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Foreign Boycotts

Foreign Boycotts. ITRN 603-002 International Trade Relations Spring 2011 Amy V. Gaskins Amanda K. Hubert Erica C. Johnston. Outline of Presentation. Overview of Foreign Boycotts Key Legislation and Laws Prohibited actions Who is affected? Major problems Arab League Boycott of Israel

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Foreign Boycotts

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  1. Foreign Boycotts ITRN 603-002 International Trade Relations Spring 2011 Amy V. Gaskins Amanda K. Hubert Erica C. Johnston

  2. Outline of Presentation • Overview of Foreign Boycotts • Key Legislation and Laws • Prohibited actions • Who is affected? • Major problems • Arab League Boycott of Israel • Background • Impact of Boycott • US Involvement • Recent News • Our Policy Proposal • What is it? • What impact will it have?

  3. Overview of Foreign Boycotts • Anti – boycott definition: • The laws are meant to encourage, and in some cases, require U.S. firms to avoid and refuse participation in a boycott not sanctioned by the U.S. government • The purpose is to prevent U.S. firms from being used to implement foreign policies in other countries that run counter to U.S. policy

  4. Title 15 of the Code of Federal Regulations • Regulations include: • Part 760Restrictive Trade Practices and Boycotts • Part 762Record keeping • Part 764Enforcement and Protective Measures • Part 766Administrative Enforcement Proceedings

  5. Key Legislation and Laws • Export Administration Act (1977) • In lapse since August 21, 2001. • Administered by the Department of Commerce, Bureau of Industry and Security, Office of Anti-Boycott Compliance • In the absence of an Export Administration Act, the U.S. dual-use export control system can be invoked by the President's emergency powers under the International Emergency Economic Powers Act. • Goal is to have an effective system of dual-use export controls -- to prevent U.S.-origin goods and technology from getting into the wrong hands, and to promote both U.S. national security and economic interests.

  6. Reporting Requirements (EAR) • U.S. persons must report receiving a request for the furnishing of information prohibited under the regulations. • Must report whether the U.S. person complied or plans to comply with the request

  7. Key Legislation and Laws (cont’d) • Ribicoff Amendment to the 1976 Tax Reform Act • Administered by the IRS • Denies tax benefits to exporters if they participate in the boycott. • Requires U.S. taxpayers to report operations in, with, or related to countries that the Treasury Department includes on their annual list of countries that may require participation in an international boycott, and with any other country from which they receive a request to participate in a boycott

  8. Key Prohibited Actions • Agreements to refuse or actual refusal to do business with or in Israel or with blacklisted companies. • Agreements to discriminate or actual discrimination against other persons based on race, religion, sex, national origin or nationality. • Agreements to furnish or actual furnishing of information about business relationships with or in Israel or with blacklisted companies. • Agreements to furnish or actual furnishing of information about the race, religion, sex, or national origin of another person.

  9. Who Does the Legislation Affect? • The EAR applies to activities of “U.S. persons: in the interstate or foreign commerce of the U.S. • Individuals, corporations and unincorporated associations resident in the United States, including the permanent domestic affiliates of foreign concerns. • U.S. persons also include U.S. citizens abroad (except when they reside abroad and are employed by non-U.S. persons) and the affiliates of domestic concerns,. • The Ribicoff Amendment applies to “U.S. taxpayers” and their related companies • Taxpayers' "operations" in, with, or related to boycotting countries or their nationals.

  10. Major Problems • Relies on companies to report anti-boycott violations • Loss of contracts from importing countries requiring information of origin of goods • Penalties are imposed on U.S. companies instead of boycotting countries

  11. Arab League Boycott of Israel

  12. Arab League Boycott of Israel-- Background • Arab boycott of Jewish interests started as early as 1922. • Palestinian Arabs who broke boycott were attacked in Jerusalem in 1929. • Arab League Council established in 1945. • “Jewish products and manufactured goods shall be considered undesirable to the Arab countries.“ • Boycott against Israel established in 1948.

  13. Arab League Boycott of Israel– Three Tiers • Primary Boycott • Prohibits the importation of products and services that originate in Israel into boycotting countries. • Secondary Boycott • Prohibits individuals, as well as businesses in non-Arab countries, from doing business with or in Israel. • Tertiary Boycott • Prohibits any entity in a member country from doing business with company or individual on the Arab League’s “Black List”.

  14. Arab League Boycott of Israel-- Impact • Impact of the Primary Boycott: • Minor because of limited trade. • Transshipment Points • However, Israeli Chamber of Commerce estimates exports are 10% less, and investment is 10% lower. • Impact of Secondary and Tertiary Boycott: • Also limited as “strictness” of such boycotts have decreased over time and remains small. • Overall Impact: • Little Economically • Symbolic

  15. Arab League Boycott of Israel– US Involvement • “Growing U.S. pressures in the direction of normalization with the Jewish state” is reason for many member countries bypassing the boycott. • U.S. opposes boycott. • Impediment to peace • Impacts US investment and trade negatively • U.S. Free Trade Agreements

  16. Arab League Boycott of Israel– Hot Off the Press! • Arab League Boycott of Israel is on Facebook! • Steven Spielberg added to Arab League “Blacklist.” • Changes to Israeli law to "protect the State of Israel in general and its citizens from particular academic, economic, and other boycotts targeting the state, its citizens and its corporations because of their connections to the State.”

  17. Policy Proposal • Continue to use Free Trade Agreements & WTO accession as policy instruments • “Carrot and stick” methodology • Enforce compliance through DSU for WTO member countries • Continue denying tax benefits to companies complying with unsanctioned boycotts • Simplify reporting process to a single form for both IRS and DoC

  18. Impact of Policy Proposal on US and Abroad • Dropping boycott as a WTO accession requirement is a unilateral action • DSU system promotes public accountability for non-compliant countries • Denying tax benefits reduces U.S. company boycott compliance by 15-30% • Simplified forms should encourage accurate reporting from companies

  19. Questions?

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