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US China hawks wage battle over commerce department post

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A once low-profile post in the commerce department has emerged as a key battleground for China hawks in Washington who want to push Joe Biden to take a hard line on technology exports to Beijing.

Biden has yet to name his choice to head the department’s Bureau of Industry and Security but some critics are already targeting Kevin Wolf, an Obama administration export control lawyer now at Akin Gump, a law firm, who is seen as the frontrunner.

“Commerce matters a lot, especially because Treasury is unlikely to take serious anti-China action. That’s why so many China hawks are focused on this,” said Derek Scissors, a China expert at the American Enterprise Institute. “If we want to take serious action against China, BIS is arguably the single most important bureau in government.”

BIS controls the export of dual-use technologies that can be employed for commercial and military purposes. Since the end of the cold war, and as China has emerged as a huge commercial market, companies have increasingly lobbied for the ability to export technology to China.

Hawks, however, worry about China’s “military-civil fusion” programme, which forces Chinese companies to share technology with the People’s Liberation Army. They say the US must be more vigilant about exports because of Chinese threats, and also because of how some technology enables human rights abuses, including the persecution of Muslim Uighurs in the north-west region of Xinjiang and the repression of pro-democracy activists in Hong Kong.

During the Trump administration BIS put dozens of Chinese companies, including Huawei, on the “entity list”, which bars US businesses from exporting to them without a licence. It also placed Semiconductor Manufacturing International Corporation and DJI, the drone maker, on the list.

In a sign of the concerns about the Biden’s administration approach to such issues, Republican senator Ted Cruz this week put a hold on the confirmation of Gina Raimondo for commerce secretary after she initially refused to commit to keeping Huawei on an export blacklist during her confirmation hearing.

Leslie Shedd, spokesperson for the House of Representatives foreign affairs committee Republicans, led by the Texas congressman Michael McCaul, said BIS should be run by someone with national security credentials and a “clear-eyed view” of the China threat. “If a nominee does not possess those . . . the congressman would have serious concerns,” she said.

Some critics also argue the bureau should no longer be run by lawyers who have worked with industry, which can be more focused on capturing market share in China than on US national security.

“The revolving door between BIS and industry must close,” said a former official. “The Biden team must act in the best interests of security, not corporate profits.”

Critics have compiled a dossier on Wolf, part of which was seen by the Financial Times, that raises questions about his work advising companies that are seeking licences to sell to Huawei, as well as his firm’s representation of some Chinese companies, including SMIC, on the entity list.

Wolf told the FT he had simply explained to clients what was permitted under law. He said he had not worked for any Chinese companies and was not responsible for work done by other lawyers at his firm.

Wolf said the China security threat was “significant and had evolved considerably” but that the existing multilateral export control system had not been built to address the current challenge.

“This is why someone who understands the threats, the technologies, the supply chains, the rules and how to create a new approach with a smaller group of close allies is needed,” said Wolf, who added that he did not know who would be nominated for the job.

One former Trump official, who believes Wolf would be a smart choice for the job, said that while the Trump administration had been good at identifying the China threat, it had been bad at addressing the challenge partly because of the chaotic application of export controls.

“We didn’t do a good enough job with the tools in our toolbox,” the former official said. “You need someone at BIS who really understands how the tools work to more effectively tackle Huawei and other Chinese companies.”

Wolf’s supporters contend that the lobbying campaign is a Republican effort to paint Biden as weak on China. Some say Wolf is a technocrat who would not make China policy, but would implement decisions taken by the National Security Council, which lacks his expertise.

But China hawks respond that while top-level decisions on things such as the “entity list” are not driven by BIS, the bureau has leeway in terms of how export control rules are crafted and implemented.

Scissors said BIS had been plagued historically by “industry capture”. Yet he said he would rather see an export-control expert run BIS than a China hawk without that background. He stressed that the Senate should grill any BIS nominee about how they view the threat from Beijing.

Robert Blair, head of policy planning at the commerce department until January, said it was crucial to have the right person in the job to “ensure US policy tools are working to protect our economic and national security, while ensuring our economic prosperity at home remains a priority”.

One executive said BIS had been a “regulatory backwater” that tended to view the balance between promoting US business and protecting American security in a way that accommodated industry, but had to change.

“BIS now finds itself on the front lines of the US-China technology conflict, an arguably even more important role than USTR (US trade representative) or the Treasury,” he said. “The question is, can BIS and its future leadership adapt to this new world?”

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Brazil virus variant found to evade natural immunity

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The P.1 Covid-19 variant that originated in Brazil and has spread to more than 25 countries is around twice as transmissible as some other strains and is more likely to evade the natural immunity people usually develop from prior infection, according to a new international study.

The research, conducted by a UK-Brazilian team of researchers from institutions including Oxford university, Imperial College London, the University of São Paulo, found that the P.1 variant was between 1.4 and 2.2 times more transmissible than other variants circulating in Brazil. 

It was also “able to evade 25-61 per cent of protective immunity elicited by previous infection” with any earlier variant, the researchers found, in a sign that current vaccines could also be less effective against it.

International concern about the P.1 variant has escalated recently, with more than 25 countries detecting the variant, including Belgium, Sweden and the UK, which has identified six cases.

The scientists are expected to release a paper describing the research on Tuesday. Dr Nuno Faria, the lead author, did not immediately respond to a request for comment. The study has not yet been peer reviewed.

The researchers have dated the emergence of the P.1 variant to November 6, 2020, around one month before cases began to surge for a second time in the Brazilian city of Manaus. They found that the proportion of cases classified as P.1 in Manaus increased from zero to 87 per cent in the space of 7 weeks. 

The paper concluded: “Our results further show that natural immunity waning alone is unlikely to explain the observed dynamics in Manaus, with support for P.1 possessing altered epidemiological characteristics.”

“Studies to evaluate real-world vaccine efficacy in response to P.1 are urgently needed,” it added.

The researchers also found that infections were 10 to 80 per cent more likely to result in death in Manaus after the emergence of P.1. However, the authors cautioned that it was not possible to determine whether this meant the variant was more lethal or whether it was a result of increased strain on the city’s healthcare system, or a combination of both. 

The P.1 variant has over 17 mutations, which alter its genetic sequence from the virus originally identified in Wuhan, including 3 key changes to the spike protein that it uses to enter human cells.

Researchers in Brazil have been using genetic sequencing technology developed by Oxford Nanopore in the UK to identify and track the variant. The technology was first used in Brazil during the Zika outbreak in 2015.

Dr Leila Luheshi, director of applied and clinical markets at Oxford Nanopore, told the Financial Times that while the B.1.1.7 variant in the UK has similar properties of high transmissibility to P.1 — it is thought to be around 1.5 times as transmissible as variants that preceded it — there was no evidence to date that it evaded past natural immunity in the same way. Studies so far have also shown that current vaccines retain their efficacy against B.1.1.7.

Luheshi said that the concern with P.1 is that “because it has these mutations around the spike . . . the hypothesis is that the vaccine will be less effective.” But she added that there is not yet definitive evidence to support this theory. 



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Coronavirus latest: Production glitches to delay Johnson & Johnson vaccine distribution

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Coronavirus latest: Production glitches to delay Johnson & Johnson vaccine distribution



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Norsk Hydro blamed for birth defects in Amazon forest pollution case

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Maria do Socorro explains in graphic detail the spate of ailments affecting newborns in her remote community in the Amazon: her grandson died after being born with his intestines outside his body, while others were missing organs or had undeveloped bones.

For the 56-year-old community leader, there is little doubt about the cause of these illnesses. She said the rainforest town had for years suffered from toxic waste pollution from the local operations of Norwegian aluminium producer Norsk Hydro.

Long a simmering environmental scandal in Brazil, the allegations were brought on to the international stage this month when Socorro’s community sued the Norwegian giant in a Dutch court, seeking damages for claims that “the incorrect disposal of toxic waste” from operations in the area had caused a variety of health ailments, polluted the rainforest and destroyed economic opportunities.

“We cannot have future generations because the children are born and then die. Whole families are contaminated,” said Socorro from the Barcarena township in the northern state of Pará.

The case — filed just days before the UK’s top court ruled that Royal Dutch Shell could face legal action in London brought by thousands of Nigerian villagers over alleged pollution — is the latest international trial pitting large, resource-hungry companies against impoverished rural communities.

It also comes amid mounting pressure on companies to abide by strict environmental standards, a push being spearheaded visibly by Scandinavian investors.

One of the allegations in the lawsuit is that the pollution has caused birth defects © Alessandro Falco/Bloomberg

“If business can be global, why can’t justice? These companies have businesses everywhere, but then when they do something wrong they want to smother the possibility of people getting compensation,” said Pedro Martins, partner at law firm PGMBM, which is representing 40,000 alleged victims bringing the suit against Norsk Hydro.

“International corporations have different standards for how they do business in the northern and southern hemispheres as if life in the southern hemisphere does not have the same value.”

Through local entities, Norsk Hydro runs three facilities — a bauxite mine, a refinery and a smelter — in Pará, a vast Amazonian state that is a flashpoint for illegal deforestation, gold mining and land-grabbing.

The company said it would respond to the request before the court in the Netherlands, where its subsidiaries controlling the local entities at issue are headquartered. It denied that in 2018 pollutants from its facilities spilled over during heavy rains and polluted nearby rivers and earth. The company declined to comment further.

A source close to the company said, however, that it did “not see the [health] effects that have been claimed. The actual impact is hard to see and there aren’t any studies showing that.”

Map of Brazil

A combination of poor sanitary conditions and the tropical climate could be behind many of the health issues, he added: “There are a lot of feelings and not so many things relating to actual facts.”

Locals say bauxite, lead and aluminium pollution have turned the region’s rivers red. A study from the Evandro Chagas Institute, a Brazilian public health body, found in 2018 that the region’s waters were so polluted with industrial waste from the Norsk Hydro facilities that they “cannot be used for recreation, fishing, or human consumption”.

Like many Amazonian communities, much of the Barcarena township depends heavily on fishing and farming for survival, work that they now say is impossible.

“I invite these Norwegians to come and bathe in our waters. I challenge them. They have good water there in Norway. Our wealth just goes there,” said Socorro, who heads Cainquiama, a group representing mainly indigenous people and quilombolas — the descendants of runaway slaves.

Nearly all of the claimants in the suit have complained about chronic pain, hair loss and skin conditions. The suit also contains claims in relation to birth defects, such as those that have affected Socorro’s grandson, who was born with gastroschisis — a hole in the abdominal wall.

A pipe belonging to alumina refinery Alnorte, which is owned by Norsk Hydro, in Barcarena © Ricardo Moraes/Reuters

“Studies around the world have shown the effects [of toxic metals] on pregnant women, foetuses and children at birth,” said Marcelo de Oliveira Lima, a public health researcher at the Chagas institute. “But our studies so far did not go deep enough to show the [connection]. Other studies are still being done.”

The case is a sensitive one for Norwegian investors and the government, which owns a 34 per cent stake in Norsk Hydro. Oslo has long attempted to hold Brasília to account for the environmental destruction of the Amazon, even publishing its own data on deforestation in the world’s largest rainforest.

“There seem to be quite some dispute about the facts in this case and in particular about the actual harm of the spill to local environment and whether the company is somehow to blame by neglecting important safety measures,” said Jeanett Bergan, head of responsible investments at the KLP pension fund, Norway’s largest pension provider.

“We know Norsk Hydro as a responsible corporate actor when doing businesses abroad. I do not think [this case] will damage the credibility of Norwegian actors.”

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here 

Martins, the lawyer leading the group action, said they brought the case in the Netherlands because of the inertia of the Brazilian court system. He believes the case can reach a verdict in 18 or 24 months.

Brazil is no stranger to environmental disasters. This month, miner Vale agreed to a $7bn settlement with authorities over a dam breach in 2019 in the Brumadinho township that killed hundreds of people and polluted vast tracts of lands with industrial sludge.

BHP was sued in a British court over a dam failure in Brazil’s Mariana township in 2015 that left 19 dead. The case was thrown out because parallel proceedings were taking place in Brazil.

“The Hydro case draws attention for having caused significant environmental damage,” said Luiz Eduardo Rielli, director of sustainability consultancy Novi. “After three years, what I care most about is: What lessons have been learned? How can we ensure that new damages do not occur?”

Additional reporting by Richard Milne in Oslo and Carolina Pulice in São Paulo



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