Michael R. Czinkota
President Trump signed a Presidential memorandum asking the United States Trade Representative (USTR) to investigate China’s laws, policies, practices, and actions and their effect on the U.S. economy. It will likely trigger an investigation into China’s alleged theft of U.S. intellectual property.
The memo asked the United States trade representative Robert Lighthizer to invoke “Section 301” and investigate China’s trade practices. For a while, fears (or gloating) of a trade war between the United States and China quickly took over the world’s major media outlets. Some analysts even believe that this will herald the advent of wintry “Sino-US trade relations”.
Section 301 authorizes the President to take all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government. It addresses violations of an international trade agreement or agreements which are unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce. The law does not require that the U.S. government wait until it receives authorization from the WTO to take enforcement actions. The President is increasingly personally focused on enforcing intellectual property (IP) rights.
However, according to China’s Ministry of Commerce (MOFCOM) spokesman, the “301 System” has been opposed by other countries for its unilateralism apparel since its launch. The U.S. promised to the world that it will implement this system within the restriction of the WTO rules. The Chinese government believes the U.S. should keep this promise and not break multilateral rules.
Not only the Trump administration, but all parts of the American government are tough on the issue of intellectual property rights and China. In the 90s alone, the United States launched 3 trade investigations into China’s intellectual property rights. Based on the historical experience, all 3 investigations of China ended in negotiations and reconciliation, without unilateral sanctions. On one hand, the Trump administration wants to leverage the investigation to reduce the U.S and China trade deficit. On the other hand, a political approach may be more effective than a legalistic investigation.
In terms of economic and trade relations between the United States and China alone, unilateralism cannot solve the trade imbalances between the two countries. Today, China’s economy has become the second largest economy in the world. The economic and trade relations between the United States and China have also become more integrated. Over the past 30 years, bilateral trade has increased by more than 200 times. In 2016, bilateral trade volume exceeded $550 billion. Mutual investment had risen to more than $170 billion. In the face of the world’s most important bilateral economic and trade relations, resorting to outdated unilateral measures will hurt the both sides. A new vision should be encouraged with new tools.
Professor Michael Czinkota (firstname.lastname@example.org) teaches international marketing at Georgetown University’s McDonough School of Business in Washington D.C. and the University of Kent at Canterbury, U.K. His key book (with Ilkka Ronkainen) is International Marketing, 10th ed., CENGAGE