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Myanmar Crisis

US broadens Myanmar sanctions beyond military with trade move

Washington threatens junta with removal of preferential tariffs after weekend bloodbath

A Myanmar national who said he recently fled to India shows a Myanmar kyat banknote at an undisclosed location in India's northeastern state of Mizoramon March 15.   © Reuters

YANGON/BANGKOK -- The U.S. has moved to broaden sanctions on Myanmar beyond those targeted specifically at military leaders and will consider excluding the country from a program of tariff-free access to the American market for certain exports.

Washington has suspended all engagement with Myanmar under the bilateral Trade and Investment Framework Agreement "until the return of a democratically elected government," U.S. Trade Representative Katherine Tai said on Monday.

The move comes in response to escalating violence by Myanmar's security forces against civilians since the country's Feb. 1 coup, and reflects heightened emphasis on democracy and human rights under the new Biden administration. It also marks a significant shift in the international debate, from sanctions focused on military interests, toward blanket measures aimed at the broader economy.

Curbs by the U.S. and other Western countries against military regimes in Myanmar in 1989 and again in the early 2000s hit the country's businesses and led to tens of thousands of job losses. This time, protesters themselves have been calling for stronger measures to deny the junta economic control.

Since the Feb. 1 coup, more than 510 unarmed civilians have been killed and more than 3,000 people detained, according to local rights group Assistance Association for Political Prisoners. Tai, who was sworn into office on March 18, said that killing by Myanmar's security forces of peaceful protesters, students, workers, labor leaders, medics and children had "shocked the conscience of the international community."

"These actions are a direct assault on the country's transition to democracy and the efforts of the Burmese people to achieve a peaceful and prosperous future," she said.

Ending special tariffs for Myanmar goods under the U.S. Generalized System of Preferences is an option for further sanctions, the USTR noted.

About 5,000 products from Myanmar have benefited from zero tariffs under the GSP, an American program that expired at the end of 2020 and is up for reauthorization by Congress. But Myanmar may be excluded as "trade unions and workers for their role in the pro-democracy protests raise serious concerns about worker rights protections," the USTR said.

At least 114 civilians were killed on Saturday alone in Myanmar, as the junta marked the annual Armed Forces Day with a vast parade of military hardware in the capital, Naypyitaw, and an escalation of deadly violence across the country's towns and cities. Security forces were filmed shooting directly at protesters as well as into houses and cars.

Foreign chambers of commerce in Yangon representing Australian, British, French and New Zealand businesses on Tuesday jointly condemned and called for an end to "the killing and violence against the Myanmar people," echoing statements issued recently by American, European and Japanese chambers. The four business groups also said operations are "extremely challenging" and noted that the internet service restrictions imposed by the junta undermined service delivery.

"Without a swift and peaceful resolution to the situation, it will be extremely difficult for responsible businesses to consider making additional investments in Myanmar," the signatories said, reflecting rising unease among the foreign business community at the killings of civilians.

The trade suspension follows last week's sanctions on Myanma Economic Holdings Public Co. Ltd. (MEHL) and Myanmar Economic Corp. (MEC), the two conglomerates owned by Myanmar's military, known as the Tatmadaw. International sanctions had been limited to military officials and their companies to avoid hurting the public.

U.S. President Joe Biden signed an executive order in early February authorizing immediate sanctions on junta leader Min Aung Hlaing and other senior junta members who directed the coup, their business interests and close family members, as well as other officials connected with the junta. More Tatmadaw officials, their family and business associates were later added.

The U.S. and U.K. last week moved to sanction MEHL, while Washington also targeted MEC. Announcing the MEHL sanctions, British Foreign Secretary Dominic Raab said the move targets the military's financial interests "to help drain the sources of finance for their campaigns of repression against civilians."

The two conglomerates have about 150 affiliated companies, according to a 2019 report published by United Nations investigators. Both military entities operate in sectors such as banking, retail, mining and gemstones. They own a wide range of joint ventures and subsidiaries, including Myanmar Brewery with Japan's Kirin Holdings and telecom operator Mytel with Viettel, a Vietnamese peer.

Despite such steps, the junta's crackdown is escalating. A Myanmar-focused investor based in Bangkok called the sanctions and trade suspension "small steps in the right direction" in rebuking the coup but said they are insufficient to change the junta's actions.

"The military machine is pretty much impervious to pressure from Western countries," he said. Suspending Myanmar's membership in the Association of Southeast Asian Nations or freezing assets in Singapore held by military-related individuals and companies may send a stronger signal than U.S. sanctions, the investor told Nikkei Asia.

During Myanmar's previous military regime, many of the major conglomerates were sanctioned for their close relationship with the military. Eventually, new investments, financial transactions and trade by U.S. companies in Myanmar were banned.

"Given the worsening political crisis and escalating violence in Myanmar, and the increasingly tough responses through sanctions and other punitive measures by Western governments, Myanmar risks becoming an unviable market for responsible businesses," said Romain Caillaud, principal at Tokyo-based advisory firm SIPA Partners.

Apart from targeted sanctions, U.N. rights envoy Thomas Andrews has urged foreign governments to sanction state-run Myanma Oil and Gas Enterprise (MOGE). The Committee Representing Pyidaungsu Hluttaw -- a body set up by deposed lawmakers -- as well as protesters and rights groups have also asked oil majors to stop working with MOGE or pay the obligatory royalties or other fees into an escrow or protected account until democracy is restored in Myanmar. They have also asked energy giants such as Total, Chevron, Posco and PTT of Thailand not to pay tax to the junta.

The move also chimes with growing calls by Myanmar protesters to hit the broader economy as part of their civil disobedience campaign, even if it means massive job losses, in order to starve the regime of financial resources and render the country ungovernable.

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