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American Shipper

China to ‘fight to the end’ against U.S.-planned tariffs

China appears to have suggested it would retaliate against tariffs ordered by President Trump, as well as a separate string of generally global tariffs on steel and aluminum Trump called for.

   China vowed to “fight to the end” in any forthcoming trade war with the U.S., suggesting it plans to retaliate against U.S. tariffs ordered by President Donald Trump on March 22 against $50 billion worth of Chinese goods.
   “We urge the U.S. to cease and desist, make cautious decisions, and avoid placing China-U.S. trade relations in danger with the purpose of hurting others that eventually end up hurting itself,” the Chinese Embassy in Washington said in a March 23 statement.
   China’s commerce ministry on March 23 also said it would retaliate against generally global U.S. tariffs assessed pursuant to Section 232 of the Trade Expansion Act of 1962, to the tune of 15 percent tariffs against about $1 billion of U.S. exports, including fruit, nuts, wine, ethanol, and seamless steel pipes, as well as 25 percent tariffs against about $2 billion of U.S. exports, including pork and recycled aluminum.
   U.S. tariffs of 25 percent for steel imports and 10 percent for aluminum imports took effect at midnight on March 23, after Trump administration investigations found such imports to threaten national security.
   In addition to those tariffs, Trump is proposing for public comment adding 25 percent tariffs for Chinese products across approximately 1,300 tariff lines, after an Office of the U.S. Trade Representative (USTR)-led investigation under Section 301 of the Trade Act of 1974 found that China unfairly forces U.S. investors to transfer their technology and intellectual property to its government.
   Section 301 allows USTR to broadly take action, including imposing tariffs, to counter any foreign country’s “unreasonable” acts, policies, and practices that have been found, through investigation, to have denied U.S. companies “fair and equitable” commercial treatment and market access. Trump issued a memo in August directing USTR to start the investigation.
   China has not announced any specific retaliatory measures to counter the U.S.’s “Section 301” tariffs.
   A White House fact sheet says these tariffs will be assessed against sectors including aerospace, information communication technology, and machinery.
   Following Trump’s direction, USTR on March 23 challenged at the World Trade Organization (WTO) China’s allegedly discriminatory technology licensing practices, the agency said in a statement.
   USTR filed a request for consultations on March 23. If consultations don’t resolve the matter within 60 days, the U.S. can take the matter to WTO dispute settlement.
   “China appears to be breaking WTO rules by denying foreign patent holders, including U.S. companies, basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends,” USTR said in a March 23 statement. “China also appears to be breaking WTO rules by imposing mandatory adverse contract terms that discriminate against and are less favorable for imported foreign technology.”
   Treasury will also propose restrictions on Chinese investment in “sensitive U.S. technology” as well, the White House fact sheet says.
   “President Trump has made it clear we must insist on fair and reciprocal trade with China and strictly enforce our laws against unfair trade. This requires taking effective action to confront China over its state-led efforts to force, strong-arm, and even steal U.S. technology and intellectual property,” U.S. Trade Representative Robert Lighthizer said in a statement. “Years of talking about these problems with China has not worked.”
   USTR released a 215-page report on March 23, detailing the findings of the Section 301 review.
   The report says China had committed on at least eight occasions since 2010 to not use technology transfer as a condition for market access, and to allow technology transfer decisions to be independently negotiated by businesses.
   But the investigation found that the transfer regime continues, “notwithstanding repeated bilateral commitments and government statements.”
   In its official publications, the Chinese government has indicated its technology-related industrial policies, and shown a proclivity for “re-innovation” of foreign technologies, USTR’s report says.
   This is actually part of an effort by China to progressively reduce its dependence on foreign technology to advance its economy toward becoming a global science and technology powerhouse, and move it away from its traditional identity as a low-cost manufacturing hub, the report says.
   USTR cited “more than 100 five-year plans, science and technology development plans, and sectoral plans over the last decade” that advance China’s foreign technology transfer policies, including the “seminal document articulating China’s long-term technology development strategy,” the National Medium- and Long-Term Science and  Technology Development Plan Outline (2006-2020) (abbreviated as “MLP”).
   The outline recognizes China’s “relatively weak indigenous innovation capacity,” as well as “weak core competitiveness” of Chinese enterprises, and that China’s “high-technology industries ‘lag’ those of more developed nations,” USTR said.
   The document also highlights 11 key sectors, and 68 priorities within the sectors for technology development, and establishes a goal of reducing the rate of dependence on foreign technologies to below 30 percent by 2020, the Section 301 review says.
   MLP Section 8(2) calls for enhancing the “absorption, digestion, and re-innovation of introduced technology” to move China toward its science and technology goals, USTR said.
   China’s foreign ownership restrictions include joint venture requirements and equity limitations to pressure U.S. technology transfers to Chinese entities, and its administrative review and licensing procedures for technology investments require or pressure technology transfers, which weaken the global competitiveness of U.S. firms, USTR said in a statement summarizing the report.
   Trump in a March 22 memo directed USTR to publish a list of proposed tariffs and affected products by the end of April 6.
   Per Section 304 of the Trade Act of 1974, “Section 301” investigations must yield at least a 30-day public comment period, which will be initiated after USTR publishes a Federal Register notice of the proposed tariffs.
   USTR will then consult with “appropriate agencies and committees” before publishing a final list of products and tariff increases to be implemented.
   During a March 22 press conference, Trump noted that the U.S., in bilateral discussions, is pressing China to help reduce the U.S. trade deficit with the nation by $100 billion, about 25 percent of the U.S.’s total trade deficit with China.
   “We’ve spoken to China and we’re in the midst of a very large negotiation,” Trump said. “We’ll see where it takes us. But in the meantime, we are sending a Section 301 action.”

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