku Islands.&rsquo;</li><li><strong>&lsquo;China&rsquo;s ban fanned fears</strong> of over-dependence on Chinese suppliers for critical commodity inputs.&rsquo;</li></ul><p><strong>&lsquo;Yet the Japan REE embargo</strong> saga illustrates at least three factors that would seriously undermine a Chinese attempt to weaponize REEs against the United States.</p><ol><li><strong>&lsquo;First, </strong>a new attempt to wield REEs aggressively would turbocharge diversification measures.&rsquo;</li></ol><ul><li><strong>&lsquo;Some observers argue </strong>that China&rsquo;s present processing preeminence locks in its strategic position in rare earths markets for &ldquo;years&rdquo; to come.&rsquo;</li><li><strong>&lsquo;Yet if Beijing weaponizes</strong> the minerals against American interests, thiscould galvanize&nbsp;and accelerate&nbsp;existing plans&nbsp;to build U.S.-based REE processing capacity.&rsquo;</li></ul><ol start="2"><li><strong>&lsquo;Second, </strong>an REE embargo would reinforce the narrative that China-based commodity supply chains are inherently untrustworthy.&rsquo;</li></ol><ul><li><strong>&lsquo;This would not only reinforce</strong> REE supply diversification measures such as those described above, but could also prompt companies to re-think China-based sourcing more broadly.&rsquo;</li><li><strong>&lsquo;If a sufficient mass of foreign firms</strong> decided that sourcing higher-end products and critical input materials from China posed unacceptable risks, a rolling exodus of such operations would set back Beijing&rsquo;s ability to realize many of its key industrial development objectives, such as moving higher up the global manufacturing value-added chain.&rsquo;</li></ul><ol start="3"><li><strong>&lsquo;Third,</strong> an REE embargo could lead to much more damaging reciprocal American responses&mdash;such as more severe restrictions on the export of semiconductors and other critical technology subcomponents that many Chinese firms literally cannot survive without.&rsquo;</li></ol><ul><li><strong>&lsquo;In contrast to the dozens</strong> of China-based rare earth producers and refiners (and the attendant likelihood of embargo leakage), the highest-end semiconductors and semiconductor production equipment are controlled by a handful of firms that guard the intellectual property of their high-added-value products jealously.&rsquo;<ul><li><strong>&lsquo;These are predominantly domiciled</strong> either in the United States, Western Europe, or close U.S. allies in Asia such as Japan and South Korea.&rsquo;</li><li><strong>&lsquo;Such high concentration</strong> and political alignment would likely make enforcement of tighter restrictions highly feasible.&rsquo;</li><li><strong>&lsquo;And without certain levels</strong> of chip performance, many tech products will either perform at a much lower level&mdash;or in some cases, not work at all.</li><li><strong>&lsquo;In other words,</strong> semiconductors are generally much less fungible than are rare earths.&rsquo;</li></ul></li><li><strong>&lsquo;Jay Huang Jie,</strong> a former Intel Managing Director in China,&nbsp;notedthat if China seeks to build its own chip industry, it &ldquo;&hellip;should be prepared for a marathon of at least a decade, which will also be loss-making [along the way].&rdquo;&rsquo;</li><li><strong>&lsquo;During those ten years,</strong> it is also possible that foreign firms could further extend their technological lead over China&rsquo;s homegrown champions, especially if the negative effects of a technological &ldquo;bamboo curtain&rdquo; fell disproportionately on China&rsquo;s semiconductor sector.&rsquo;</li><li><strong>&lsquo;The impacts</strong> of falling further behind and having to settle for &ldquo;good enough&rdquo; technology goods would be momentous.&rsquo;</li></ul><p><strong>&lsquo;In addition,</strong> an embargo would likely raise REE prices, which would give Chinese suppliers strong economic incentives to smuggle REEs into the market.&rsquo;</p><ul><li><strong>&lsquo;Even if the metals</strong> were not sold &ldquo;directly&rdquo; to American customers, simply by making their way into the market at a premium price they would help ensure that necessary supplies are available.&rsquo;</li><li><strong>&lsquo;And the premium price</strong> would likely not be overly burdensome to manufacturers or the final consumers of REE-containing products.&rsquo;</li></ul><p><strong>&lsquo;Whereas a motor vehicle</strong> literally contains hundreds of kilograms of steel, and is thus very exposed to changes in steel commodity prices and physical availability, REE are more like &ldquo;vitamins of chemistry.&rdquo;&rsquo;</p><ul><li><strong>&lsquo;In other words,</strong> a product often cannot function without them, but a given phone, computer, etc., only needs a very small quantity to achieve its functionality goals.&rsquo;</li><li><strong>&lsquo;An iPhone, for instance,</strong> may contain as little as&nbsp;one-fourth of a gramof rare earths.&rsquo;</li><li><strong>&lsquo;This means </strong>that for neodymium, one of the densest rare earths, a piece of metal the size of an easily smuggled Coca-Cola can would be sufficient to produce at least 10,000 iPhones.&rsquo;</li><li><strong>&lsquo;Thus, the effects</strong> of even significant price increases would be diluted by the rare earths&rsquo; small share of overall production materials input.&rsquo;</li><li><strong>&lsquo;This dynamic ultimately</strong> helps underpin market adaptability in the face of politically-motivated supply restrictions.&rsquo;</li></ul><p><strong>&lsquo;China is either bluffing</strong> or has not fully factored in the downsides it faces, were it to impose such an embargo.&rsquo;</p><ul><li><strong>&lsquo;China&rsquo;s REE weapon</strong> is a crude weapon to detonate at best, with theself-inflicted fallout&nbsp;likely prohibitively harmful to the country&rsquo;s economic well-being.&rsquo;</li></ul></td></tr></tbody></table>

II. POTENTIAL BACKLASH FROM THE U.S.
4. Trade war: How lawyers vs economists as negotiators lead to the breakdown in talks

<table class="nl_card"><tbody><tr><td><table class="multi-block"><tbody><tr><td class="bg-holder"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11acc189e27161c7072f70_Zhiwu%20Chen.png"></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption">Zhiwu Chen | Director of the Asia Global InstituteTim Stratford | AmCham China chairman</p><p class="excerpt">‘The rise in trade tensions between the US and China may be due to the American side’s failure to appreciate the implications of China’s not being a rule-of-law country – that administrative action, not laws on the books, get things done in China.’</p><p><strong>Much is written</strong> about why the U.S. China trade talks broke down.</p><ul><li><strong>One of the best explanations</strong> is in&nbsp;&lsquo;Why the US and China See Negotiations Differently,&rsquo; by <strong>Shang-Jin Wei</strong>, former Chief Economist of the Asian Development Bank, now Professor of Finance and Economics at Columbia University, which was highlighted here a few ago in <a href="https://www.chinadebate.com/newsletter/the-30-year-detour-the-path-from-tiananmen-to-xi-jinping#article2">the 3<sup>rd</sup> item of May 18 newsletter</a>.</li><li><strong>Now, Zhiwu Chen</strong>, Director of the Asia Global Institute (AGI) and former professor of economics at Yale, comes at the question from a different and equally useful angle in <a href="https://www.asiaglobalonline.hku.hk/could-the-us-and-china-have-avoided-escalating-their-trade-war/" target="_blank">&lsquo;Could the US and China Have Avoided Escalating Their Trade War?&rsquo;</a></li></ul><p><strong>&lsquo;As widely reported,</strong> a key trigger for the falling out was the US side&rsquo;s insistence that some agreed terms be cemented in Chinese law, whereas the China side was only willing to abide by the terms through regulatory and administrative action,&rsquo;</p><p>writes <strong>Zhiwu Chen</strong>.</p><ul><li><strong>&lsquo;Was that difference</strong> in position worth the resulting dramatic reversal, with both countries pulling back from making a deal?&rsquo;</li><li><strong>&lsquo;Not from</strong> the Chinese perspective.&rsquo;</li></ul><p><strong>&lsquo;The core American team</strong> consists mostly of experienced lawyers.&rsquo;</p><ul><li><strong>&lsquo;Well trained and highly experienced practitioners,</strong> these lawyers are particularly skilled at imagining all possible scenarios and specifying corresponding remedies and actions as a complex agreement is worked out.&rsquo;</li></ul><p><strong>&lsquo;By contrast</strong>, all known members of the Chinese team majored in economics and related fields when in college or graduate school and none of them has formal legal training or practiced law.&rsquo;</p><ul><li><strong>&lsquo;It is thus not surprising</strong> that they are professionally more comfortable speaking in general terms than about detailed and nuanced scenarios and contingencies.&rsquo;</li><li><strong>&lsquo;Lawyerly talk</strong> is like a foreign language to them.&rsquo;</li></ul><p><strong>&lsquo;This difference in professional background</strong> between the two teams led to a large gap in understanding of the importance of legislative action to enforce terms.&rsquo;</p><ul><li><strong>&lsquo;To American lawyers, </strong>regulatory and administrative action does not mean as much as laws that are a result of a long legislative process and that are enforced by the judiciary.&rsquo;</li><li><strong>&lsquo;The US team probably did not</strong> fully appreciate the implications of China&rsquo;s not being a rule-of-law country &ndash; that administrative action, not laws on the books, get things done in China.&rsquo;</li><li><strong>&lsquo;Ask any Chinese</strong> on the street whether laws or administrative action is more effective in enforcing trade agreements, and without doubt most if not all would say the latter.&rsquo;</li></ul><p><strong>&lsquo;Failure to understand</strong> the asymmetry in governance structure and political culture between the US and China has to some extent fueled the distrust between the two sides&rsquo;:</p><ul><li><strong>&lsquo;The US side interpreted </strong>China&rsquo;s refusal to change relevant laws as evidence of a lack of sincerity and commitment.&rsquo;</li><li><strong>&lsquo;The China side viewed</strong> the American insistence on legislative action as putting emphasis on something that would be less useful for enforcement but more publicly humiliating.&rsquo;</li><li><strong>&lsquo;Hence,</strong> the breakdown.&rsquo;</li></ul><p><strong>&lsquo;Over the past four decades,</strong> China&rsquo;s legislature, the National People&rsquo;s Congress, has passed hundreds of statutory laws, many of which contradict each other.&rsquo;</p><ul><li><strong>&lsquo;It is impractical</strong> to take all these laws on the books at face value.&rsquo;</li><li><strong>&lsquo;As the&nbsp;Constitution of the People&rsquo;s Republic of China</strong>states, the nation is based on the rule of the Communist Party, not the rule of law.&rsquo;</li></ul><p><strong>&lsquo;Against this institutional background and governance culture,</strong> the Chinese trade negotiators understandably put more faith in enforcement via administrative and regulatory action than on laws passed by the legislature.&rsquo;</p><ul><li><strong>&lsquo;The American negotiators can,</strong> of course, push China to implement market reforms faster.&rsquo;</li><li><strong>&lsquo;As for the legislation</strong> they have been demanding China pass, even if such laws were agreed and made it on to the statute books, they would deliver less compliance than administrative and regulatory measures, which are still the mainstay of Chinese governance.&rsquo;</li></ul></td></tr></tbody></table>

5. A primer on how Chinese law might enforce a US-China trade deal

<table class="nl_card"><tbody><tr><td><table class="multi-block"><tbody><tr><td class="bg-holder"><a href="https://www.brookings.edu/blog/order-from-chaos/2019/05/15/a-primer-on-how-chinese-law-might-enforce-a-us-china-trade-deal/" target="_blank"><img src="https://assets.website-files.com/5c864c33af62620dca1373ac/5d11acfc5a662a4d7584f737_Jamie%20P.%20Horsley.png" alt="CHINADebate"></a></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption">Brookings</p><p class="excerpt">‘If the other substantive issues can be resolved, would an agreement be enforceable even if it falls short of being codified in national laws?’</p><p><strong>&lsquo;A key point of contention</strong> is U.S. insistence that Chinese commitments be &ldquo;codified by law in China, not just a State Council announcement,&rdquo; writes Jamie Horsley of Yale Law School and Brookings in <a href="https://www.brookings.edu/blog/order-from-chaos/2019/05/15/a-primer-on-how-chinese-law-might-enforce-a-us-china-trade-deal/">&lsquo;A primer on how Chinese law might enforce a US-China trade deal.&rsquo;</a></p><ul><li><strong>&lsquo;The</strong><strong>S. seeks</strong>&ldquo;very strong enforcement provisions&rdquo; to correct past Chinese behavior on trade, which he characterized as unfair, nonreciprocal, and sometimes unlawful.&rsquo;</li><li><strong>&lsquo;The</strong><strong>Chinese side </strong>was averse to the idea of a foreign country dictating Chinese law.&rsquo;</li><li><strong>&lsquo;Instead, negotiators from Beijing</strong> reportedly offered to codify the agreement through&nbsp;regulatory and administrative actions.&rsquo;</li><li><strong>&lsquo;The standoff raises an important question:</strong> If the other substantive issues can be resolved, would an agreement be enforceable even if it falls short of being codified in national laws?&rsquo;</li></ul><p><strong>&lsquo;The difference between</strong><strong>&ldquo;laws,&rdquo; &ldquo;regulations,&rdquo; and &ldquo;rules.</strong>&rdquo; National laws, local regulations, State Council regulations, and rules are all part of what is collectively called &ldquo;legislation&rdquo; (lifa).&rsquo;&nbsp;</p><ul><li><strong>&lsquo;National laws&nbsp;(fal&uuml;)</strong> are adopted by China&rsquo;s National People&rsquo;s Congress (NPC) and the NPC Standing Committee pursuant to formal procedures&mdash;including public notice and comment&mdash;set forth in the&nbsp;Legislation Law.&rsquo;</li><li><strong>&lsquo;Similarly,&nbsp;local regulations&nbsp;</strong>(difangxing fagui) are adopted by the people&rsquo;s congress operating in a particular province or autonomous region.&rsquo;&nbsp;</li><li><strong>&lsquo;State Council regulations&nbsp;</strong>(xingzheng fagui), which are legally binding and enforceable, are also governed by the Legislation Law and subject to public comment and other procedures stipulated in&nbsp;State Council implementing regulations(colloquially, the &ldquo;Rulemaking Regulations&rdquo;).&rsquo;</li><li><strong>&lsquo;The same applies to&nbsp;rules&nbsp;</strong>(guizhang), which are promulgated by central departments and local governments.&rsquo;</li></ul><p><strong>&lsquo;Although less authoritative than laws,</strong> State Council regulations are still national in scope, extending from the central government down to township-level governments.&rsquo;</p><ul><li><strong>&lsquo;State Council regulations</strong> are superior to local regulations and rules. They are used both to implement and fill gaps in national law.&rsquo;</li><li><strong>&lsquo;But they must not conflict</strong> with superior law or make provisions for criminal matters, deprivation of citizens&rsquo; political rights, compulsory measures or penalties restricting a citizen&rsquo;s personal freedom, or the judicial system.&rsquo;</li></ul><p><strong>&lsquo;As it relates to U.S.-China trade talks,</strong> Chinese commitments that are codified in NPC laws would clearly be the most authoritative and meaningful.&rsquo;</p><ul><li><strong>&lsquo;But if other issues</strong> are satisfactorily resolved, well-drafted State Council regulations might be an acceptable alternative for some issues.&rsquo;</li><li><strong>&lsquo;They apply nationwide</strong> (not only at the center but also at local levels of government), they are generally more detailed than laws, they are subject to notice and comment procedures, and they are enforceable in Chinese courts.&rsquo;</li><li><strong>&lsquo;Moreover,</strong> regulations can always be upgraded into NPC law later, which may make them at least a reasonable stepping-stone to a final agreement in the trade dispute.&rsquo;</li></ul></td></tr></tbody></table>

III. CONGRESS & THE PRESIDENT REACT
6. Impact of tariffs on U.S. businesses in China: AmCham survey

<table class="nl_card"><tbody><tr><td><table class="multi-block"><tbody><tr><td class="pdf-container"><iframe src="https://docs.google.com/viewer?url=https://www.amchamchina.org/uploads/media/default/0001/11/8ff21b4b6efac1163c9072c6569fe96250f3a8dd.pdf&amp;embedded=true" style="width:100%; height:500px;border:none;"></iframe></td></tr></tbody></table></td></tr><tr><td class="nl-post"><p class="caption"></p><p class="excerpt">Approximately 40.7% of respondents are considering or have relocated manufacturing facilities outside China.’</p><p><strong>Read </strong>the 9-page survey results <a href="https://www.amchamchina.org/uploads/media/default/0001/11/8ff21b4b6efac1163c9072c6569fe96250f3a8dd.pdf" target="_blank">here</a></p><p><strong>&lsquo;From May 16-20, 2019,</strong> AmCham China and AmCham Shanghai conducted a joint survey of our member companies to assess the impact of the increase in U.S. and Chinese tariffs on companies operating in China.</p><ul><li><strong>&lsquo;The survey</strong> received nearly 250 responses, with companies represented as follows&rsquo;:<ul><li><strong>&lsquo;manufacturing-related</strong>6%,&rsquo;</li><li><strong>&lsquo;services</strong>5%,&rsquo;</li><li><strong>&lsquo;retail and distribution</strong>8%, and&rsquo;</li><li><strong>&lsquo;other industries</strong>6%.&rsquo;</li></ul></li></ul><p><strong>&lsquo;The key findings</strong> from the survey are&rsquo;:</p><ol><hr/><li><strong>IMPACT OF TARIFFS.</strong>&lsquo;The negative impact of tariffs is clear and hurting the competitiveness of American companies in China.&rsquo;</li></ol><ul><li><strong>&lsquo;The vast majority</strong> (74.9%) of respondents said the increases in U.S. and Chinese tariffs are having a negative impact on their businesses.&rsquo;</li><li><strong>&lsquo;The impact</strong> was higher for manufacturers at 81.5% for U.S. tariffs and 85.2% for Chinese tariffs. The impact of the tariffs is felt through lower demand for products (52.1%), higher manufacturing costs (42.4%), and higher sales prices for products (38.2%).&rsquo;</li></ul><hr/><ol start="2"><li><strong>&ldquo;IN CHINA FOR CHINA.&rdquo;</strong>&lsquo;To cope with the impact of the tariffs, companies are increasingly adopting an &ldquo;In China, for China&rdquo; strategy (35.3%), or delaying and canceling investment decisions (33.2%).&rsquo;</li></ol><ul><li><strong>&lsquo;In China for China</strong> is a strategy to localize manufacturing and sourcing within China to mainly serve the China market.&rsquo;</li><li><strong>&lsquo;Such strategy constitutes</strong> a rational choice for many companies to insulate themselves from the effects of tariffs while maintaining their ability to pursue domestic market opportunities.&rsquo;</li></ul><hr/><ol start="3"><li><strong>CHINA RETALIATION. &lsquo;</strong>Over half of respondents (53.1%) have not seen any increase in non-tariff retaliatory measures by the Chinese government.&rsquo;</li></ol><ul><li><strong>&lsquo;Roughly one in five</strong> have experienced increased inspections (20.1%) and slower customs clearance (19.7%).&rsquo;</li><li><strong>&lsquo;Members also experienced</strong> slower approval for licenses or other applications (14.2%) and other complications from increased bureaucratic oversight or regulatory scrutiny (14.2%).&rsquo;</li></ul><hr/><ol start="4"><li><strong>RELOCATION PLANS.</strong>&lsquo;Approximately 40.7% of respondents are considering or have relocated manufacturing facilities outside China.&rsquo;</li></ol><ul><li><strong>For those</strong> that are moving manufacturing out of China,&rsquo;<ul><li><strong>&lsquo;Southeast Asia (24.7%) and Mexico (10.5%)</strong> are the top destinations.&rsquo;</li><li><strong>&lsquo;Fewer than 6%</strong> of members said they have or are considering relocation of manufacturing to the U.S.&rsquo;</li></ul></li></ul><p><strong>Based on the survey,</strong> the <a href="https://www.scmp.com/business/companies/article/3011259/us-china-trade-war-hurting-american-companies-china-tariffs-cut" target="_blank">South China Morning Post</a> created a chart of where U.S. companies are thinking of relocating outside China:</p><img style="width:100%" src="https://listly-temp.s3.amazonaws.com/871952_US-China%20trade%20war%20'hurting%20American%20_business.png" alt="CHINADebate"><hr/><ol start="5"><li><strong>BILATERAL RELATIONS CONCERNS.</strong>&lsquo;If no agreement to resolve the trade frictions is reached within the next two months, members are most concerned about a deterioration of the bilateral relationship (52.7%).&rsquo;</li></ol><ul><li><strong>&lsquo;As a reflection of this sentiment,</strong>7% of members supported a return to the status quo, showing that members want a deal and a return to the pre-tariff predictability and stability of the U.S.-China trade relationship.&rsquo;</li><li><strong>&lsquo;At the same time,</strong> this would suggest that 53.3% of members favor negotiations continuing towards a deal that addresses structural issues allowing them to operate on a more level playing field.&rsquo;</li><li><strong>&lsquo;Additionally,</strong> members are also concerned about an increase in operating costs (45.6%) and being forced to find alternative sources for items currently produced in either the U.S. (22.2%) or China (22.2%).&rsquo;</li></ul></td></tr></tbody></table>

IV. EXTRADITION LAW:PRO & CON