China’s trade practices “in several specific areas,” especially forced technology transfer and the Made in China 2025 industrial program, continue to “cause particular concern” for U.S. “stakeholders,” the Office of the U.S. Trade Representative reported. Made in China 2025 “seeks to build up Chinese companies in 10 targeted sectors "at the expense of, and to the detriment of, foreign industries and their technologies,” said Friday’s report. The program’s “initial goal” is to “ensure, through various means, that Chinese companies develop, extract or acquire their own technology, intellectual property and know-how and their own brands,” said USTR. Its ultimate goal is “to capture much larger worldwide market shares” in China’s targeted “strategic sectors,” said the office. U.S. and Chinese negotiating teams, trying to hammer out a comprehensive trade agreement, continue “to make progress during candid and constructive discussions on the negotiations and important next steps,” said the White House Friday. Talks continue this week in Washington. "Building on the substantive progress achieved," China hopes the two sides "can continue to work with concerted efforts, meet each other halfway, implement the importance consensus reached by the two presidents, and make attempts to ensure a mutually beneficial agreement,” said a Foreign Ministry spokesperson Monday.
The American information and communications technology sector is bearing an especially heavy burden from “bilateral tariff escalation” between the U.S. and China, Rhodium Group analyst Lauren Gloudeman told reporters on a conference call, based on a its report for the U.S. Chamber of Commerce (see 1903140001). Friday's report called costs “unambiguously severe” on the ICT industry, she said. The Trump administration’s tariffs “raised prices for nearly one-third of ICT imports from China, which is equivalent to nearly 20 percent of the ICT imports around the world,” said Gloudeman. “Bilateral tariffs result in lower GDP, employment, investment and trade flows” for the U.S., she said. “We see higher import and export prices, meaning higher costs for consumers and businesses.” Long-term ICT “productivity growth” is at risk through lower U.S. “competitiveness” and production stagnation, Gloudeman said. “U.S. GDP would cumulatively face $1 trillion in losses within 10 years across all tariff-escalation scenarios that we modeled,” she said, $64 billion to $91 billion yearly in the first five years. The Office of the U.S. Trade Representative didn't comment Monday.
Recent supply-chain “activity” emanating from tariffs on Chinese goods “ebbed and flowed” among clients of contract electronics manufacturer Jabil, said CEO Mark Mondello on a Q2 call Thursday. “We've been very helpful to a significant amount of our customers in terms of game plans” for shifting supply chains outside China, he said. “Some have been proactive and some are taking a wait and see.” For customers seeking to modify supply chains to escape or reduce duties exposure, “we are very well-positioned to accommodate them,” he said. “It's kind of a wait and see for a lot of us in the next six to eight weeks” as U.S.-China trade talks move toward some unknown conclusion, he said. The U.S. "before too long" will have either "a good result or we’re going to have a bad result,” U.S. Trade Representative Robert Lighthizer told the Senate Finance Committee Tuesday (see 1903130036)
Section 301 tariffs on Chinese imports would reduce U.S. GDP by up to $1 trillion within a decade if left in place, concluded a Rhodium Group study for the U.S. Chamber of Commerce. The tariffs are “eroding” U.S. “competitiveness” in information and communication technology and “undermining globalized supply chains,” said the chamber, which plans to release the report Friday. “U.S. tariffs, together with Chinese retaliation, are disrupting global trade and supply chains, further damaging American businesses, workers, farmers, ranchers and investors,” commented the chamber in August, arguing unsuccessfully against imposition of the List 3 tariffs that took effect Sept. 24. The three rounds of tariffs imposed since July are costing the tech industry $1 billion a month in higher fees, estimated CTA in December (see 1812140045). U.S. Trade Representative Robert Lighthizer, in two recent appearances before Congress, refused to say if a trade deal with China hinges on lifting the tariffs or keeping them in place to enforce Chinese compliance (see 1903130036).
The rate of the third tranche of tariffs on Chinese goods “will remain at 10 percent" indefinitely, said a prepublication Federal Register “modification” notice released Thursday by the Office of the U.S. Trade Representative. That prevented a hike to 25 percent at 12:01 a.m. EST Saturday. At President Donald Trump's "discretion,” the USTR “determined that it no longer is appropriate” to hike the tariffs, “in light of progress in discussions with China” on a new trade accord. That levies aren't increasing is the “good news,” emailed trade expert David Cohen with Sandler Travis. Staying at 10 percent indefinitely is "not so good news, he added. Hundreds of tech companies testified last summer against the penalties.
Delaying the increase to 25 percent on the 10 percent Section 301 tariffs on $200 billion in Chinese imports will require a “presidential proclamation” or publication of a Federal Register notice before the midnight Friday deadline to avert an automatic rate hike, emailed customs law expert Ted Murphy of Baker McKenzie Monday. President Donald Trump, for the second time since December, postponed the rate hike in a pair of tweets Sunday, citing “substantial progress” in U.S.-China trade talks (see 1902250001).
As the U.S. approaches the “final weeks” of negotiations with China on a comprehensive trade deal, “we urge you to insist that the deal make substantial, verifiable, and enforceable progress to address the myriad threats identified” in the Office of the U.S. Trade Representative’s Trade Act Section 301 report on allegedly unfair Chinese trade practices, seven Democratic senators wrote President Donald Trump Wednesday. "Any acceptable agreement must, at a minimum, commit China to cease the predatory practices” uncovered in the 301 investigation, including forced technology transfer and discriminatory licensing terms, said the letter by Sens. Robert Menendez of New Jersey, Sheldon Whitehouse of Rhode Island, Mark Warner of Virginia, Maggie Hassan of New Hampshire, Ben Cardin of Maryland, Michael Bennet of Colorado and Catherine Cortez Masto of Nevada. "The only way to hold the Chinese government to its word is to lay out clear metrics by which we can judge compliance," they said. Ending China’s unfair trade practices is “a critical step” toward “reversing the damage” those policies have had on the U.S. economy. they said.
The Office of the U.S. Trade Representative should defend U.S. interests against intellectual property threats in the EU, China and various countries, tech groups commented through Thursday night. USTR collected comments for its Special 301 report on international IP practices. Copyright safe harbors included in the Digital Millennium Copyright Act and exceptions like fair use are critical, the Internet Association said, citing IP threats from the EU, China and others. Efforts to chip away at the safe harbor framework “threaten the ability of internet companies to expand globally by eliminating” copyright certainty, IA said. BSA|The Software Alliance cited “digital protectionism and isolationism.” Restrictions on “cross-border data transfers; coercive technology transfer; and discrimination against foreign companies, products, and technologies” are counter to U.S. interests, BSA said. The Computer & Communications Industry Association asked USTR to recognize that Europe is attempting to weaken liability protections and enact “copyright policies that will likely have significant negative consequences for the digital economy” like “snippet taxes.” Counterfeiting and piracy in China “remain at epidemic levels,” the U.S. Chamber of Commerce said. Ongoing trade negotiations offer opportunity for the U.S. and China to address IP protection and technology transfer issues, the chamber said. Theft and infringement in China continue to put the software industry at risk, ACT|The App Association said, recommending China remain on the priority watch list. Algeria, Argentina, India, Indonesia, Kuwait, Russia and Ukraine also should remain on the list, ACT said. Public Citizen raised concerns about Malaysia, which hasn't been on the watch list since 2012.
The Office of the U.S. Trade Representative is wrong to propose lowering the de minimis threshold on shipments from Canada and Mexico, said the Internet Association. A lower threshold would mean more goods crossing borders could be subject to duties. "A consistent, high de minimis threshold benefits the entire American e-commerce system, including thousands of small businesses that use the internet to export and import," said IA Director-Trade Policy Jordan Haas Wednesday. USTR’s proposed provision in legislation implementing the new North American Free Trade Agreement “would force small businesses to navigate a complicated, confusing net of customs rules,” said Haas. Businesses complained that even the concessions won in the new NAFTA are complicated and confusing, because Mexico and Canada have different de minimis levels for sales taxes and for customs duties.
A Chinese Foreign Ministry spokesperson sidestepped questions Tuesday at a Beijing news conference about whether the U.S. risks endangering its trade talks with China if it follows through with threats to extradite Huawei Chief Financial Officer Meng Wanzhou to the U.S. from Canada to stand trial on criminal charges. Meng was arrested Dec. 1 while changing planes in Vancouver on suspicion of violating U.S. sanctions against Iran (see 1812060042). In ordering Meng’s detention, “what the U.S. has done, with its egregious nature, severely infringes upon the legal and legitimate rights and interests of Chinese citizens,” said the spokesperson. China urges the U.S. to “take measures to correct its wrongdoings and withdraw its arrest order for the Chinese citizen,” she said, hinting at Chinese retaliation if the U.S. fails to do so. The Office of the U.S. Trade Representative didn’t comment Tuesday.