US Sanctions, Export Controls on Hong Kong May Only Hurt US Companies, Trade Expert Says

Imposing sanctions and export controls on certain people and entities in Hong Kong for human rights violations may not achieve the U.S.’s goal and may only hurt U.S. companies, said William Reinsch, an international business chair at the Center for Strategic and International Studies.

Reinsch, speaking alongside other panelists during a Sept. 26 CSIS event in Washington, said sanctions on Hong Kong’s economy won’t necessarily change the region’s policies. “There are a lot of things you can do ... that'll make you feel better,” Reinsch said. “The question is, will it make the situation on the ground in Hong Kong any better?”

Reinsch’s comments came as a House committee passed two Hong Kong bills that could increase export controls on the region, change Hong Kong's special status in customs and require the Trump administration to assess whether Hong Kong is abiding by U.S. export controls and sanctions.

Although Reinsch did not specifically endorse or criticize the bills, he said unilateral U.S. sanctions won’t lead to change in Hong Kong, which has been mired in protests and accusations of human rights violations. “In the process of separating yourself from the economy or sanctioning the economy, if you do it alone, if you do it unilaterally, you don't achieve your objective,” Reinsch said. “Other people step in and fill the gap and do the things you have decided to prohibit yourself from doing.”

Reinsch, a former under secretary of export administration for Commerce, said restrictions on U.S. businesses' dealings would only hurt the U.S. “You won’t change other countries’ policy,” he said. “You deprive [U.S. companies] of the market and you deprive [U.S. companies] of the influence they have in the marketplace.”

Although trade tensions between the U.S. and the European Union have acted as a barrier to any collaboration between the two sides against China’s trade practices, the humanitarian situation in Hong Kong may be an area to find common ground, said Stephanie Segal, a senior fellow with CSIS. If the U.S. hopes to bring multilateral sanctions or pressure on China, national security issues -- rather than trade issues -- may be a good place to start, she said.

“I think if you elevate the discussion to something that is a bit more values-based ... I think that’s where you have the strongest ties,” Segal said during the panel. “I think ultimately that is the argument that’s going to have the most traction and is going to be the most durable.”

If the U.S. does not have multilateral support, it should strongly consider holding off on sanctions that may only hurt U.S. businesses, Reinsch said. But if the U.S. approves sanctions, it would “have to go through a fairly rigorous analytical process to get there,” he said.