U.S. Trade Representative Robert Lighthizer filed a request for consultations at the World Trade Organization to “address China’s discriminatory technology licensing requirements,” his office said in a March 23 news release. President Donald Trump’s memorandum proposing Section 301 tariffs on about $60 billion worth of Chinese goods imported to the U.S. directed Lighthizer to address “China’s discriminatory technology licensing practices” through a WTO dispute proceeding (see 1803220034), of which the consultations request was the first step, Lighthizer's office said.
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
The Office of the U.S. Trade Representative will soon release a list of the 1,300 tariff lines from China recommended because of China's forced technology transfer, forced joint ventures, intellectual property theft and technology licensing restrictions (see 1803220030). Within that list, the agency will propose 25 percent tariffs on aerospace, information and communication technology, and certain machinery, the White House said in a fact sheet. The total value of goods subject to levies will be $50 billion, the amount the administration says is the annual cost to American businesses because of China's unfair restrictions.
The Chapter 11 bankruptcy filing by Toys 'R' Us could reduce new orders of toys in the near future, said Steve Pasierb, president of The Toy Association, in a letter. "In addition to the direct negative impact on some companies, the flood of liquidation product from [Toys 'R' Us] can likely weaken sales at both mass and specialty retailers," he said. "Likewise, there will be a short-term negative influence on orders coming into our manufacturing members, at least until the ramp-up happens to stock for the 2018 holiday season." The toy industry is now "at an inflection point," he said.
Senate Finance Committee Chairman Orrin Hatch, R-Utah, speaking at a conference hosted by free-trade interest groups, said Congress will assert itself when it's time to renew fast-track trade negotiating authority in July -- and that no changes to NAFTA can take effect unless Congress signs off. "Because the Constitution very clearly assigns to Congress the power to lay and collect tariffs and to regulate foreign commerce, Congress must have the final word on the fate of NAFTA," he said March 20, according to prepared remarks. "Congress will use the extension disapproval process under the Trade Promotion Authority law to emphasize that the administration must adhere to the TPA negotiating objectives and to encourage the president to seek new agreements with our trading partners."
International Trade Today is providing readers with some of the top stories for March 12-16 in case they were missed.
Tariffs are a tax on consumers, and not the right way to address China's industrial policies and unfair trade practices, the U.S. Chamber of Commerce says. U.S. Chamber CEO Thomas Donohue said March 15 that sweeping tariffs against China "could lead to a destructive trade war with serious consequences for U.S. economic growth and job creation. The livelihood of America’s consumers, businesses, farmers, and ranchers are at risk if the administration proceeds with this plan." Administration officials say the Section 301 technology transfer and intellectual property investigation response will be released in the coming weeks.
Despite the recent attention on Section 232 tariffs, some expect the effects of the Section 301 investigation started last year (see 1708210024) to eclipse the steel and aluminum import restrictions, panelists said at a Washington International Trade Association event March 13. Wendy Cutler, a former acting deputy U.S. trade representative, said once the White House announces what it's doing to respond to China's intellectual property transgressions, "we won't be talking about steel and aluminum."
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.
Members of the U.S. beef industry pleaded to the interagency Section 301 Committee on Feb. 15 to assess proposed retaliatory tariffs in response to its allegations of EU discrimination against U.S. beef exports, while representatives of the motorcycle, rayon fiber, and confectionery industries cautioned against the move. The Office of the U.S. Trade Representative in December issued a list of 85 headings and subheadings from the EU that the U.S. is considering for retaliatory tariffs, including food and a smattering of other products (see 1612270025).
Sen. Mike Lee, R-Utah, plans to introduce a bill that would make all executive branch trade actions, including tariff raises, subject to congressional approval, as part of his call for Congress to reclaim constitutional powers to lead U.S. trade policy, he wrote in an opinion column for Forbes (here). The yet-to-be-introduced Global Trade Accountability Act would help ensure that Congress would be involved in any decision that would increase trade barriers, Lee said. One example of a statute giving the executive branch “far too much power” to raise tariffs is Trade Act of 1974 Section 122, which allows the president to impose temporary import “surcharges” of up to 15 percent on any goods to deal with “large and serious” U.S. balance-of-payment deficits, Lee said.