Biden Administration Initiates New Trade Action Against China
Since the first investigation of China by the Trump Administration under Section 301 of the Trade Act of 1974 (Section 301 Investigation) conducted by US Trade Representative Robert Lighthizer, the United States has targeted the Peoples’ Republic of China (PRC) with a number of tools and tariffs aimed at protecting the intellectual property of the US technology and other data rich industries. They ranged from expanding the powers of the Committee on Foreign Investment in the United States (CFIUS) as well as expanded export controls and recent regulation and legislation related to cross-border data transfer like Tiktok. And of course, the tariffs imposed on China as a remedy to the Section 301 investigation imposed are still in place and under review by the Biden Administration, although US Trade Representative Tai also said this week that review was close to completion.
In the Biden Administration, a new chapter has begun under Section 301where the focus on China is now beyond protecting intellectual property and the tech industry, now investigating their action in subsidizing their maritime, logistics and shipbuilding sectors. This week, the United States Trade Representative office (USTR) initiated an investigation under Section 301 pursuant to a request made by five trade unions. In a formal notice issued by the USTR for a hearing on 29 May 2024, the USTR acknowledged the complaint made by the five trade unions and requested public comments on allegedly unreasonable, discriminatory, unfair and inequitable, and/or state assistance acts of the Chinese PRC in the maritime, logistics, and shipbuilding industries. In addition to a public hearing, the USTR said it is seeking public comments, which should be submitted by May 22 via the appropriate online portal at https://comments.ustr.gov/s/.
The practical result of a finding in favor of the complainants is the imposition of tariffs. While Section 301’s definitions for “unreasonable”, “discriminatory”, and “export targeting” (state intervention), are broadly defined, applied to this case there is a specific provision in the Trade Act involving the provision of “subsidies for the construction of vessels used in the commercial transportation by water of goods between foreign countries and the United States”. A finding of harm in this case, with the imposition of tariffs on the Chinese shipping industry, the principal means of transport of goods from China to the U.S., which still our largest trading partner, could have serious consequences for supply chains, American business that continues to import goods from China and for the American consumer.
If that isn’t enough to think about, President Biden also opened another new front with China this week, calling for the tariff rates on steel and aluminum to be raised from an average of 7.5% to 22.5%. He also called out China for tariff evasion by routing Chinese shipments through Mexico directing his staff to work with Mexico to shut down such evasion.
And, finally. a group of aviation trade groups and unions as well the members of Congress issued separate letters regarding further approvals of new inbound flights between the U.S. and China, because of Chinese “anti-competitive” practices. It was noted that PRC airlines were still flying over Russian airspace whereas U.S. airlines were not, thereby giving the PRC airlines a competitive advantage.
It is clearly an election year, and with forty-one percent of Americans naming China as the greatest U.S. enemy in a Gallup poll released in March, and the top perceived U.S. adversary for the fourth straight year, it is clear they are going to be getting even more attention as we approach November.
