Treasury, USTR Officials to Talk Trade in China; Quick Negotiated Settlement Seen Likely to Be Unsatisfactory
Treasury Secretary Steve Mnuchin will lead a delegation to China in a few days to discuss trade issues, including potential Section 301 tariffs, President Donald Trump said during a press conference April 24. Mnuchin, joined by U.S. Trade Representative Robert Lighthizer, will discuss unfair intellectual property rights issues that led the U.S. to propose the 25 percent tariffs under Section 301. Tariffs will be levied "unless we make a trade deal. I think we've got a very good chance of making a deal," Trump said in a meeting earlier in the day.
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There may be "a little bit more clarity about the U.S.'s next steps" after Mnuchin and Lighthizer return, Eric Emerson, Steptoe & Johnson's international trade practice chairman, said while moderating a panel April 25 on the Section 301 actions. A pledge by China to buy an additional $100 billion in U.S. products so that the 301 enforcement action is dropped would be a disservice to businesses who want to sell in China, according to panelist Erin Ennis, head of government affairs for the U.S.-China Business Council. Ennis said that while the trade deficit is a legitimate issue to address with China, it has nothing to do with the intellectual property violations that the Section 301 process is supposed to address. "We have to get away from the idea there is one big thing China can do," she said.
Terence Stewart, managing partner of Stewart and Stewart law firm, agreed that a solution announced after one trip is not to be hoped for. "A negotiated solution that's arrived at quickly is not likely to be significant," he said. If the dispute can't be solved quickly, tariffs likely won't work to convince China to take its thumb off the scale for its homegrown industries, said Josh Kallmer, senior vice president for global policy at the Information Technology Industry Council. "The costs will be borne by Americans. It won't be quick. The odds of success are not extremely high."
But Stewart, the only panelist in favor of using tariffs as leverage, also is skeptical about the other panelists' suggestion that a longer-term negotiation with allies -- or actions at the World Trade Organization -- will change the course of state-backed enterprises in China. "None of them look like they will deliver a change in direction, largely because the Chinese have no real incentive to change," he said. "I totally understand where the rest of my panel is coming from" in opposing tariffs, he said. But he said 20 years of the business community counseling engagement with China has led to very limited progress in opening up the country to true competition. He said another agreement wherein the U.S. says "here's what we'd like to see," without tariffs, is not a serious attempt to solve the problems. "That may be better for business," he said.
Stewart said he doesn't expect the release of a product list anytime soon from the Office of the U.S. Trade Representative for $100 billion in Chinese imports that would face tariffs if the Chinese retaliate after the first round of U.S. Section 301 tariffs (see 1804060033). "With the amount of pushback they got from businesses and Congress, it's not surprising," he said. "It may yet come, but I think it would only come if there's further deterioration."