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    The Carried Interest Loophole Survives Another Political Battle

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    The latest effort to narrow the preferential tax treatment used by private equity executives failed after Senator Kyrsten Sinema objected.WASHINGTON — Once again, carried interest carried the day.The last-minute removal by Senate Democrats of a provision in the climate and tax legislation that would narrow what is often referred to as the “carried interest loophole” represents the latest win for the private equity and hedge fund industries. For years, those businesses have successfully lobbied to kill bills that aimed to end or limit a quirk in the tax code that allows executives to pay lower tax rates than many of their salaried employees.In recent weeks, it appeared that the benefit could be scaled back, but a last-minute intervention by Senator Kyrsten Sinema, the Arizona Democrat, eliminated what would have been a $14 billion tax increase targeting private equity.Lawmakers’ inability to address a tax break that Democrats and some Republicans have called unfair underscores the influence of lobbyists for the finance industry and how difficult it can be to change the tax code.In addition to doing away with the carried interest provision, the deal Democratic leaders cut with Ms. Sinema included a 1 percent excise tax on stock buybacks and changes to a minimum corporate tax of 15 percent that favored manufacturers.On Friday, the private equity and hedge fund industries applauded the development, describing it as a win for small business.“The private equity industry directly employs over 11 million Americans, fuels thousands of small businesses and delivers the strongest returns for pensions,” said Drew Maloney, the chief executive of the American Investment Council, a lobbying group. “We encourage Congress to continue to support private capital investment in every state across our country.”Bryan Corbett, the chief executive of the Managed Funds Association, said: “We’re happy to see that there is bipartisan recognition of the role that private capital plays in growing businesses and the economy.”Carried interest is the percentage of an investment’s gains that a private equity partner or hedge fund manager takes as compensation. At most private equity firms and hedge funds, the share of profits paid to managers is about 20 percent.Under existing law, that money is taxed at a capital-gains rate of 20 percent for top earners. That’s about half the rate of the top individual income tax bracket, which is 37 percent. A tax law passed by Republicans in 2017 largely left the treatment of carried interest intact, after an intense lobbying campaign, but it did narrow the exemption by requiring executives to hold their investments for at least three years in order to enjoy preferential tax treatment.An agreement reached last week by Senator Joe Manchin III, Democrat of West Virginia, and Senator Chuck Schumer of New York, the majority leader, would have extended that holding period to five years from three, while changing the way the period is calculated in hopes of reducing taxpayers’ ability to take advantage of the lower 20 percent tax rate.What’s in the Democrats’ Climate and Tax BillCard 1 of 6A new proposal. More

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    Carried Interest Is Back in the Headlines. Why It’s Not Going Away.

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    Changes demanded by Senator Kyrsten Sinema will preserve a tax loophole that Democrats have complained about for years.For years, Democrats and even some Republicans such as former President Donald J. Trump have called for closing the so-called carried interest loophole that allows wealthy hedge fund managers and private equity executives to pay lower tax rates than entry-level employees.Those efforts have always failed to make a big dent in the loophole — and the latest proposal to do so also faltered this week. Senate leaders announced on Thursday that they had agreed to drop a modest change to the tax provision in order to secure the vote of Senator Kyrsten Sinema, Democrat of Arizona, and ensure passage of their Inflation Reduction Act, a wide-ranging climate, health care and tax bill.An agreement reached last week between Senator Chuck Schumer, the majority leader, and Senator Joe Manchin III, Democrat of West Virginia, would have taken a small step in the direction of narrowing carried interest tax treatment. However, it would not have eliminated the loophole entirely and could still have allowed rich business executives to have smaller tax bills than their secretaries, a criticism lobbed by the investor Warren E. Buffett, who has long argued against the preferential tax treatment.The fate of the provision was always in doubt given the Democrats’ slim control of the Senate. And Ms. Sinema had previously opposed a carried interest measure in a much larger bill called Build Back Better, which never secured the 50 Senate votes needed — Republicans have been unified in their opposition to any tax increases.Had the legislation passed in the form that Mr. Schumer and Mr. Manchin presented it last week, the shrinking of the carried interest exception would have brought Democrats a tiny bit closer to realizing their vision of making the tax code more progressive.What is carried interest?Carried interest is the percentage of an investment’s gains that a private equity partner or hedge fund manager takes as compensation. At most private equity firms and hedge funds, the share of profits paid to managers is about 20 percent.Under existing law, that money is taxed at a capital-gains rate of 20 percent for top earners. That’s about half the rate of the top individual income tax bracket, which is 37 percent.The 2017 tax law passed by Republicans largely left the treatment of carried interest intact, after an intense business lobbying campaign, but did narrow the exemption by requiring private equity officials to hold their investments for at least three years before reaping preferential tax treatment on their carried interest income.What would the Manchin-Schumer agreement have done?The agreement between Mr. Manchin and Mr. Schumer would have further narrowed the exemption, in several ways. It would have extended that holding period to five years from three, while changing the way the period is calculated in hopes of reducing taxpayers’ ability to game the system and pay the lower 20 percent tax rate.Senate Democrats say the changes would have raised an estimated $14 billion over a decade, by forcing more income to be taxed at higher individual income tax rates — and less at the preferential rate.The longer holding period would have applied only to those who made $400,000 per year or more, in keeping with President Biden’s pledge not to raise taxes on those earning less than that amount.The tax provision echoed a measure that was initially included in the climate and tax bill that House Democrats passed last year but that stalled in the Senate. The carried interest language was removed amid concern that Ms. Sinema, who opposed the measure, would block the overall legislation.Why hasn’t the loophole been closed by now?Many Democrats have tried for years to completely eliminate the tax benefits private equity partners enjoy. Democrats have sought to redefine the management fees they get from partnerships as “gross income,” just like any other kind of income, and to treat capital gains from partners’ investments as ordinary income.Such a move was included in legislation proposed by House Democrats in 2015. The legislation would also have increased the penalties on investors who did not properly apply the proposed changes to their own tax filings.The private equity industry has fought back hard, rejecting outright the basic concepts on which the proposed changes were based.“No such loophole exists,” Steven B. Klinsky, the founder and chief executive of the private equity firm New Mountain Capital, wrote in an opinion article published in The New York Times in 2016. Mr. Klinsky said that when other taxes, including those levied by New York City and the state government, were accounted for, his effective tax rate was between 40 and 50 percent.What would the change have meant for private equity?The private equity industry has defended the tax treatment of carried interest, arguing that it creates incentives for entrepreneurship, healthy risk-taking and investment.The American Investment Council, a lobbying group for the private equity industry, described the proposal as a blow to small business.“Over 74 percent of private equity investment went to small businesses last year,” said Drew Maloney, chief executive of the council. “As small-business owners face rising costs and our economy faces serious headwinds, Washington should not move forward with a new tax on the private capital that is helping local employers survive and grow.”The Managed Funds Association said the changes to the tax code would hurt those who invested on behalf of pension funds and university endowments.“Current law recognizes the importance of long-term investment, but this proposal would punish entrepreneurs in investment partnerships by not affording them the benefit of long-term capital gains treatment,” said Bryan Corbett, the chief executive of the association.“It is crucial Congress avoids proposals that harm the ability of pensions, foundations and endowments to benefit from high-value, long-term investments that create opportunity for millions of Americans.”Jim Tankersley More

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    Analysis Deems Biden’s Climate and Tax Bill Fiscally Responsible

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    Despite Republican claims, the new legislation would be only a modest corporate tax increase, Congress’s Joint Committee on Taxation found.After more than a year of trying — and failing — to pack much of President Biden’s domestic agenda into a single tax-and-spend bill, Democrats appear to have finally found a winning combination. They’ve scrapped most of the president’s plans, dialed down the cost and focused on climate change, health care and a lower budget deficit.As soon as party leaders announced that new bill last week, Republicans began attacking it in familiar terms. They called it a giant tax increase and a foolish expansion of government spending, which they alleged would hurt an economy reeling from rapid inflation.But outside estimates suggest the bill would not cement a giant tax increase or result in profligate federal spending.An analysis by the Joint Committee on Taxation, a congressional nonpartisan scorekeeper for tax legislation, suggests that the bill would raise about $70 billion over 10 years. But the increase would be front-loaded: By 2027, the bill would actually amount to a net tax cut each year, as new credits and other incentives for low-emission energy sources outweighed a new minimum tax on some large corporations.That analysis, along with a broader estimate of the bill’s provisions from the nonpartisan Committee for a Responsible Federal Budget, suggests that the legislation, if passed, would only modestly add to federal spending over the next 10 years. By the end of the decade, the bill would be reducing federal spending, compared with what is scheduled to happen if it does not become law.And because the bill also includes measures to empower the Internal Revenue Service to crack down on corporations and high-earning individuals who evade taxes, it is projected to reduce the federal budget deficit over a decade by about $300 billion.Adding up the headline cost for what Democrats are calling the Inflation Reduction Act is more complicated than it was for many previous tax or spending measures that lawmakers approved. The bill blends tax increases and tax credits, just as Republicans did when they passed President Donald J. Trump’s signature tax package in 2017. But it also includes a spending increase meant to boost tax revenues and a spending cut meant to put more money in consumers’ pockets.Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said the composition of the deal was vastly different from a larger bill that Democrats failed to push through the Senate in the fall. It included several spending programs that were set to expire after a few years, and budget hawks warned that the overall package would add heavily to federal debt if those programs were eventually made permanent, as Washington has been known to do, without offsetting tax increases.Ms. MacGuineas called the original idea, known as Build Back Better, “a massive gimmicky budget buster.” She had kinder words for the new package, saying it “manages to push against inflation, reduce the deficit, and, once fully phased in, it would actually cut net spending, without raising net taxes.”“That is a pretty monumental improvement,” she added.The bill springs from an agreement between Senator Chuck Schumer of New York, the majority leader, and Senator Joe Manchin III of West Virginia, a key centrist Democrat. President Biden blessed it last week, and it carries what remains of what was once his $4 trillion domestic agenda.Understand What Happened to Biden’s Domestic AgendaCard 1 of 7‘Build Back Better.’ More

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    Truckers’ Protests Over Labor Law Block Access to Oakland’s Port

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    For days, a convoy of truckers has blocked the roads that serve the Port of Oakland, crippling a major West Coast cargo hub already hampered by global supply chain disruptions.The protest is meant to send a message to Gov. Gavin Newsom: Keep the drivers clear of a California labor law that they say threatens their livelihood.The truckers, primarily independent owners and operators, are demonstrating in opposition to Assembly Bill 5, a law passed in 2019 that requires gig workers in several industries to be classified as employees with benefits, including minimum wage and overtime pay.Along with a coalition of trade groups, the truckers want Mr. Newsom to issue an executive order putting off the application of the 2019 law to their work and to bring labor and industry to the table to negotiate a path forward.A representative of Mr. Newsom said the state would “continue to partner with truckers and the ports to ensure the continued movement of goods to California’s residents and businesses, which is critical to all of us.”Smaller protests were organized last week at the twin ports of Los Angeles and Long Beach.In a statement, Danny Wan, executive director of the Port of Oakland, said he understood the displays of frustration. But he warned against more delays surrounding the ports, a vital link in a supply chain already hemorrhaging from Russia’s invasion of Ukraine and Covid-19 lockdowns in China.“Prolonged stoppage of port operations in California for any reason will damage all the businesses operating at the ports and cause California ports to further suffer market share losses to competing ports,” he said.When Mr. Newsom signed the measure into law, it received immediate rebukes from companies like Uber and Lyft, whose leaders argued that the law would change their businesses so severely that it might well destroy them.The state law codified a California Supreme Court ruling from 2018 that said, among other things, that people must be classified as employees if their work was a regular part of a company’s business.Both Uber and Lyft, along with DoorDash, quickly lobbied for a ballot measure that would allow gig economy companies to continue treating their drivers as independent contractors.California voters passed the measure, Proposition 22, in 2020, but last year a California Superior Court judge ruled that it was unconstitutional. Uber and Lyft quickly appealed and have been exempt from complying with Assembly Bill 5 while the court proceedings play out.But that wasn’t the case for the truckers. In June, the U.S. Supreme Court declined to hear a challenge by California truckers, who under the new law are viewed as employees of the trucking companies they do business with.Nearly 70,000 California truck drivers work as independent owners and operators, ferrying goods from ports to distribution warehouses. Trucking companies and the protesting drivers argue — as Uber and Lyft did — that if Assembly Bill 5 is applied to them, the drivers will have less flexibility in when and how they work.Proponents of the law say the companies could simply take the drivers on as full- or part-time employees and continue to offer them flexible schedules.A majority of port truckers in California are independent operators and do not work for a single company. A smaller number of drivers are unionized and are represented primarily by the Teamsters.Matt Schrap, chief executive of the Harbor Trucking Association, a trade group for transportation companies serving West Coast ports, said the “frustration is that there is no pathway for folks to have independence.”“That frustration is boiling over into action,” Mr. Schrap said.Lorena Gonzalez Fletcher, a former state lawmaker who was an architect of the labor bill, rejected the idea that applying the law to the trucking industry would be a disservice to drivers.“These truck companies have a business model that is misclassifying workers,” said Ms. Gonzalez Fletcher, who is about to take over as head of the California Labor Federation. “How they have been operating has been illegal.”The trucker protests come as the International Longshore and Warehouse Union is engaged in contract negotiations with the Pacific Maritime Association, representing the shipping terminals at 29 ports from San Diego to Seattle.Farless Dailey III, president of Local 10 of the longshore union, said that for their own safety, his members were not trying to get through the truck blockade.“They don’t get paid when they don’t get in,” he said. “But we’re not going to put our members in harm’s way to pass through the line of truckers.”Officials at the port said the largest marine terminal had been closed since Monday because of the protests. Three other smaller terminals have operated, but with a limited capacity.Christopher S. Tang, a distinguished professor at the University of California, Los Angeles, Anderson School of Management, who studies supply chains, said the shutdowns at the Port of Oakland should not — for now — cause major issues for consumers.“The impact will not be significant in the short term,” he said. “Many retailers have stockpiled inventory.”On Thursday, German Ochoa, a trucker who lives in Oakland, arrived at the port, as he had every day this week.As horns from semitrucks blared in the background, Mr. Ochoa said by phone that he was standing shoulder to shoulder with other truckers. Some held poster boards that read, “Take down AB 5!!!” and “AB 5 Has Got to Go!,” he said.“This is taking away my independence,” Mr. Ochoa said. “It’s my right to be an independent driver.”Noam Scheiber More

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    America’s Safety Net for Workers Hurt by Globalization Is Falling Apart

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    A 60-year-old program that provides retraining to workers whose jobs are eliminated because of foreign competition has expired, leaving many at risk.WASHINGTON — In September, the lighting factory in Logan, Ohio, where Jeff Ogg has clocked in nearly every day for the last 37 years, will shut its doors, driven out of business by a shift from fluorescent lighting toward LED technology that is often made cheaply in China.At 57, Mr. Ogg is not yet ready to retire. But when he applied to a national retraining program that helps workers who have lost their jobs to foreign competition, he was dismayed to see his application rejected. A follow-up request for reconsideration was immediately denied.The program that Mr. Ogg looked to for help, known as Trade Adjustment Assistance, has for the past 60 years been America’s main antidote to the pressures that globalization has unleashed on its workers. More than five million workers have participated in the program.But a lack of congressional funding has put the program in jeopardy: Trade assistance was officially terminated on July 1, though it continues to temporarily serve current enrollees. Unless Congress approves new money for the $700 million program, it will cease to exist entirely.Established in 1962, trade assistance was intended to help workers whose factory and other jobs were increasingly moving overseas as companies chased cheap labor outside the United States. It provides services like subsidies for retraining, job search assistance, health coverage tax credits and allowances for relocation.But the benefits have been gradually scaled back given a lack of funding, including limiting who qualifies for assistance. A year ago, the program was restricted to workers who make goods, even though jobs in services have also undergone a wave of offshoring as companies set up call centers and accounting departments overseas. In addition, only those whose jobs shifted to countries that have a free-trade agreement with the United States — like Canada and Mexico, but not China — were eligible for assistance.On July 1, the program stopped reviewing new applications and appeals from workers whose applications have been rejected, and it will be phased out.While often criticized as inefficient and bureaucratic, the program has been the country’s primary answer to trade competition for decades. Its disappearance may leave thousands of workers without critical support as they seek new jobs. In 2021, the Department of Labor certified 801 petitions for trade adjustment assistance from various workplaces, covering an estimated 107,454 American workers.The decision over whether to reauthorize the program has become a casualty of an intense fight in Congress over what to include in a sprawling bill aimed at making America more competitive with China. The centerpiece of the legislation is $52 billion in funding for semiconductor manufacturing in the United States, but lawmakers have been clashing over whether to include other provisions related to trade, such as funding for worker retraining.House Democrats had proposed including other trade provisions as well, including measures to increase scrutiny on investments that might send American technology overseas and eliminate tariff exemptions for small-value goods imported from China.The State of Jobs in the United StatesJob gains continue to maintain their impressive run, easing worries of an economic slowdown but complicating efforts to fight inflation.June Jobs Report: U.S. employers added 372,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the sixth month of 2022.Care Worker Shortages: A lack of child care and elder care options is forcing some women to limit their hours or has sidelined them altogether, hurting their career prospects.Downsides of a Hot Market: Students are forgoing degrees in favor of the attractive positions offered by employers desperate to hire. That could come back to haunt them.Slowing Down: Economists and policymakers are beginning to argue that what the economy needs right now is less hiring and less wage growth. Here’s why.On Tuesday, the Senate voted to advance a smaller legislative package that includes funding for the chips industry and broader research and development, but lacks funding for Trade Adjustment Assistance or other trade-related measures. The chips legislation will still require further approval in both the House and Senate.Supporters of Trade Adjustment Assistance say that they will not stop pushing for its reauthorization, and that funding for the program could still be included in other legislation.Senator Sherrod Brown, Democrat from Ohio, blamed Republican lawmakers for “holding T.A.A. hostage” and said he would continue fighting to reauthorize the program.“They have sold out American manufacturing over and over by voting for trade deals and tax policy that send jobs overseas, and continue to block investments to empower workers who lose their jobs because of those bad trade deals,” Mr. Brown said in emailed remarks. “T.A.A. serves workers — like those in Logan, Ohio — who have their lives upended through no fault of their own.”The program and its benefits are already out of reach for Mr. Ogg and 50 others who work at the Logan plant, which manufactures the glass tubes in fluorescent lighting fixtures that were once ubiquitous in schools and offices. The plant tried to transition to making LED lights in recent years, but found those lights could be purchased more cheaply from abroad.“Our plant, our people, most of them have been there 25-plus years,” said Mr. Ogg, who is the president of the local United Steelworkers union. “You work in the same place that long, that’s all you know.”Mr. Ogg said he had no complaints about his career at the plant, where he estimates the average wage is between $25 and $30 an hour — enough for him to buy a home and raise three children. But he’s feeling unsure about what to do next. He previously worked as a mechanic, but said the type of machinery that he had worked on was no longer around.“A lot has changed,” Mr. Ogg added. “If you’ve been stuck in one place for 30-some years, you’re going to need some help to go to the next level.”Trade Adjustment Assistance was intended to do just that — help workers who need new skills to compete in a more globalized economy. The program offered income support to workers who lost their jobs and exhausted unemployment benefits while they retrained for other jobs. Those who are 50 and older and take on lower-paying jobs could qualify for a wage insurance program that temporarily boosted their take-home pay.Some academic research has found benefits for those who enrolled in the program. Workers gave up about $10,000 in income while training, but 10 years later they had about $50,000 higher cumulative earnings than those who did not retrain, according to research from 2018 by Benjamin G. Hyman, an economist at the Federal Reserve Bank of New York.Still, those relative gains decayed over time, Mr. Hyman’s research shows. After 10 years the incomes of those who received assistance and those who did not were the same — perhaps because the jobs that workers in T.A.A. trained for had also become obsolete as a result of automation and trade competition. Yet Mr. Hyman concluded that earnings returns from the program “may be larger and more effective than previously thought.”The United Steelworkers Local 1999 in Indianapolis, which fought to save manufacturing jobs from companies like Rexnord, which moved its operations to Mexico in 2017.Alyssa Schukar for The New York TimesThe program fell victim to concerns over its expense and efficiency, as well as what was left out of the broader package of trade legislation. In the past, the funding for the program was coupled with something called Trade Promotion Authority, which streamlined the process for congressional approval of U.S. trade agreements.The combination of Trade Promotion Authority and Trade Adjustment Assistance was a political formula that worked for decades, said Edward Alden, a senior fellow at the Council on Fore­­­ign Relations. Presidents promised businesses more access to foreign markets, and they made commitments to providing labor unions and their supporters with compensation if jobs were lost in the process.But American views on trade have turned more negative in recent years, as China began dominating global industries and as income inequality widened. Democrats have grown so disillusioned with the effects of global trade and split over its benefits that the Biden administration has declined to push for new pacts.Before writing any new trade deals, Mr. Biden said he would first focus on boosting American competitiveness, including by investing in infrastructure, clean energy, and research and development. And when Trade Promotion Authority expired last year, Biden administration officials did not lobby Congress to reauthorize it.Some Republicans are balking at reapproving trade adjustment assistance when the president shows little intention to open up new overseas business opportunities through trade agreements.“America’s on the sidelines right now on trade, and President Biden’s moratorium on new trade agreements seems firm,” Representative Kevin Brady, Republican of Texas, told reporters late last month. “There would have to be a much stronger ironclad commitment to resuming American leadership in trade to even begin this discussion on extending T.A.A.”“We’re open to creative ideas here, but if we don’t have a serious, significant trade agenda that opens up markets for American workers, T.A.A. doesn’t make much sense,” Mr. Brady added.Mr. Biden’s plans to boost American competitiveness have only been partly fulfilled. While Congress approved billions of dollars for new infrastructure investments, other aspects of the president’s domestic agenda, including funding for the energy transition, have crumbled. Lawmakers have struggled to amass the support even for legislation in favor of expanded funding for the semiconductor industry, which is widely seen as key to American industry and national security.With so many other legislative goals at stake, the termination of a decades-old solution to the economic trade-offs of free trade has garnered little attention.“The old consensus on trade is gone,” said Mr. Alden of the Council on Foreign Relations. “And we don’t have a new one.”Catie Edmondson More

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    Supply Chains Tainted by Forced Labor in China, Panel Told

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    Human rights activists and others urged the Biden administration to cast a wide net to stop imports of products made with forced labor in Xinjiang.WASHINGTON — Human rights activists, labor leaders and others urged the Biden administration on Friday to put its weight behind a coming ban on products made with forced labor in the Xinjiang region of China, saying slavery and coercion taint company supply chains that run through the region and China more broadly.The law, the Uyghur Forced Labor Prevention Act, was signed by President Biden in December and is set to go into effect in June. It bans all goods made in Xinjiang or with ties to certain entities or programs that are under sanctions and transfer minority workers to job sites, unless the importer can demonstrate to the U.S. government that its supply chains are free of forced labor.It remains to be seen how stringently the law is applied, and if it ends up affecting a handful of companies or far more. A broad interpretation of the law could cast scrutiny on many products that the United States imports from China, which is home to more than a quarter of the world’s manufacturing. That could lead to more detentions of goods at the U.S. border, most likely delaying product deliveries and further fueling inflation.The law requires that a task force of Biden administration officials produce several lists of entities and products of concern in the coming months. It is unclear how many organizations the government will name, but trade experts said many businesses that relied on Chinese factories might realize that at least some part or raw material in their supply chains could be traced to Xinjiang.“I believe there are hundreds, perhaps thousands, of companies that fit the categories” of the law, John M. Foote, a partner in the international trade practice at Kelley Drye & Warren, said in an interview.The State Department estimates that the Chinese government has detained more than one million people in Xinjiang in the last five years — Uyghurs, Kazakhs, Hui and other groups — under the guise of combating terrorism.China denounces these claims as “the lie of the century.” But human rights groups, former detainees, participating companies and the Chinese government itself provide ample documentation showing that some minorities are forced or coerced into working in fields, factories and mines, in an attempt to subdue the population and bring about economic growth that the Chinese government sees as key to stability.Rushan Abbas, the founder and executive director of the nonprofit Campaign for Uyghurs, who has written about the detention of her sister in Xinjiang, said at a virtual hearing convened by the task force on Friday that forced labor had become a “profitable venture” for the Chinese Communist Party, and was meant to reduce the overall population in Xinjiang’s villages and towns.“The pervasiveness of the issue cannot be understated,” she said, adding that forced labor was made possible by “the complicity of industry.”Gulzira Auelkhan, an ethnic Kazakh who fled Xinjiang for Texas, said in the hearing that she had been imprisoned for 11 months in Xinjiang alongside ethnic Kazakhs and Uyghurs who were subject to torture and forced sterilization. She also spent two and a half months working in a textile factory making school uniforms for children and gloves, which her supervisors said were destined for the United States, Europe and Kazakhstan, she said through a translator.It is already illegal to import goods made with slave labor. But for products that touch on Xinjiang, the law will shift the burden of proof to companies, requiring them to provide evidence that their supply chains are free of forced labor before they are allowed to bring the goods into the country.Supply chains for solar products, textiles and tomatoes have already received much scrutiny, and companies in those sectors have been working for months to eliminate any exposure to forced labor. By some estimates, Xinjiang is the source of one-fifth of the world’s cotton and 45 percent of its polysilicon, a key material for solar panels.But Xinjiang is also a major provider of other products and raw materials, including coal, petroleum, gold and electronics, and other companies could face a reckoning as the law goes into effect.In the hearing on Friday, researchers and human rights activists presented allegations of links to forced labor programs for Chinese manufacturers of gloves, aluminum, car batteries, hot sauce and other goods.Horizon Advisory, a consultancy in Washington, claimed in a recent report based on open-source documents that the Chinese aluminum sector had numerous “indicators of forced labor,” like ties to labor transfer programs and the Xinjiang Production and Construction Corps, which has been a target of U.S. government sanctions for its role in Xinjiang abuses.Xinjiang accounts for about 9 percent of the global production of aluminum, which is used to produce electronics, automobiles, planes and packaging in other parts of China.The State Department estimates that China has detained more than one million people in Xinjiang in the last five years. The Urumqi No. 3 Detention Center has room for at least 10,000 people. Mark Schiefelbein/Associated Press“China is an industrial hub for the world,” Emily de La Bruyère, a co-founder of Horizon Advisory, said at the hearing.The Latest on China: Key Things to KnowCard 1 of 4Marriages and divorces. More

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    House Votes to Suspend Normal Trade Relations With Russia

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    WASHINGTON — The House voted overwhelmingly on Thursday to strip Russia of its preferential trade status with the United States, moving to further penalize the country’s economy in response to the invasion of Ukraine.The lopsided 424-to-8 vote came after President Biden announced last week that the United States and its European allies would take new steps to isolate Russia from the global trading system. All of the lawmakers who opposed the measure were Republicans.The bill, which would allow the United States to impose higher tariffs on Russian goods, is the latest in a series of measures that lawmakers have approved to support Ukraine and punish Russia for its invasion. Others include a ban on Russian oil and gas products and a $13.6 billion military and humanitarian aid package.The trade measure still needs Senate approval. Senator Chuck Schumer, Democrat of New York and the majority leader, said he would work to move it through the chamber quickly.The House vote came a day after President Volodymyr Zelensky of Ukraine delivered a searing speech to Congress via video link in which he urged lawmakers to do more to help his country and penalize Russia. His address, as well as a wrenching video he showed of Russian-inflicted carnage in Ukraine, hung heavily over the House floor on Thursday as lawmakers debated the trade bill.Mr. Zelensky “showed us the absolute horrors that Russia is inflicting on the Ukrainian people in full view of the world,” said Representative Richard E. Neal, Democrat of Massachusetts and the chairman of the Ways and Means Committee. “And he pleaded for us to do more. With the legislation that stands before us at this hour, we intend to answer his call.”Top lawmakers in the House proposed nearly a month ago to strip Russia of its trading status and begin a process to expel the country from the World Trade Organization. But last week, as the House worked to advance the legislation in tandem with a measure to ban the importation of Russian oil and gas products, Democrats stripped out the trade provision at the request of the Biden administration, which sought more time to confer with European allies about the move.“Folks, I know I’ve occasionally frustrated you,” Mr. Biden said to House Democrats at their retreat in Philadelphia last week. “But more important than us moving when we want to is making sure all of NATO is together — is together. They have different vulnerabilities than we do.”The move by the United States to strip Russia of its preferential trade status — known as “permanent normal trade relations” — carries symbolic weight, but trade experts have said it would have a limited economic effect compared with other sanctions that have already been imposed.The legislation passed by the House would also suspend normal trade relations with Belarus, in recognition of its role in aiding Russia’s attack on Ukraine.Stripping Russia of its trading status would be the latest in a growing list of economic penalties imposed on the country, whose economy is facing collapse.Russia-Ukraine War: Key Things to KnowCard 1 of 4A key vote. More

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    Washington State Advances Landmark Deal on Gig Drivers’ Job Status

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    Lawmakers have passed legislation granting benefits and protections, but allowing Lyft and Uber to continue to treat drivers as contractors.The Washington State Senate on Friday passed a bill granting gig drivers certain benefits and protections while preventing them from being classified as employees — a longstanding priority of ride-hailing companies like Uber and Lyft.While the vote appears to pave the way for ultimate passage after a similar measure passed the state House of Representatives last week, the two bills would still have to be reconciled before being sent to the governor for approval. Gov. Jay Inslee has not said whether he intends to sign the legislation.Mike Faulk, a spokesman for Mr. Inslee, said Friday that the governor’s office usually did not “speculate on bill action,” adding, “Once legislators send it to our office, we’ll evaluate it.”The Senate legislation — the result of a compromise between the companies and at least one prominent local union, the Teamsters — was approved 40 to 8.The action follows the collapse of similar efforts in California and New York amid resistance from other unions and worker advocates, who argued that gig drivers should not have to settle for second-class status.Under the compromise, drivers would receive benefits like paid sick leave and a minimum pay rate while transporting customers. The bill would also create a process for drivers to appeal so-called deactivations, which prevent them from finding work through the companies’ apps.But the minimum wage wouldn’t cover the time they spend working without a passenger in the car — a considerable portion of most drivers’ days. And like independent contractors, they could not unionize under federal law.One especially controversial feature of the bill is that it would block local jurisdictions from regulating drivers’ rights. A similar feature helped ignite opposition that killed the prospects for such a bill in New York State last year.Looming in the background of the legislative action in Washington State was the possibility of a ballot measure that could have enacted similar changes with weaker benefits for drivers. After California passed a law in 2019 that effectively classified gig workers as employees, Uber, Lyft and other gig companies spent roughly $200 million on a ballot measure that rolled back those protections. The legislation is still being litigated after a state judge deemed it unconstitutional. More