These Are Some of Trump’s Weapons in His Trade Fight With China
(Bloomberg) -- President Donald Trump says he’s on a mission to save American industrial jobs, cut China’s trade surplus with the U.S. and strike back at what he says have been decades of theft of intellectual property by Chinese businesses. Under past U.S. presidents, the preferred trade tool was filing cases at the World Trade Organization’s Dispute Settlement Body, where they can take three to five years to fully resolve. Trump has dipped into a different, much more immediate arsenal of weapons, most of them under the rationale that trade affects national security.
Section 232 (of the Trade Expansion Act of 1962)
This allows the president to adjust imports without a vote by Congress should the Department of Commerce find evidence of a national-security threat from foreign shipments. After Commerce Secretary Wilbur Ross, a former steel tycoon, declared that such a threat exists in the metals industry, Trump levied tariffs of 25 percent on imported steel and 10 percent on imported aluminum. The U.S. law doesn’t define “national security,” so the president has wide latitude to determine a threat. Advocates of the Section 232 action on steel, for instance, said a weakened U.S. steel industry would be less ready to build tanks and other weaponry should a military crisis arise. The U.S. has said it’s also investigating national-security implications of importing automobiles.
Section 301 (of the Trade Act of 1974)
This allows the U.S. trade representative, who is part of the Executive Office of the President, to designate and retaliate for unfair trade practices by other nations. Last year, Trump asked his trade representative, Robert Lighthizer, to start a Section 301 investigation of whether China is harming American intellectual property rights, innovation, or technology development. That review led to duties on $34 billion in Chinese goods that are due to take effect on July 6.
CFIUS, the Committee on Foreign Investment in the U.S.
This panel of government officials, led by the Treasury secretary, reviews proposed acquisitions of American businesses by foreign buyers to determine if the deals pose risks to national security. Under Trump, it’s stopped a string of acquisitions, many involving Chinese buyers of American technology firms. Trump’s order blocking Broadcom Ltd.’s $117 billion takeover of Qualcomm Inc. -- what would have been the biggest deal in the history of technology -- was based on recommendations from CFIUS. Congress is working to finalize legislation that would broaden CFIUS’s oversight to include minority investments by foreigners in “critical technology” or “critical infrastructure” and in joint ventures where technology companies contribute intellectual property.
Section 214 (of the Communications Act of 1934)
The National Telecommunications and Information Administration, a branch of the Commerce Department, recommended that the U.S. communications regulator deny state-backed China Mobile’s seven-year-old application to offer international voice traffic between the U.S. and foreign countries. China Mobile’s entry "would pose unacceptable national security and law enforcement risks,” the NTIA said. It asked the Federal Communications Commission to deny China Mobile’s application under Section 214, which regulates foreign carriers’ access to the U.S. communications market. The Chinese government could use links established by China Mobile for economic espionage and intelligence collection, according to the NTIA filing.
The FCC, which regulates interstate communications and aims to help companies provide universal access, has proposed barring companies that receive subsidies from spending the funds with "suppliers that raise national-security concerns." Such suppliers would undoubtedly include China’s Huawei Technologies Co. and ZTE Corp. Huawei has objected, and big U.S. carriers led by AT&T Inc. and Verizon Communications Inc. have told the FCC to go slow and consult with security agencies. After advancing its proposal in April, the FCC took comments and didn’t immediately schedule the second vote needed to turn the proposal into policy.
The U.S. Commerce Department banned ZTE Corp. from buying American technology for seven years, essentially ending its ability to operate as a business, for failing to stick to a settlement over the company’s violations of Iran and North Korea sanctions. Trump views the sanctions case as a bargaining chip in overall trade talks with China. As a favor to Chinese President Xi Jinping, the U.S. in June reached a deal to allow ZTE to get back in business after the Chinese telecommunications company pays a record fine and agrees to management changes. The full lifting of the ban is still pending.
The Reference Shelf
- A 2017 Bloomberg article outlined the Trump’s administration’s complaints on the global trading system.
- QuickTake explainers on free trade, Trump’s fears of U.S. trade deficits, intellectual property and what role the WTO might play.
- Can Trump win a trade war with China?
- China should listen to U.S. complaints on trade, Michael Schuman writes in Bloomberg Opinion.
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