Congress needs to “instruct” U.S. Trade Representative Robert Lighthizer to bring a World Trade Organization case for violating WTO rules against unfair trade practices, testified Information Technology and Innovation Foundation President Rob Atkinson Wednesday before the House IT Oversight Subcommittee. Congress should “take a hard line on limiting most Chinese investment” in the U.S., including in Chinese-backed “tech accelerators,” said Atkinson. He urged limiting “ongoing science and technology cooperation” with China, "especially considering that much of that cooperation is lopsided,” he said. The Trump administration placed Trade Act Section 301 tariffs “on a wide array of Chinese exports in an effort to bring the Chinese government to the negotiating table,” said Atkinson. “It is not clear if this approach will succeed.” The “most important step” the U.S. can take is develop a “joint campaign with our allies” to curb bad Chinese behavior, he said, to make "it more likely that China feels like it has no choice but to play more by the rules.”
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
The FCC approved a declaratory ruling and order designed to speed the deployment of small cells and 5G across the U.S. Commissioner Jessica Rosenworcel, whose vote had been in doubt (see 1809200007), partially dissented and partially concurred Wednesday.
The Information Technology Industry Council, like CTA, questions whether President Donald Trump's "action" proposing a third tranche of 25 percent Section 301 tariffs on $200 billion worth of Chinese imports "is legal" under the 1974 Trade Act, emailed spokesman Jose Castaneda Monday. ITI has made no “final decision” whether to pursue “litigation” against the administration to block the tariffs from taking effect, he said.
CTA is “skeptical” the Trump administration’s third tranche of tariffs on $200 billion of Chinese imports can withstand a court “challenge” because the duties are "unlawful" under the 1974 Trade Act, said the association Friday and in comments at Thursday's deadline in docket USTR-2018-0026. “We are reviewing all options,” emailed a spokesperson when asked if CTA will sue to block the levies. The package of tariffs “may be vulnerable to a legal challenge because they are not based on the required legal finding” of unfair Chinese trade practices, “and instead are retaliatory in nature and require a separate Section 301 investigation,” which U.S. Trade Representative Robert Lighthizer “did not conduct,” said CTA. Section 301 “authorizes actions following fact-based investigations, not the responses to China's retaliatory actions,” it said. Lighthizer’s office didn’t comment. President Donald Trump reportedly said the installment could start “very soon” and he's preparing a fourth wave on $267 billion on Chinese imports.
CTA identified 380 tariff codes that would cause “significant harm” to the consumer technology industry’s member companies and to consumers resulting from the third installment of Trade Act Section 301 duties against Chinese imports, blogged Sage Chandler, CTA vice president-international trade, Tuesday. She cited codes identifying items that allow access to the internet, including servers, desktop computers, printed circuit assemblies and connected devices. Connected devices cover a "vast array of tech products" including e-readers, smartwatches, speakers and fitness devices, plus the components and the infrastructure products that make them work, such as modems, routers and gateways, Chandler said. Tariffs, as a remedy to shortcomings in Chinese national policy and practice, are more likely to cause “adverse short- and long-term consequences to our economy than incentivize change in China's discriminatory IP practices,” she said. If enacted, new tariffs affecting $200 billion in trade will continue the “destructive ripple effect” the Trump administration started with the first round of tariffs that affected the tech industry and the U.S. economy as a whole, Chandler said. Products on the proposed tariff list “disproportionately impact small companies, many of which manufacture and assemble in the United States, and startup companies that design and engineer U.S. intellectual property.” A CTA study said 25 percent tariffs on printed circuit board assemblies and connected devices will cause price increases of up to 6 percent, even affecting products made entirely with U.S. labor and components. CTA estimates those increases will cause a consumer spending drop of 12 percent. “Price shock and drop in demand have the potential to devastate our industry,” said Chandler, with the impact of a 25 percent tariff on connected devices alone expected to cost American consumers an extra $3.2 billion annually. “That contradicts USTR's stated aim in the product selection process of avoiding goods commonly purchased by American consumers,” she said. Technology tariffs are “counterproductive,” said the trade specialist, at a time when the U.S. is looking to achieve “digital integration, advanced telecommunications technology and increase internet access for rural populations.” Tariffs are taxes on Americans, not foreign governments, she said, and they "undermine the competitiveness of American companies.” Tech firms that testified Tuesday in a second day of public hearings on the tariffs were asked about the practicality of sourcing products from countries other than China. Brilliant Home Technology did an "evaluation" of where it could source products other than from China, and did so "before we knew about tariffs," said CEO Aaron Emigh. The company found quality in Vietnam and Indonesia couldn't match Chinese standards, he said. India could manufacture the product well, but since most of the components come from China, extending the supply chain in that way would introduce risks Brilliant felt weren't worth it, he said. "In our estimation it was not practical to manufacture anywhere outside of China," he said.
The proposed third tranche of 25 percent Trade Act Section 301 tariffs on Chinese imports targets equipment “critical for the build-out” of 5G, IoT and “big data,” says K.C. Swanson, Telecommunications Industry Association director-global policy, in prehearing testimony posted Monday in docket USTR-2018-0026. Swanson is scheduled to testify Aug. 21, day two of four days of Office of U.S. Trade Representative hearings. Requests to testify were due Monday under the deadline USTR Robert Lighthizer extended when announcing Aug. 1 he will “consider,” under President Donald Trump’s direction, raising the third tranche of proposed duties to 25 percent from 10 percent (see 1808010073). The “network-based technologies” in which U.S. companies lead the world “depend on underlying hardware,” said Swanson. “Taxing that hardware,” as tariffs on network servers, gateways and modems would do, will raise costs for consumers, she writes: That "stands to discourage U.S. adoption of advanced technologies in a period of growing global competition.” Duties "will hit so many of the telecom products essential to the operation of the internet,” Swanson says. More than 10 million Americans use the computer networking products Zyxel Communications sources from China under certain tariffs hearings for home internet access and for “network computers in the workplace,” commented the company. Its largest customers include CenturyLink, Cincinnati Bell and Hawaiian Telecom, it said. Zyxel’s router products “are used to proliferate broadband throughout the U.S.,” it said. With 34 million Americans lacking "an affordable and reliable broadband connection,” government levies would run counter to DCC and other broadband initiatives, the company said.
Tech interests virtually struck out in their attempts to persuade U.S. Trade Representative Robert Lighthizer to spare their products and components from a second tranche of 25 percent Trade Act Section 301 tariffs on imports from China. Despite heavy industry lobbying to exclude semiconductors and other key parts from the second round of new levies, the list Lighthizer released Tuesday contains 279 tariff lines of goods worth about $16 billion in trade value, a mere 2 percent reduction from 284 lines in the originally proposed list released June 15 (see 1806150030). The new tariffs will take effect Aug. 23, said Lighthizer, who soon will announce a "process" for seeking exclusions from the new duties.
The Trump administration’s proposed Trade Act Section 301 tariffs on Chinese goods imported to the U.S. under the Harmonized Tariff Schedule’s 8517.62.00 subheading targets equipment “critical for the build-out of high-speed broadband internet” and related IoT technologies, said the Telecommunications Industry Association in comments posted Saturday in docket USTR-2018-0026. The comments were filed July 27, when 10 percent tariffs were still on the table, days before U.S. Trade Representative Robert Lighthizer announced he will “consider” hiking the duties to 25 percent (see 1808010018).
China urges the U.S. “to adopt a correct attitude" on trade relations between the two countries and not try to "blackmail China because it will not work,” said Foreign Ministry spokesman Geng Shuang at a Beijing news conference Thursday, reacting to the Trump administration’s announcement it will “consider” hiking the latest round of proposed Trade Act Section 301 tariffs on Chinese imports to 25 percent from 10 percent (see 1808010069). China also urges the U.S. “to return to rationality and refrain from acting impulsively, otherwise they will end up hurting themselves,” he said.
President Donald Trump directed U.S. Trade Representative Robert Lighthizer to consider raising the third round of Trade Act Section 301 tariffs to 25 percent from 10 percent, the USTR and others confirmed Wednesday afternoon.