China IP Reform Using Section 301 of the Trade Act of 1974
There are alternatives to address China’s policies and practices that would not have the same adverse impacts on U.S. consumers, businesses, and local communities or undermine the benefits of the tax reform. In particular, it is critically important that the Administration work with likeminded partners to address common concerns with China’s trade and investment policies. Imposition of unilateral tariffs by the Administration would only serve to split the United States from its allies, hinder joint action to effectively address shared challenges, and ensure that foreign companies take the place of markets that American companies, farmers and ranchers must vacate when China retaliates against U.S. tariffs. We urge the Administration not to impose tariffs and to work with the business community to find an effective, but measured, solution to China’s protectionist trade policies and practices that protects American jobs and competitiveness.
China is guilty of abusing the trading system, including the use of nontariff barriers and arbitrary enforcement to put foreign companies at a disadvantage. Working out a new trading arrangement that stopped this misbehavior would be constructive. But to succeed the U.S. would need a united front with allies and trading partners to press China to obey World Trade Organization rules, or establish some new ones.
The best way out of this showdown is for the two sides to call a truce and negotiate a new trade understanding. Yet neither Donald Trump nor Xi Jinping wants to look like the one standing down, so escalation is more likely than retreat. As the tariff casualties mount, even many Trump voters are going to ask: When is the master negotiator actually going to negotiate a better trade deal?
A more judicious use of tariffs would give the Chinese government an incentive to stop stealing the intellectual property of U.S. companies. China now requires U.S. firms operating in China to form a “partnership” with a Chinese counterpart and share their technology with it. The Chinese use that stolen technology to compete with American firms in China and around the world. The threat of punitive tariffs could lead the Chinese government to agree to allow U.S. firms to operate in China without local partners. If China did not live up to the agreement, the tariffs could be reimposed. At their 2013 California summit, the U.S. and China issued a communiqué stating that neither government would support cybertheft for commercial purposes.
American policy to block the theft of U.S. technology is legitimate and desirable. But it is not the same as a U.S. policy to try to prevent China from achieving its “Made in China 2025” goal of becoming a global leader in high-tech industries through its own research and investments. If the U.S. wants to retain the lead in technology manufacturing and services, it should support education in the U.S. and provide incentives for American firms to do the necessary investments and research.
The United States Trade Representative shall determine, consistent with section 302(b) of the Trade Act of 1974 (19 U.S.C. 2412(b)), whether to investigate any of China's laws, policies, practices, or actions that may be unreasonable or discriminatory and that may be harming American intellectual property rights, innovation, or technology development.
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