In a March 22, 2018, press release, the United States Trade Representative (USTR) website reported that President Trump announced his decisions on the actions the Administration will take in response to China’s unfair trade practices covered in the USTR Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. USTR Robert Lighthizer initiated the investigation in August 2017 at the direction of the President.
USTR said that the President has instructed that the appropriate response to China’s harmful acts, policies and practices should include three separate actions.
- Tariffs – The President has instructed the Trade Representative to publish a proposed list of products and any tariff increases within 15 days of today’s announcement. After a period of notice and comment, the Trade Representative will publish a final list of products and tariff increases.
- WTO dispute – The President has instructed the Trade Representative to pursue dispute settlement in the World Trade Organization (WTO) to address China’s discriminatory technology licensing practices.
- Investment restrictions – The President has directed the Secretary of the Treasury to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States.
The press release stated:
The Chinese government’s technology transfer and intellectual property policies are part of China’s stated intention of seizing economic leadership in advanced technology as set forth in its industrial plans, such as “Made in China 2025.”
Section 301 is a key enforcement tool that allows the United States to address a wide variety of unfair acts, policies, and practices of U.S. trading partners. The investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation addresses four categories of acts, policies, and practices of the Government of China that unfairly result in the transfer of technologies and intellectual property from U.S. companies to China. These policies harm U.S. businesses and workers and threaten the long-term competitiveness of the United States.
USTR staff, with the assistance of dozens of experts from across the Administration, prepared a comprehensive report containing detailed findings. The report is available on the USTR website.
The report supports the following conclusions:
- China uses foreign ownership restrictions, including joint venture requirements, equity limitations, and other investment restrictions, to require or pressure technology transfer from U.S. companies to Chinese entities. China also uses administrative review and licensing procedures to require or pressure technology transfer, which, inter alia, undermines the value of U.S. investments and technology and weakens the global competitiveness of U.S. firms.
- China imposes substantial restrictions on, and intervenes in, U.S. firms’ investments and activities, including through restrictions on technology licensing terms. These restrictions deprive U.S. technology owners of the ability to bargain and set market-based terms for technology transfer. As a result, U.S. companies seeking to license technologies must do so on terms that unfairly favor Chinese recipients.
- China directs and facilitates the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and to generate large-scale technology transfer in industries deemed important by Chinese government industrial plans.
- China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies. These actions provide the Chinese government with unauthorized access to intellectual property, trade secrets, or confidential business information, including technical data, negotiating positions, and sensitive and proprietary internal business communications, and they also support China’s strategic development goals, including its science and technology advancement, military modernization, and economic development.
The European Union Chamber of Commerce in China likewise concluded in a report entitled “China Manufacturing 2025: Putting Industrial Policy Ahead of Market Forces” that there has been an “unprecedented wave of outbound investments” in recent years from China into firms in industries of relevance to Made in China 2025, and many of these investments have been in areas where foreign business is unable to make equivalent investments in China.
The USTR report also notes, “As the global economy has increased its dependence on information systems in recent years, cyber theft became one of China’s preferred methods of collecting commercial information because of its logistical advantages and plausible deniability.” The report goes on to conclude that “based on available information on China’s cyber intrusions, experts have concluded that China’s cyber intrusions and cyber theft align with its industrial policy goals.”