‘Vigorous Engagement’ Sought With China to Curb Trade Abuses, USTR Says

The U.S. continues to pursue “vigorous engagement” with China to “increase the benefits” that U.S. businesses, service providers and consumers “derive from trade and economic ties” with the Chinese, the Office of the U.S. Trade Representative said in its annual report on global foreign trade barriers (see 1904010045). 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,” USTR said.

The Trump administration’s Section 301 tariffs on $250 billion in Chinese imports “seek to address China’s forced technology transfer regime,” the report said. “This regime is one of the instruments through which China intends to meet its Made in China 2025 targets.”

In 2018, when the Section 301 tariffs and retaliatory Chinese duties took effect, the “U.S. goods trade deficit” with China increased 11.6 percent from a year earlier, to $419.2 billion, the report said. U.S. goods exports to China were down 7.4 percent, to $120.3 billion, it said. U.S. imports from China were up 6.7 percent to $539.5 billion, it said. Despite the 7.4 percent decline, China in 2018 was the third-largest goods market for U.S. exporters behind Canada and Mexico, it said.

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,” the report said. 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,” it said. Its ultimate goal is “to capture much larger worldwide market shares” in China’s targeted “strategic sectors,” it said.

Even if China fails to “achieve fully” all the industrial policy goals of Made in China 2025, “it is still likely to create or exacerbate market distortions and create severe excess capacity in many of the targeted sectors,” doing “long-lasting damage to U.S. interests,” the report said. China-backed companies will “increase their market share at the expense of U.S. companies operating in these sectors,” it said.

That China “seeks to protect many domestic industries through a restrictive investment regime” is a serious worry among foreign investors, the report said. The Chinese government “may condition investment approval on a requirement that a foreign enterprise transfer technology, conduct research and development in China, satisfy exporter local content requirements or make valuable, deal-specific commercial concessions,” it said.

The administration’s “sustained bilateral engagement” with China hasn’t curbed the investment restrictions, the report said. Soon after President Donald Trump visited Beijing in November 2017, China announced the relaxation of some restrictions, and “took some steps in that direction in 2018,” it said. But “many significant barriers remain,” it said.

The U.S. and Chinese 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,” the White House said. The talks continue this week in Washington, it said. "Building on the substantive progress achieved," China hopes the two sides "can continue to work with concerted efforts, meet each other halfway, implement the important consensus reached by the two presidents, and make attempts to ensure a mutually beneficial agreement,” a Foreign Ministry spokesperson said April 1.