Donald Trump may crack down on China’s ‘IP theft’ laws with US$30b tariffs – upsetting US Chamber of Commerce

China entered the WTO in 2001 ‘saying they’d play by the rules and since that time they’ve basically broken every rule in the book’, Navarro said 

PUBLISHED : Friday, 16 March, 2018, 12:28am
UPDATED : Friday, 23 March, 2018, 12:05pm

US President Donald Trump will soon crack down on Chinese intellectual property theft, White House trade adviser Peter Navarro said, escalating a confrontation with companies that might suffer from a US-China trade war.

Among the solutions Trump will be offered are tariffs of US$30 billion or more to be placed on Chinese goods unless the country agrees to end a law forcing foreign businesses to transfer proprietary technology to their Chinese partners.

But that suggestion has been slammed by the US Chamber of Commerce, which says that such tariffs could have a “devastating” effect on the incomes of American families.

In an interview on CNBC, Navarro said: “In the coming weeks, President Trump is going to have on his desk some recommendations on [US Trade Representative] Robert Lighthizer’s … investigation into China’s theft and forced transfer of intellectual property.

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“This will be one of the many steps the president is courageously going to take in order to address unfair trade practices,” he said.

“I don’t think there’s anybody on Wall Street that will oppose cracking down on China’s theft of our intellectual property.”

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The tariffs of US$30 billion or more were first reported by The Wall Street Journal, citing a White House official and people briefed on administration deliberations. 

The clash over how to challenge both China’s trade surplus with the US and its treatment of intellectual property started just a few months into Trump’s tenure, with a self-initiated investigation into imported steel and aluminium.

In August, Lighthizer launched an investigation under section 301 of the US Trade Act of 1974 into the Chinese regulations, which force US companies operating in the country to transfer technology and intellectual property rights to local business partners. 

Soon afterward, his office began taking testimony from US companies, seeking verification that the Chinese government uses unfair tactics on US companies’ operations in China “to require or pressure the transfer of technologies and intellectual property to Chinese companies”, according to USTR documents. 

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Navarro's comments come less than a week since Trump announced he would soon levy punitive tariffs on imports of steel and aluminum.

That move came with the caveat that some allies, including Canada and Mexico, would receive exemptions, and singled out China as a source of state-subsidised oversupply of the metals. 

US lawmakers, including speaker of the Republican-controlled House of Representatives Paul Ryan and Senator Orrin Hatch, the second-highest ranking congressional Republican, have been pressuring Trump in recent weeks to direct his punitive trade initiatives at China. 

Condemnation of China's trade practices has become a bipartisan exercise in Washington. 

“China has taken terrible advantage of America over the past decade or two, and they don’t play fair,” Senate minority leader Chuck Schumer said ahead of last week's announcement on metal tariffs.

He also urged the Trump administration to “make sure what they do is focus on China. They are our number one trade problem; not Canada, not Europe”.

Restrictions on foreign investment in sectors including finance, media and telecommunications and car manufacturing have been in place as part of the terms of China’s accession to the World Trade Organisation. 

These rules force foreign companies to partner with local entities, effectively ceding to them proprietary technology. 

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“China entering the WTO in 2001 was a fundamental shock,” Navarro told CNBC. “China came in saying they’d play by the rules and since that time they’ve basically broken every rule in the book. And basically they’ve destabilised the world trading system.” 

The US trade deficit with China reached a record US$276 billion (HK$2.16 trillion) last year, putting more pressure on Trump, who campaigned for president in 2016 on a promise that he would address the trade imbalance.

The US Chamber of Commerce has pushed back against tariffs as a solution to the trade imbalance nearly every time Trump’s anti-China rhetoric escalates. 

“The US Chamber is very concerned about the increasing prospects of a trade war, which would put at risk the economic momentum achieved through the administration’s tax and regulatory reforms,” the trade body said shortly before Trump announced his plan for a 25 per cent punitive tariff on steel and 10 per cent on aluminium. 

“We won’t drive the economy to over 3 per cent growth or continue to create jobs if we go down this path.  

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“These new tariffs would directly harm American manufacturers, provoke widespread retaliation from our trading partners and leave virtually untouched the true problem of Chinese steel and aluminium overcapacity,” the chamber said. 

“Alienating our strongest global allies amid high-stakes trade negotiations is not the path to long-term American leadership.”