Options on Hong Kong: A Suggested NSC Memo
June 2, 2020Beijing’s decision to pass a national security law that would bypass Hong Kong’s legislature to impose potentially draconian restrictions on Hong Kong citizens’ civil liberties presents the United States and the international community with hard choices. China’s assault on Hong Kong’s autonomy sets the stage for a crackdown that could destroy Beijing’s promise of “one country, two systems” and send a ripple of uncertainty across Asia. Yet retracting Hong Kong’s special status or imposing sanctions risks harming the people of Hong Kong without necessarily increasing the likelihood that Beijing changes course or pays a high political cost. Last week, Secretary of State Mike Pompeo condemned the proposed Chinese legislation and notified Congress that “Hong Kong does not continue to warrant treatment under United States laws in the same manner as U.S. laws were applied to Hong Kong before July 1997.” This determination that the United States should no longer continue to extend special status to Hong Kong does not dictate what Hong Kong’s actual status will be in practical terms, leaving unanswered how the administration will proceed on specific policies. President Trump’s subsequent press conference on China, while condemnatory, hinted at possible future actions but yielded little new information on the administration’s actual intentions. In this memo, we imagine how senior officials from previous administrations would frame the problem for a meeting of the National Security Council in order to illustrate the policy options available for the President (and we cheated by giving ourselves slightly more words to do so than the White House Executive Secretary would allow . . .).
TO: National Security Council Principals Committee
FROM: The National Security Advisor
RE: Our Policy on Hong Kong
- Advance a “free and open Indo-Pacific” by demonstrating clear and consistent U.S. commitments to our alliances, support for democratic norms, and opposition to coercion of independent states or democratic entities by China:
- Deter potential future coercion against Taiwan;
- Reassure U.S. allies and partners that the United States can both deter coercion/repression and manage stable U.S.-China relations.
- Restore Chinese commitments to the 1997 Hong Kong Basic Law consistent with the 1984 Sino-British Joint Declaration’s protection of Hong Kong’s economic autonomy and self-government:
- At a minimum, deter Beijing from implementing the new legislation in Hong Kong in a way that would erode the territory's rights and freedoms under the Basic Law;
- If possible reverse Beijing’s broader efforts since 2014 that “one country” will now overrule “two systems.”
- Avoid harm to Hong Kong’s continued success as a financial hub for greater China consistent with the principles of self-government established in 1997.
On May 27, China’s National People’s Congress (NPC) voted 2,878 to 1 in favor of the decision to empower its standing committee to draft national security legislation for the Hong Kong Special Administrative Region that would bypass the local legislative process via Annex III of the city’s Basic Law. As NPC Standing Committee Vice Chair Wang Chen stated, the law will grant sweeping new powers to limit personal freedoms of local residents in order to protect “national sovereignty and territorial integrity.” The timing of the promulgation in Hong Kong remains uncertain, with Chinese state media indicating the process could take anywhere from two to six months. It is clear that Beijing has decided that it now has the latitude to reinterpret its commitments to Hong Kong’s autonomy in ways that demonstrate disregard for the impact on China’s international standing. In addition to undermining the guarantee of basic civil liberties in Hong Kong, this move suggests a dangerous increase in Beijing’s risk tolerance that could have broader implications for Taiwan and other targets of Chinese coercion in the region.
The Secretary of State has officially notified Congress that “Hong Kong does not continue to warrant treatment under United States laws in the same manner as US laws were applied to Hong Kong before July 1997.” The United Kingdom, Canada, and Australia immediately issued a joint statement declaring that their governments are “deeply concerned at proposals for introducing legislation related to national security in Hong Kong.” Japan and other major democratic states have followed with similar statements. There is robust bipartisan support in Congress for further actions to impose costs on Beijing and demonstrate support for the people of Hong Kong. The 2019 Hong Kong Human Rights and Democracy Act, which passed by unanimous voice vote in the House and unanimous consent in the Senate, states that the President “shall” impose targeted sanctions on those officials identified as responsible for the suppression of human rights in Hong Kong (we interpret the statute as granting the President full latitude in any application of targeted sanctions).
While bipartisan support is strong in the U.S. Congress for taking punitive actions against China, other governments and legislatures around the world have been somewhat less resolute, which is likely entering Beijing’s cost-benefit analysis on the policy. There are some important exceptions, including the United Kingdom’s announcement that all citizens of Hong Kong now have the right to emigrate to Britain. At the same time, there is mounting evidence that international public opinion has turned against Beijing more broadly in response to China’s early cover-up and lack of transparency regarding the new coronavirus and subsequent aggressive “Wolf Warrior” diplomacy. It is important to recognize—and to communicate—that while Hong Kong’s status within China is sui generis, Beijing may measure the international response to this crackdown in the context of future coercive options against Taiwan and territorial disputes with India, Japan, and U.S. allies in Southeast Asia.
One complication is that pressure against China will likely hit the Hong Kong economy hardest. Termination of Hong Kong’s special status would revoke favorable visa waivers and export control rules but not financial flows, which are the mainstay of Hong Kong’s economy. It is not certain whether termination of Hong Kong’s status would lead to capital flight or whether investors would take confidence in the continued autonomy of Hong Kong’s financial regulators.
The bottom line is that administration enjoys public and congressional support for the current strong declaratory policy on Hong Kong but may have to consider higher-risk options in the likely event that Beijing is not swayed by international statements of concern. The following three options with the pros and cons for each have been developed by the Deputies Committee for our consideration. At the next National Security Council Meeting with the President, we will discuss the elements of a comprehensive strategy based on your initial assessment of these options.
Option One: International Diplomatic Pressure
Rely primarily on building an international diplomatic coalition to pressure Beijing not to implement a national security law without the direct participation of the territory’s people, legislature, and judiciary, and to warn against reneging on China’s pledge to preserve Hong Kong’s autonomy and freedoms under “one country, two systems.” This could include a G7 leaders statement and/or a UN joint statement.
- Avoids early escalation and allows Beijing time to amend or retract the policy.
- Creates reputational risks for China at a time that it is being criticized for its early mishandling of the pandemic.
- Provides a quick response while Beijing is still deliberating how to proceed. Foreign ministers from Australia, Canada, and the United Kingdom have already signed a statement criticizing China’s move, so there is allied support for pushback that could be built upon.
- Signals potential willingness of a coalition of like-minded countries to impose costs later.
- No material cost imposition.
- Beijing appears to view the correlation of international forces as favorable right now despite the strong declaratory policy of close U.S. allies in recent days.
- Beijing will likely threaten to use punitive economic measures against other countries that join that coalition.
Option Two: Targeted Sanctions
Under last year’s Hong Kong Human Rights and Democracy Act, the United States could impose sanctions on Chinese government officials and security authorities for violating the basic freedoms and rights of the Hong Kong people. Under the newly proposed Hong Kong Autonomy Act, the United States could additionally sanction banks engaged in “significant transactions” with individuals and entities that “materially contribute to the contravention” of Beijing’s legal commitments to Hong Kong’s autonomy. These measures would aim to target the implementers of the national security law but leave Hong Kong’s special status largely intact.
- Demonstrates U.S. resolve vis-à-vis China, a willingness to accept risk to deter further steps to implement law by Beijing, and the U.S. commitment to human rights and the rule of law.
- Allows the United States to ratchet up pain on Beijing in a stepwise and targeted manner, limiting collateral damage when compared to more dramatic options.
- Leaves more significant U.S. leverage—i.e., policy changes stemming from Hong Kong’s decertification—on the table for later use if the United States needs to shape how Beijing implements the national security law.
- Beijing is likely to retaliate against U.S. companies operating in mainland China, either through formal mechanisms, or more likely, through the raft of informal tools at Beijing’s disposal.
- While it might deter further encroachments in the near term, sanctions may not shake Beijing’s resolve to implement the proposed national security legislation.
- While the economic impact of sanctions on the Hong Kong economy is likely less pronounced than the full revocation of Hong Kong’s unique economic status under U.S. law, any sanctions against local officials will contribute to investor and business uncertainty nonetheless.
Option Three: Revoke Hong Kong’s Status under U.S. Law
Under both the Hong Kong Policy Act of 1992 and last year’s Hong Kong Human Rights and Democracy Act, the Trump administration can determine that Hong Kong is not “sufficiently autonomous” to continue enjoying its “unique treatment” in its relationship with the United States. Such a conclusion authorizes the United States to treat Hong Kong like every other region within the People’s Republic of China including with regard to tariffs, export controls, investment limits, health and safety standards, extradition, airlines, and travel and immigration. However, the law does not mandate any specific changes or the pace, sequencing, or breadth of such changes.
- Decertifying Hong Kong avails the administration of the ability to adopt actions that carry the highest potential to deter Beijing from either adopting the National Security Law or carrying it out in a brutal manner. This is because these steps would hurt the economy of Hong Kong and the surrounding Pearl River Delta—first, by reducing its role in trade and investment, and second, by generating momentum for U.S. companies and residents to leave the city.
- By demonstrating leadership, the United States could open the door for other democracies to follow suit, providing an even larger deterrent to rash action by Beijing.
- Even if these steps do not stop Beijing from moving forward, weakening Hong Kong hurts China’s economy and slows its ambitions to be a global tech, trade, and financial powerhouse.
- Such steps will do most direct damage to Hong Kong’s economy rather than the rest of China. Those people the United States wants to help will suffer the most.
- Hong Kongers who want to protect the city’s autonomy will be in a weaker position to use whatever civic spaces remain in Hong Kong to advocate for their positions, whether on the street, in the media, or inside the government.
- Acting precipitously, particularly if the United States moves forward with substantive measures to change its treatment of Hong Kong (e.g., adjusting its tariff schedule), may have the opposite effect of what is intended. Instead of deterring Beijing, such moves may propel it to act more resolutely and harshly, believing that subversion in Hong Kong will grow the longer they wait to act and that patience with Hong Kong and the United States will not yield it any benefits.
Conclusion and Recommendations:
It is unlikely that we can compel Beijing to not enact the legislation. However, the specific implementation remains open-ended, and this is likely where the United States can still exert pressure, including keeping open the option for more dramatic steps such as the revocation of Hong Kong’s unique economic and legal status under U.S. law. Though not directly parallel, it is worth noting that Beijing’s establishment of a provocative Air Defense Identification Zone (ADIZ) over the East China Sea in November 2013 was not followed by implementation of threats to intercept aircraft. Yet even if Beijing does not follow passage of the law with immediate draconian measures in Hong Kong, we can be certain that there will be a steady increase in extraditions and coercive pressure on the Legislative Council and the press (the same “cabbage-peeling” approach that followed the ADIZ announcement). In other words, we will face yet another “gray zone” competition that will eventually result in the evisceration of Hong Kong’s autonomy through a series of measures less visible than the new law unless countered. Our strategy should therefore show readiness to escalate pressures but maintain flexibility and consider off-ramps for Beijing.
As we develop a strategy based on a review of the difficult options above, we will benefit from the following lines of effort:
- We must internationalize the Hong Kong issue as much as possible, aligning our efforts with those of our allies while remaining the pacesetter and encouraging higher risk tolerance from our partners.
- We should encourage U.S. legislation requiring appointment of a Special Envoy on Hong Kong who would be responsible for sustaining attention to the issue internationally and encouraging legislation and policies that track with the U.S. Hong Kong Human Rights and Democracy Act.
- We should utilize the G7, Quad meetings, Australia–US Ministerial Consultations, and other regular meetings of like-minded allies and partners to keep the pressure on Beijing.
- We must communicate and win support for the assessment that suppression of Hong Kong’s autonomy is linked to China’s broader strategy to establish a sphere of influence fueled by investments and punitive measures that extends steadily outward across the Himalayas, the Indian Ocean, and the Western Pacific.
- We should prepare for implementation of targeted sanctions, mindful of possible retaliation against U.S. firms.
- The Deputy’s Committee should prepare a notional list of sanction targets with an assessment of impact, blowback, and implementation challenges.
- The Deputy Secretaries of State and Treasury should meet with key U.S. business leaders, agricultural groups, and members of Congress to explain the policy and prepare remedies and counter-counter measures in advance—demonstrating seriousness of intent to Beijing in the process.
- The Deputies Committee should prepare contingency plans for withdrawal of U.S. citizens from Hong Kong if Beijing moves in a direction that requires decertifying Hong Kong’s status.
- The Treasury Department should prepare an economic impact and mitigation plan.
- Contingency plans should be coordinated with the Five Eyes and Japan.
- While classified, the existence of this planning should not be denied.
- The Secretary of State should prepare a major address on Hong Kong. Because international alignment is so critical, the State Department should instruct Embassies London, Canberra, Tokyo, and Ottawa to develop shared themes and pre-coordinated messaging. Connecting the message of Hong Kong’s status to larger questions of Chinese intentions will be critical. The speech should leave a rhetorical off-ramp for Beijing to de-escalate. Though difficult in the current environment, it would be useful to have joint bipartisan statements from the leadership in the House and Senate echoing these themes.
Jude Blanchette holds the Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Victor Cha is senior adviser and holds the Korea Chair at CSIS as well as the D.S. Song-KF Chair in the Department of Government and the Edmund A. Walsh School of Foreign Service (SFS) at Georgetown University. Bonnie Glaser is senior adviser for Asia and director of the China Power Project at CSIS. Michael Jonathan Green is senior vice president for Asia and Japan Chair at CSIS and director of Asian Studies at SFS. Scott Kennedy is senior adviser and holds the Trustee Chair in Chinese Business and Economics at CSIS.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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