China also joined other countries in opposing a transparency proposal sent to the WTO by the U.S. and four other members earlier this month.
China complained during a World Trade Organization (WTO) Council for Trade in Goods meeting on Tuesday about a U.S. decision to prohibit technology exports to a Chinese memory chip maker on national security grounds, a Geneva source said in an email on Tuesday.
The U.S. Commerce Department on Oct. 29 placed restrictions on U.S. exports to Fujian Jinhua Integrated Circuit Co. Ltd., a Chinese integrated circuit manufacturer, citing national security concerns.
China said the addition of the company to Commerce’s Entity List violates WTO rules and abuses the WTO’s national security exception, the Geneva source said.
In 2017, U.S.-based Micron Technology accused Fujian Jinhua of stealing intellectual property for manufacture of its circuits, before Fujian Jinhua made similar accusations against Micron earlier this year.
During the Goods Council meeting, China described Micron as the United States’ largest maker of dynamic random-access memory integrated circuits, which China said have a totally different nature from products spelled out in the WTO national security exemption, including fissionable materials and arms and ammunition.
The U.S. responded that Commerce’s decision was a law enforcement action meant to protect national security and IP and that Fujian Jinhua was posing a significant risk and would negatively impact U.S. national security and foreign policy.
China then replied that courts should rule on IP breaches and that it’s not appropriate for the U.S. to use export restrictions in lieu of a court ruling, according to the Geneva source.
China went on to raise concerns about other U.S. trade restrictions implemented on the basis of national security, pointing to the Federal Communications Commission’s decision to ban imports of communication equipment and the Transportation Security Administration’s decision to prohibit imports of airport security equipment from China.
The U.S. said both issues fall under national security concerns and that the aviation security equipment issue is security-specific and therefore would not be productively discussed in the WTO Goods Council, the Geneva source noted.
China voiced its grievances as Treasury Secretary Steven Mnuchin has led U.S. officials in resuming talks with Chinese officials to calm trade tensions, as President Donald Trump and Chinese President Xi Jinping prepare to meet during the G20 summit in Buenos Aires Nov. 30-Dec. 1, the Wall Street Journal (WSJ) reported Monday.
China has retaliated against tariffs imposed by the U.S. against $250 billion worth of imports from China, in 2017 import value, after a Section 301 investigation led by the Office of the U.S. Trade Representative (USTR) found that China is stealing IP from U.S. companies.
The U.S. is demanding that China put forward a concrete offer before talks on a trade deal can begin in earnest, but Chinese officials are saying they want to talk first before making a formal proposal, according to the WSJ article.
Meanwhile, USTR spreadsheets updated Thursday show 9,927 exclusion requests in connection with a first tranche of 25 percent tariffs affecting $34 billion in yearly imports are either under consideration or have been denied, and another 464 exclusion requests in connection with a second tranche of 25 percent tariffs applying to $16 billion in yearly imports are under consideration.
USTR hasn’t established an exclusion process for a third tranche of Section 301 tariffs—set to rise from 10 percent to 25 percent on Jan. 1—affecting $200 billion in yearly imports from China. The agency hasn’t granted any exclusions for the first two tranches.
U.S. Transparency Proposal Addressed at WTO Goods Council
In addition to addressing U.S. trade-related security measures, China and other WTO members during the Goods Council meeting also discussed a Nov. 1 transparency proposal submitted by the U.S., EU, Japan, Argentina and Costa Rica that calls for penalties to be leveled against members that don’t comply with WTO notification requirements for matters such as subsidies.
The proposal calls for penalties to be leveled against members that don’t comply with WTO notification requirements for matters such as subsidies.
China objected to the proposal and “a number of members also took issue” with the use of penalties on members failing to meet notification obligations and with the impact it would have on least developed and developing countries struggling with capacity constraints, according to the Geneva source.
But other members said the proposal was a good starting point for further discussions. More than 30 members took the floor to comment on the matter.
Among the penalties outlined in the proposal are the prohibition of representatives of offending member governments from being nominated to preside over WTO bodies and a fine of 5 percent of an offending member’s assessed contribution to the WTO budget.
Penalties would take effect for members that fail to provide complete notifications and that don’t request notification assistance from the WTO secretariat within one year of a notification deadline.
But the above-stated penalties would have to be announced less than two full years after a notification deadline and would take effect “at the beginning of the second year,” according to the proposal.
The proposal also spells out several penalties to be assessed after two but before three years after an ignored notification deadline.