China-US relations

Trump ‘plans to trigger China trade probe’

PUBLISHED : Sunday, 13 August, 2017, 3:38am
UPDATED : Sunday, 13 August, 2017, 11:27pm

US President Donald Trump plans to trigger an investigation into intellectual property violations by China, in a push to tackle complaints that the economic relationship between the two countries is stacked in Beijing’s favour.

Trump planned to sign an executive memorandum on Monday directing US Trade Representative Robert Lighthizer to investigate Chinese laws, policies, practices or actions that might be “unreasonable or discriminatory” to US technology and intellectual property, senior US administration ­officials said in Washington.

China’s foreign and trade ministries did not respond to the announcement but state-run Xinhua said Washington’s threat to investigate China’s trade practices would “harm mutually beneficial China-US trade ties and ultimately hurt American consumers”.

The US officials said the investigation would focus on China’s “forceful transfer of technology” and “intellectual property theft” towards foreign companies doing business in China.

They said the investigation could take as much as a year, and either lead to negotiating an agreement with China, US unilateral trade remedy actions or entering into dispute settlement process in the World Trade Organisation. 

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The investigation under section 301 of the US Trade Act of 1974 will be Trump’s first major trade action against China.

But Washington has threatened similar measures against Beijing before.

In 1989, the US put China on an intellectual property “priority watch list”, leading to a minor tariff row but avoiding a full-scale trade war.

Mei Xinyu, a researcher with a Ministry of Commerce think tank, said this kind of US pressure did not stop China emerging as the world’s top manufacturing power and the world’s biggest exporting country.

Asked earlier this month about possible US action, Commerce Ministry spokesman Gao Feng said every member of the WTO should follow WTO rules in taking trade measures.

The US investigation comes at a sensitive time, with a steep escalation in military tensions between the United States and North Korea, a traditional ally and trading partner with China.

Pyongyang and Washington have been engaged in a war of words since Thursday when Trump warned North Korean leader Kim Jong-un that further threats by him would be “met with fire and fury”.

Pyongyang responded by announcing a intermediate-range missile strike plan near the US Pacific island territory of Guam.

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In a phone call earlier this weekend, Trump and his Chinese counterpart Xi Jinping “agreed North Korea must stop its provocative and escalatory behaviour”, according to a White House statement released after the phone call. 

US administration officials said the North Korean issue and the trade investigation were “totally unrelated”.

“I don’t believe we are heading towards a period of great conflict. This is simply business between two countries,” a US senior official said.

Speculation about a trade war between the world’s two biggest economies spread last month after the US and China failed to reach an agreement over their long-standing trade disputes during their Comprehensive Economic Dialogue in Washington. 

A US senior official said the US Trade Representative would seek counsel with the appropriate advisers, and sought to play down the potential that such an investigation would damage relations with Beijing.

“If the investigation is instituted, we will consult with China, we will give interested parities opportunities to comment. There would likely be a hearing. And these investigations can take as much as year before we reach a conclusion,” the official said.

Pressure from some US government bodies and business associations has been building for years, and has largely been a bipartisan issue in Washington.

The US Federal Trade Commission warned the US Congress about China’s intellectual property protection practices last year, after attempts to steer Beijing towards clearer antitrust regulations were deemed to have largely failed.

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“China’s agencies are pursuing non-competition objectives through competition enforcement to promote either certain industries or particular Chinese competitors,” the FTC said in a prepared statement to a subcommittee of the US House of Representatives in June 2016.

“We recognise that the pursuit of competition enforcement without procedural safeguards or based on opaque, non-competition standards undermines the legitimacy of antitrust enforcement around the world. Many of the concerns about IP-related antitrust enforcement have been focused on China.”

Under the terms of China’s entry to the WTO in 2001, Beijing was allowed to limit foreign ownership of companies in key industries including telecommunications and car manufacturing. These limitations forced many foreign companies into joint ventures with Chinese entities, many of them state-owned, effectively a form of technology transfer.

The US and China can beat the trade deficit with a treaty, not all-out war

US government negotiators agreed to these allowances because Chinese companies were not competitive internationally at the time. US companies and government officials largely approved of these terms to gain access to Chinese markets.

The growth of companies like Huawei, now a global manufacturer of telecommunications networking equipment and a competitor to US companies like Qualcomm and Cisco, underscores how those conditions have changed.