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What 2021 means for global sanctions and trade

Kimberly Zelnick


Partner, New York

Nabeel Yousef


Partner, Washington, DC

Stephanie Brown Cripps

Brown Cripps

Counsel, New York

Mark Goldberg


Associate, Washington, DC

In 2020 the long-simmering US-China trade war accelerated, with each side creating or implementing new regulatory enforcement mechanisms that leverage economic pressures to achieve geopolitical outcomes. This has left many companies caught between the world’s two biggest economies, struggling to avoid significant regulatory risk in a rapidly escalating conflict that has seen (among other things) the US government intervene in high-profile corporate transactions and the Chinese government institute its first-ever unified export controls regime. The new administration coming to Washington seems unlikely to relieve the pressure in the short term: although many of the US’s trade war measures were signature policies of the Trump White House, President-elect Biden has already stated that he does not intend immediately to roll back Trump-era tariffs. Indeed, his foreign policy is broadly expected to recreate many elements of President Obama’s (which included, for example, opposition to Chinese naval operations in the South China Sea and support for the Trans-Pacific Partnership as a free-trade alternative to Chinese influence). Furthermore, many anti-China measures (especially those focused on US caution regarding Chinese telecommunications firms and China’s purported human rights violations in Hong Kong and Xinjiang) have enjoyed broad bipartisan support in Congress, indicating that the tensions run deeper than US political fault lines.

Away from the US, in 2020 the EU imposed sanctions on China relating to its actions in Hong Kong; India banned dozens of apps operated by Chinese companies following military confrontations between the two countries high in the Himalayas; and the UK, the Netherlands, and others have proposed new or expanded official processes to review foreign direct investments for potential national security concerns. Trade controls like these will likely continue to proliferate on a global scale, requiring well-informed and globally coordinated strategies to mitigate the risks they present.

The dynamism of the US-China dispute has spread to other US sanctions and trade agendas as well, with 2020 witnessing new forms of sectoral sanctions targeting Venezuela, heightened tensions with Russia (especially regarding cyber, military, intelligence, and energy export issues), and the Trump White House’s “maximum pressure” campaign against Iran. A Biden White House seems primed to change course on some – but not all – of these priorities - for example, President-elect Biden has publicly repudiated President Trump’s rejection of the Iran nuclear deal and has committed to lift some Iran-related sanctions in exchange for Iran’s return to compliance with the deal. He has also indicated a willingness to revisit Obama-era rapprochement with Cuba. On the other hand, President-elect Biden has taken strong anti-Russia positions in the past. He and his key advisers, including Secretary of State nominee Tony Blinken, played a central role in the US response to Russia’s 2014 annexation of Crimea, while during his time out of office Biden also served on an international commission dedicated to fighting Russian influence in Western elections. He has supported the recognition of Juan Guaidó as Venezuela’s legitimate leader and has criticized what he characterizes as President Trump’s misdirected focus on opposing the Maduro regime (rather than resolving the humanitarian crisis on the ground). However, President-elect Biden still espouses the use of “intelligent” and multilateral sanctions to lead to new elections and the release of political prisoners.

2021 may also feature continuing intersections between sanctions and trade issues, international investigations, and corporate compliance risks. This trend enjoyed a significant profile in 2020, with the US Department of Justice using its criminal prosecution authority to pursue a “China Initiative” targeting Chinese corporate misconduct in the United States, while the US Securities and Exchange Commission fielded proposals to increase its oversight of US-listed, China-based companies. Away from China, US criminal authorities resolved an expansive foreign corruption and military export controls case alongside their counterparts in Europe. From a sanctions policy perspective, the crossover and globalization of issues in 2020 saw the EU and the UK join the US, Canada and the Baltics in adopting a global Magnitsky-style sanctions program, making bribery, corruption, or human rights violations anywhere in the world a basis for imposing sanctions.

Overall, the sanctions and trade arena promises to remain a highly fraught, quickly changing battleground in 2021 – one in which it may prove increasingly difficult for international businesses to sell, move money, and make new deals across borders.