U.S. Moves to Confront China on Trade

"WASHINGTON -- The Biden administration is preparing to confront China on its industrial subsidies and seek ways to protect America's edge in new technologies, hardening U.S. economic policy toward the nation's chief global rival.

U.S. efforts to be rolled out in coming months could include a new investigation into Beijing's support for sectors it considers strategic, using Section 301 of the Trade Act, according to people familiar with policy discussions.

Section 301 is a powerful tool allowing U.S. officials to single out certain practices of a trading partner and take punitive action should they determine those practices violate trade law. While the people didn't cite potential targeted sectors, China has identified semiconductors, artificial intelligence, 5G wireless and electric vehicles as areas where it seeks global leadership.

The White House is also weighing more scrutiny of U.S. companies' investments in China, tighter export controls on sensitive technologies and greater cooperation with European and Asian allies and partners on subsidies and other issues, these people said.

The Office of the U.S. Trade Representative said in its annual policy agenda on Tuesday that it is realigning its China policy to confront Beijing's nonmarket practices but didn't provide new details on specific measures.

"It is apparent that existing trade tools need to be strengthened, and new trade tools need to be forged," the USTR said in a Feb. 16 report to Congress.

The changes will allow President Biden, a Democrat, to distance himself from his Republican predecessor's trade policy, which resulted in a "phase one" trade deal with China in 2020 and remains largely intact.

"We are seeing increasing signs of their own distinctive approach," said Scott Kennedy, senior adviser at the Center for Strategic and International Studies, of White House officials.

While the administration has been considering a potential new 301 case for some time, the new initiative comes as efforts to build on the phase-one deal have stalled, with high-level U.S. and Chinese officials no longer in close communications on trade, according to people close to both sides.

Relations between the two countries eased with the signing of the trade deal in 2020 but have since soured over issues including the Covid-19 pandemic, Taiwan and China's crackdown on Muslim ethnic groups.

Chinese leaders are frustrated that Washington has largely left the Trump-era tariffs in place while expanding the list of Chinese technology companies subject to blacklisting over their alleged support for China's military and Beijing's mass surveillance of ethnic groups.

A fresh 301 investigation could have severe repercussions, according to some Chinese officials and government advisers, who say China might respond with retaliatory measures -- including adding U.S. companies to its "unreliable entity" list barring them from the Chinese market.

"Hundreds of Chinese companies are on the U.S. government's entity list these days," said a government adviser in Beijing. "But China has refrained from putting any U.S. firms on its entity list."

Chinese President Xi Jinping doesn't want relations with Washington to become outright hostile, the officials and advisers say, but has little motivation to compromise on key issues at the heart of the strained bilateral ties.

Despite signing of the 2020 trade accord, the Trump administration kept 25% tariffs on approximately $250 billion of Chinese imports and 7.5% tariffs on $120 billion of Chinese imports.” [1]

 

China needs world leadership in semiconductors. Russia was just cut off from Western semiconductor sources with sanctions. What a coincidence for China ... 

 

1. U.S. News: U.S. Moves to Confront China on Trade
Hayashi, Yuka; Wei, Lingling; Leary, Alex. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 03 Mar 2022: A.2.