While USTR officially has a year to make a determination in the pending Section 301 investigation into Chinese intellectual property theft and forced technology transfer, this deadline is likely to be moved up significantly. USTR will probably rule that American firms have been harmed by Chinese actions and that these injuries require remedies. Damages could involve significant tariffs, calculated by considering harm caused cumulatively over the past decade. President Trump’s State of the Union address on January 30, provides the perfect opportunity to highlight the evolving trade agenda and note recent or upcoming actions, particularly vis-à-vis China.
The United States has now moved one step closer to dusting off a Cold War trade relic and applying it to China. In authorizing US Trade Representative (USTR) Robert Lighthizer to investigate whether to self-initiate a Section 301 case against China for alleged unfair trade practices, we have started down a path first traveled in the 1970s and 1980s. This will give rise to a dangerous trend that could rapidly shake the very system of global rules that have worked well for most firms for decades. While there appears to be strong pressure from different quarters to Washington to “do something,” it is not at all clear that many understand the power of 301 to destroy the trading system now.
So, what happens when President Donald Trump, urged on by his equally enthusiastic advisors, significantly ramps up enforcement efforts against China? Or moves beyond standard measures like anti-dumping lawsuits and does impose tariffs or starts to block trade? These are critically important questions that ought to be asked and answered prior to American actions. The response matters not just to the United States and China or to American and Chinese companies but much more broadly to Asia and, potentially, to the wider world.