Potential USTR China IP Probe Could Result in Tariffs, Other Import Restrictions
President Donald Trump on Aug. 14 issued a memorandum directing U.S. Trade Representative Robert Lighthizer to determine whether to investigate Chinese “laws, policies, practices, or actions” that might be harming U.S. intellectual property rights, innovation or technological development. The memo pointed to language in the Trade Act of 1974 that requires the Office of the U.S. Trade Representative to undertake several requirements in self-initiating an investigation under Section 301 of that law. Section 301 gives the president broad authority, including import duties, to retaliate against restrictions found to “burden or restrict” U.S. commerce.
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Section 302 of the Trade Act of 1974 requires USTR to publish notice in the Federal Register upon self-initiation of any Section 301 investigation. Statutory language also requires USTR to consult with “appropriate” advisory committees composed of government and private-sector officials before taking any resulting trade actions. In all Section 301 investigations, USTR must “request consultations” with the scrutinized country.
Trump isn't "prejudging" whether "serious and consistent allegations" of Chinese IP theft are true, but reports indicate numerous cases wherein China has forced U.S. companies to “transfer their innovation to benefit China,” according to a White House fact sheet. USTR will have the responsibility of deciding whether to launch a formal investigation. The fact sheet cites U.S. Chamber of Commerce data showing “the equivalent of 12.5 percent” of Chinese goods exports are counterfeit, as well as a 2017 update to the 2013 report of the public/private Commission on the Theft of American Intellectual Property that found Chinese government policies lead to the theft of U.S. IP.
“China has implemented laws, policies, and practices and has taken actions related to intellectual property, innovation, and technology that may encourage or require the transfer of American technology and intellectual property to enterprises in China or that may otherwise negatively affect American economic interests,” the memo says. “These laws, policies, practices, and actions may inhibit United States exports, deprive United States citizens of fair remuneration for their innovations, divert American jobs to workers in China, contribute to our trade deficit with China, and otherwise undermine American manufacturing, services, and innovation.”
If the U.S. takes any action that damages bilateral economic and trade relations, China will “never sit back and will take all appropriate measures to resolutely safeguard” Chinese rights and interests,” the Chinese Ministry of Commerce said in a statement reported Aug. 15 by The Associated Press. The ministry said the memo violated the spirit of U.S. WTO commitments, according to the AP.
China should take the Trump administration's assessment seriously and improve the trade relationship, Information Technology Industry Council CEO Dean Garfield said in a statement. He said both the U.S. and China should address the issues in the months before the November Asia-Pacific Economic Cooperation Economic Leaders’ Meeting in Vietnam.
While Trump’s memo drew mostly praise from Republican and Democratic congressional trade leaders, House Ways and Means Trade Subcommittee ranking member Bill Pascrell, D-N.J., expressed concern that it would lead to only “another investigation and report.” He added: “The Trump Administration has called for report after report on the detrimental practices of our trading partners but hasn’t actually done anything about it. The time for action is now.” The administration in April launched separate Section 232 investigations into whether steel and aluminum imports are threatening U.S. national security, in which affirmative findings would authorize broad retaliation. The results of a still unreleased steel investigation missed Commerce Secretary Wilbur Ross’ self-imposed deadline of June 30 (see 1705240034). Pascrell also said Trump should “call for passage” of Pascrell’s May-introduced Jobs and Trade Competitiveness Act, which would create administrative protective order (APO) procedures within CBP's antidumping and countervailing duty evasion investigations (see 1705300048).
Among the lawmakers who voiced their support and hopes for working with the administration on this issue were Senate Finance Committee Chairman Orrin Hatch, R-Utah, and ranking member Ron Wyden, D-Ore., and Ways and Means Chairman Kevin Brady, R-Texas, ranking member Richard Neal, D-Mass., and Trade Subcommittee Chairman Dave Reichert, R-Wash.