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American Shipper

Chinese president vows to cut auto tariffs, open investment regime

President Xi’s words at the Boao Forum for Asia come after President Trump tweeted complaints about China car tariffs and threatened a second round of “Section 301” tariffs against the country.

   Chinese President Xi Jinping on Tuesday pledged more openness to foreign investment and lower auto tariffs while China launched a World Trade Organization (WTO) complaint against global U.S. tariffs on steel and aluminum.
   Xi’s statement on lower auto tariffs came a day after President Donald Trump noted in a tweet that China charges 25 percent tariffs on U.S. car exports, while the United States charges 2.5 tariffs on imports of cars from China. “Does that sound like free or fair trade,” Trump said. “No, it sounds like STUPID TRADE – going on for years!”
   Trump administration officials have cited unfair intellectual property rights (IPR)-related practices in China as a basis for a U.S. proposal to levy 25 percent tariffs on about $50 billion worth of Chinese products pursuant to an investigation led by the Office of the U.S. Trade Representative (USTR) under Section 301 of the Trade Act of 1974, which allows trade remedies to counter unreasonable foreign commercial practices.
   China last Wednesday announced an intent to impose 25 percent tariffs on 106 items imported from the United States worth about $50 billion in 2017 in retaliation for the proposed Section 30” tariffs.
   Trump then upped the ante by threatening more retaliation on Thursday.
   In a statement distributed by the White House, Trump said he instructed USTR to consider whether $100 billion of tariffs, in addition to the $50 billion previously announced, might be appropriate under Section 301 “and, if so, to identify the products upon which to impose such tariffs.”
   U.S. Trade Representative Robert Lighthizer then issued a statement in support of Trump’s directive, calling it an appropriate response to China’s retaliation threat.
   “Unfortunately, China has chosen to respond thus far with threats to impose unjustified tariffs on billions of dollars in U.S. exports, including our agricultural products,” Lighthizer said. “Such measures would undoubtedly cause further harm to American workers, farmers and businesses. Under these circumstances, the President is right to ask for additional appropriate action to obtain the elimination of the unfair acts, policies, and practices identified in USTR’s [Section 301] report.”
   USTR noted that any additional U.S. tariffs would be subject to a public notice-and-comment process similar to the one USTR set forth last week for the first round of tariffs proposed by the Trump administration.
   He also noted that he instructed Agriculture Secretary Sonny Perdue, with the support of other Cabinet members, to use his broad authority to implement a plan to protect U.S. “farmers and agricultural interests.”
   Trump said in the statement that the United States remained “prepared to have discussions in further support” of his administration’s commitment to achieving “free, fair and reciprocal trade” and to protect the technology and intellectual property of U.S. companies and individuals.
   Speaking during the 2018 Boao Forum for Asia annual conference in Boao, China, Xi announced “major measures” to be taken by China with regard to market liberalization.
   “First, we will significantly broaden market access,” he said, as translated. “A number of landmark measures are to be launched this year.”
   Xi said China would, “as soon as possible,” ease foreign equity restrictions in the manufacturing sector, in particular the automobile industry.
   He said China will “have to rely more heavily on improving the investment environment” and implementing more open investment policies than the past.
   Xi also said China will strengthen its IPR protection regime, saying that would provide the “biggest boost” for enhancing Chinese economic competitiveness.
   Xi pledged to enact policies that drive more imports, noting that his government doesn’t seek a trade surplus. Part of that policy will involve a significant lowering of Chinese automobile tariffs this year, as well as a drop in tariffs on some other products, he said.
   Finally, Xi said China will seek faster progress to join the WTO Government Procurement Agreement.
   On the same day, the WTO circulated a report to its members that China has requested consultations with the United States regarding global U.S. duties of 25 percent on steel and 10 percent on aluminum that took effect March 23.
   Consultations are the first step in the WTO’s dispute settlement system and can be escalated to consideration by a formal dispute panel if they’re not resolved within 60 days of filing.
   China’s request cites myriad WTO rules that the country claims the U.S. Section 232 measures violate and says the United States hasn’t provided “reasoned and adequate explanation” of how imports of the metals have increased and how they cause or threaten serious injury to domestic producers.
   China also claimed that the United States has failed to follow proper WTO procedural requirements, including notification and consultation procedures, and that the U.S. is improperly applying tariffs irrespective of the source of supply as well as abridging a requirement to apply such measures “only for a necessary period of time.”
   In addition to proposing retaliation against the U.S.’s Section 301 tariffs, China on April 2 activated tariffs covering about $3 billion worth of U.S. goods in retaliation against the Section 232 duties on steel and aluminum.
   China imposed 25 percent duties on eight different imported goods, including pork and pork products, as well as 15 percent duties on 120 imported items, including fruit.
   Members of the Trump administration, including Commerce Secretary Wilbur Ross, have expressed their belief that the United States’ Section 232 tariffs fall under a WTO “national security” exception from standards of the multilateral body generally requiring all members to maintain low tariffs. Therefore, the United States’ steel and aluminum tariffs should be compliant with WTO rules, Ross said during a February call with reporters.
   Amid widespread backlash to the tariffs from U.S. business interests, including the agriculture and technology industries, some trade analysts recently have stated that tariffs probably won’t have catastrophic economic impacts, even if the tit-for-tats intensify.
   City University of New York economist Paul Krugman wrote in a recent New York Times op-ed that even if the U.S. enters a full-scale trade war, “conventional estimates” suggest that the resulting costs “don’t come anywhere near” 10 percent, or even 6 percent, of GDP.
   “In fact, it’s one of the dirty little secrets of international economics that standard estimates of the cost of protectionism, while not trivial, aren’t usually earthshaking either,” Krugman wrote.
   Michael Stumo, CEO of the Coalition for a Prosperous America (CPA), said in an interview with American Shipper that tariffs change the composition of trade, not quantitative trade balances or economic growth trajectories.
   Tariffs “block some things coming in, [and] other things flow around,” Stumo said. “We like tariffs at CPA, but that’s because we like to optimize the composition of trade so that we’re not a natural resource colony to Asian industrial powers where we export commodities and import manufactured goods.”

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