BEING tough on China was a constant theme of President Donald Trump’s election campaign. On August 14th he had another chance to wield his presidential pen to show that he is making good on his promises—in this case of a “zero-tolerance policy on intellectual-property theft and forced technology transfer”. With the cameras rolling, he formally instructed Robert Lighthizer, the United States Trade Representative, to consider launching an investigation into China’s alleged crimes. “This is just the beginning,” was Mr Trump’s final flourish for the news bulletins.
His record of translating signatures into policies is patchy. Two others, launching investigations into whether imports of steel and aluminium threaten America’s national security, seem to have fizzled. But whereas proposals for import restrictions on these commodities met fierce resistance from consumers and America’s allies, China’s trade practices provoke much more agreement. It is one of the few issues about which Republicans and Democrats can agree.
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Wilbur Ross, America’s commerce secretary, recently wrote in the Financial Times that “American genius is under attack from China.” Poor countries need ideas and technology from richer ones to grow. But countries hungry for investment may have to offer intellectual-property protection in return. China is different. It is such a draw for foreign firms that it feels able to make tougher demands of them.
American technology giants such as Advanced Micro Devices, Hewlett Packard Enterprise, Intel and Qualcomm are all working with Chinese companies to develop new products. China’s critics see such efforts as examples of its abuse of its market power. Bill Reinsch of the Stimson Centre, a think-tank, says the problem American businesses face in China is that its “policy is to let foreigners in, extract their technology, then force them out”. In some industries, American companies can enter the Chinese market only in joint ventures with Chinese firms. As the Chinese government tries to make China a world leader in technology-intensive industries like semiconductors, driverless cars and biotechnology, the fear is that it will plunder its foreign partners’ intellectual jewels, and then get rid of them.
In response to Mr Trump’s latest order, China’s foreign ministry warned his administration to respect multilateral trade rules. This is a nod to the tool that the Trump administration is poised to use: Section 301 of the Trade Act of 1974. This law harks back to an era of aggressive American unilateralism, before the establishment of the World Trade Organisation in 1995. It allows America to levy punitive tariffs if a trading partner is found to be unfairly restricting trade. In the 1980s it was used to force other countries to buy more American goods.
Since then, it has fallen out of fashion. Unsurprisingly, other countries resented being bullied by the Americans, preferring a globally agreed set of rules. The Chinese think that the Americans should take their complaints to the WTO, a slower process. Dangling the threat of a 301 action made for a good photo opportunity of Mr Trump looking tough. China will be waiting to see if he acts tough, too.
Source: economist
The Trump administration is investigating Chinese trade practices