Myanmar Sanctions to be Lifted and GSP Privileges Restored
Following meetings today with Myanmar State Counsellor Aung San Suu Kyi,President Barack Obama announced that the United States will lift all remaining financial and trade sanctions against Myanmar. This decision was made after ongoing consultations with the National League for Democracy (NLD) and at the request of Aung San Suu Kyi on behalf of the Government of Myanmar. Although the President made this intention clear, the decision will not be legally effective until he issues a new Executive Order terminating the “national emergency” and revoking the related Executive Orders. At that time, the sanctions imposed under the US Treasury Department’s “Burmese Sanctions Regulations” will no longer be in effect, and they will be formally removed in the course of necessary administrative actions. The announcement of this policy change is similar to that with the initial sanctions easings in 2012, which were first announced and later administratively implemented.
The termination of the “national emergency” with respect to the actions of the former junta government in Myanmar first declared in 1997 will eliminate all the restrictive measures imposed to date under the International Emergency Economic Powers Act (IEEPA). This means that the prohibitions that have been “kept on the books,” even though many had previously been licensed, will be removed altogether.
This includes the prohibitions involving new investment, financial services, and imports of jade and rubies, as well as those targeting Specially Designated Nationals (SDNs) listed under the Myanmar sanctions program. The requirements and limitations included in the previous licenses, including the US State Department’s “Reporting Requirements on Responsible Investment,” will also be eliminated along with the associated underlying prohibitions.
As a result, there will no longer be any US sanctions impediments to financial and trade transactions with Myanmar, and the previously sanctioned individuals and entities will be removed from the SDN list—dealings with them will not be prohibited once the program under IEEPA is officially terminated. It is important to remember, however, that there are individuals and entities within Myanmar sanctioned under other authorities, such as the North Korea and Counter Narcotics programs, that remain on the SDN list.
President Obama also announced the restoration of Myanmar’s Generalized System of Preferences (GSP) privileges, which had been revoked in 1989, effective November 13. The GSP program is intended to provide opportunities for developing countries to grow their economies through trade with the United States. GSP promotes economic growth by eliminating duties on nearly 5,000 types of products imported from over 120 designated beneficiary countries and territories. To qualify for GSP benefits, a country must meet statutory requirements, including taking steps to ensure internationally recognized worker rights and provide adequate and effective protection of intellectual property rights. Without GSP, products sourced in Myanmar are subject to duties of as much as 17% when imported into the United States.
Today’s announcements come on the heels of the introduction yesterday of legislation outlining Congressional concerns about Myanmar that also seeks to support and encourage further reform and economic development. The proposed “Burma Strategy Act of 2016,” put forth by Senators Cardin (D-MD) and McCain (R-AZ), calls for a development fund to provide incentives for US investment in Myanmar that upholds the highest business standards, including international labor standards and transparency as well as environmental, anti-corruption, human rights protections; a gemstone strategy to support NLD efforts to reform the country’s extractives sector; bilateral economic and humanitarian assistance to promote national reconciliation efforts and strengthen anti-corruption and transparency initiatives; and limited military-to-military engagement for language training and to encourage participation in the peace process, as well as reinforce respect for human rights and pursue civilian control of the military.
The draft bill also calls for benchmarks and guidelines for further sanctions relief, as well as efforts toward Myanmar’s eligibility for preferential treatment under the GSP program, both of which may have been rendered moot by today’s announcements. Senator Gardner (R-CO) has also proposed Myanmar-specific legislation to boost the country’s economy with his “Empower Burma Act of 2016.” Although some in Congress want to maintain sanctions pressure, members who have long supported Aung San Suu Kyi and the NLD will not want to stand in the way of her wishes and views of Myanmar’s needs.
While the US Government has long set parameters for economic engagement in Myanmar, today’s announcement effectively ends that practice. Though the SDNs and other restrictions under the Myanmar sanctions program will now be removed, investors will still have to contend with the myriad of issues present in the Myanmar market, as well as continue to undertake due diligence on prospective partners to ensure compliance with local and international standards or regulations. Additionally, the NLD has already shown that it will take action itself if its principles are not met—it has suspended permits for jade mining, temporarily banned logging, and postponed high rise construction in Yangon until certain environmental and corporate standards are defined. The Government of Myanmar will now exclusively guide investment undertaken in the country, and the NLD will seek to promote transparency and anti-corruption, and limit negative environmental and social impacts, through enactment of its own laws and policies.