Trump Turns To 43-Year-Old 'America First' Trade Law To Pressure China | KUOW News and Information

Trump Turns To 43-Year-Old 'America First' Trade Law To Pressure China

Aug 14, 2017
Originally published on August 14, 2017 8:32 pm

Updated at 10:35 p.m. ET

President Trump on Monday authorized his top trade official to look into whether China is guilty of intellectual property theft, a move that could eventually lead to trade sanctions.

Trump called his action "a very big move" against practices that cost our nation "millions of jobs and billions and billions of dollars each and every year."

He cited not just the theft of intellectual property such as computer software, but also Beijing's requirement that U.S. companies turn over proprietary technology as a condition of entering China's markets.

"We will safeguard the copyrights, patents, trademarks, trade secrets and other intellectual property that is so vital to our security and to our prosperity," Trump said at the White House. He was flanked by U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and members of his economic team.

Monday's steps were very preliminary, and analysts say that it could be a long time, if ever, before significant trade sanctions are imposed on China.

Eventually, it could lead the administration to initiate what's called a Section 301 investigation, a sanctions mechanism that's part of the Trade Act of 1974.

Section 301 was widely used in the 1980s under the Reagan administration. More recently US presidents have complied with a requirement to obtain World Trade Organization authorization before using Section 301.

But Trump has implied he may use Section 301 without WTO authorization. Bypassing the WTO would be quicker.

"It saves time," says Matt Gold, a former deputy assistant US trade representative. A WTO case "would take a few years for us to bring it to a WTO panel, get a decision, then it will get appealed to the WTO appellate body. Then we get another decision. Then we have to go through another WTO process to get authorization for specific types of trade barriers. ... So it can take a few years to get the WTO authorization."

But Gold says using Section 301 without WTO authorization would leave the US government in conflict with its obligations under international law.

The White House move was applauded by technology groups, which have long complained about intellectual property theft. The Information Technology and Innovation Foundation issued a statement saying "for too long China has flouted the spirit, if not always the letter of its commitments under the WTO and other agreements."

Sen. Sherrod Brown, D-Ohio, said launching the investigation sends a strong signal to China that it will be held accountable if it doesn't work with the United States to level the playing field. But he said the Trump administration needs to go further to address dumping of products such as steel. "We need to follow through with meaningful action and that means the president needs to get serious about trade enforcement, especially on steel," Brown said.

But there are risks to the White House approach. Caroline Freund, a senior fellow at the Peterson Institute for International Economics, says U.S. companies that try to do business with China could get hurt in several ways. "China is likely to retaliate with tariffs on their own of U.S. goods, and then U.S. companies will be further hurt in China," she said. "It won't lead to anything positive."

In an editorial on Monday, the state-run newspaper China Daily said the investigation will "poison" relations.

But Freund also points out that for all of Trump's rhetoric about China while on the campaign trail, the White House so far has been slow to take action against unfair trade practices. Trump backed off of labeling China a currency manipulator for instance, and a long promised report on steel dumping has been delayed.

She says that's because it's one thing to talk about steel tariffs, but imposing them hurts other U.S. manufacturers, such as automakers and appliance companies.

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AUDIE CORNISH, HOST:

By some estimates, U.S. companies lose as much as $300 billion a year to China because of the theft of intellectual property. Today President Trump formally asked the U.S. trade representative to look into the problem, and NPR's Jim Zarroli reports that investigation could eventually lead to trade sanctions against China.

JIM ZARROLI, BYLINE: President Trump said intellectual property theft costs the United States millions of jobs each year. That includes the forced transfer of valuable technology from U.S. companies as a condition of access to China's markets. Trump said, for too long, wealth has been drained from our country while Washington turned a blind eye.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: We will safeguard the copyrights, patents, trademarks, trade secrets and other intellectual property that is so vital to our security and to our prosperity.

ZARROLI: The steps announced by the White House today are very preliminary. U.S. trade representative Robert Lighthizer will essentially look into the issue, and depending on what he finds, the administration could initiate what's called a Section 301 investigation, a rarely used mechanism from the 1974 Trade Act. That would eventually allow the U.S. government to impose tariffs on China, and it could do so unilaterally without having to go through the World Trade Organization. Matt Gold is a former deputy assistant U.S. trade representative.

MATT GOLD: It saves time. The WTO case - it would take a few years for us to bring it to a WTO panel, get a decision. Then it will get appealed to the WTO appellate body. Then we get another decision.

ZARROLI: The president's move was applauded by technology groups who have long complained about IP theft. The Information Technology and Innovation Foundation issued a statement saying, for too long, China has flouted the spirit, if not always the letter, of its commitments under the WTO and other agreements.

Democratic Senator Sherrod Brown of Ohio said launching the investigation sends a strong signal to China that it will be held accountable if it doesn't work with the U.S. to level the playing field. But he said the Trump administration needs to go further to address the dumping of products such as steel.

SHERROD BROWN: We need to follow through with meaningful action. And that means the president needs to get serious about trade enforcement, especially on steel.

ZARROLI: But there are risks to what the White House is embarking on. Trade disputes are typically arbitrated by the WTO, and acting unilaterally could backfire. Caroline Freund, senior fellow at the Peterson Institute for International Economics, says U.S. companies that try to do business with China could get hurt in several ways.

CAROLINE FREUND: One, China is likely to retaliate with tariffs of their own on U.S. goods, and then U.S. companies will be further hurt in China. It won't lead to anything positive.

ZARROLI: But Freund also points out that for all of Trump's rhetoric on the campaign trail, the White House has so far been slow to take action against unfair trade practices. Trump backed off of labeling China a currency manipulator, for instance, and a long-promised report on steel dumping has been delayed.

FREUND: The administration embarks on something. They think it's going to be simple. Let's just impose tariffs on steel. But then it turns out to be a lot more complicated because of the way the economy is so intertwined.

ZARROLI: It's one thing to talk about steel tariffs, for example, Freund says, but imposing them hurts other U.S. manufacturers such as automakers and appliance companies. President Trump has asked for an investigation into intellectual property theft, but any action to stop it still seems a long way off. Jim Zarroli, NPR News, New York.

(SOUNDBITE OF SAN FERMIN SONG, "BRIDE") Transcript provided by NPR, Copyright NPR.