US Considers Upping Stakes Again In Trade Dispute With China Over IP, Tech Transfer

The Trump administration today announced it is considering raising its proposed tariffs from 10 to 25 percent on $200 billion worth of Chinese imports. The move is another in an attempt to get China to change the way it treats US companies including by alleging forcing transfer of technology and intellectual property.

Comments are being sought on the idea of an increase until 5 September. The deadline for appearing at a USTR hearing on the subject is 13 August.

The fight arose after the 2018 US Section 301 analysis came out in March, and is the subject of a dispute settlement case filed by the US at the World Trade Organization.

“The Trump Administration continues to urge China to stop its unfair practices, open its market, and engage in true market competition,” US Trade Representative Robert Lighthizer said in a press release. “We have been very clear about the specific changes China should undertake. Regrettably, instead of changing its harmful behavior, China has illegally retaliated against U.S. workers, farmers, ranchers and businesses.”

In a call with reporters today, administration officials would not directly say the increase in the proposed tariff rate is tied to China’s currency alone, but did say that devaluing currency for competitive purposes can be among a range of actions.

Another consideration is that, rather than responding to the initial tariffs announced the US by changing its behaviour, China responded with tariffs on some 40 percent of US imports into the country. So an increase in the rate of US tariffs could counter that, they said.

US officials are in communication with Chinese counterparts, the officials said. “Communication remains open” and Lighthizer remains ready to engage, they said.

For the WTO case filed by the US, there is a consultation period, after which the US can request a dispute panel.

Officials pointed out that the US is not alone in its claims against China, but is joined by “many likeminded partners,” referencing the European Union.

When asked if further raising tariffs on Chinese goods entering the US would hurt American consumers, the officials said all views would be taken into account in the comment period, but that the “worst thing for the US economy and US workers is if China continues doing what it is doing,” which is to take measures aimed at putting US workers out of work.

“We are trying to get China to change behaviours,” one official said. “That’s going to take time.”

[Update:] A USTR official said afterward that most of the matters covered in the Section 301 investigation do not involve the WTO agreements, and “nothing in US law or under the WTO agreements prevents the United States from taking action on these matters to protect the US national interest.”

“The additional tariffs are a part of the US response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property, as found in the Section 301 investigation,” the official said.

One of the matters covered in the investigation – technology licensing requirements – “does appear to be inconsistent with China’s WTO obligations,” the official added, and USTR has requested consultations with China pursuant to the WTO Dispute Settlement Understanding.

However, “no further information on the consultations request is available at this time,” they said. [end update]

Background, from the USTR press release:

“Interested parties may address this possible increase in the level of the additional duty in their comments on the proposed action. The proposed list and process for the public notice and comment period is set out in the Federal Register notice issued on July 10 and published in the Federal Register on July 17. To view the July 17 notice, including the list of proposed products to be subject to additional duties, click here. In light of the possible increase of the additional duty rate to 25 percent, the close of the written comment period is extended from August 30 to September 5, and the due date for requests to appear at the public hearing is extended to August 13. These modifications to the comment period will be set out in a notice to be published shortly in the Federal Register.”

 

Image Credits: USTR