‘Little Political Appetite’ for New Tariffs, US-China Commission Told

Direct negotiations with China are, “at this point, unlikely to yield meaningful results” in curbing Beijing’s unfair trade practices, Emily Kilcrease, senior fellow at the Center for a New American Security, told the U.S.-China Economic and Security Review Commission in written testimony at a hearing April 14. “China has little incentive to commit to binding rules that will require structural changes to a system they believe works for their economic and political objectives,” she said.

In the context of “unsuccessful direct engagement” with China, the U.S. “will need to rely more heavily on defensive measures to mitigate the harm of China’s practices,” Kilcrease said. A “fresh” Section 301 investigation “may be under consideration” at the Office of the U.S. Trade Representative “to focus specifically on China’s subsidies practices,” she said. What “remedial action” would emerge under a new Section 301 investigation “remains unclear,” Kilcrease said. There’s “little political appetite” in the U.S. or among its allies “for further tariff escalation,” she said. One benefit of a new Section 301 investigation may be that it would allow the Biden administration to “adjust” the existing tariffs on Chinese imports, she said.

USTR “will be forced to issue an opinion this spring on whether or not to renew the initial tranche of tariffs, which will otherwise automatically expire,” Kilcrease said. July 6 is the fourth anniversary of the List 1 tariffs taking effect on Chinese imports, and the 1974 Trade Act requires their expiration after four years unless they’re extended through a notice and comment rulemaking.

The Information Technology and Innovation Foundation thinks USTR should craft a new Section 301 investigation into China's cloud services restrictions and its other unfair digital trade practices, “as these are among the most clearly egregious examples whereby China targets U.S. firms,” Stephen Ezell, vice president-global innovation policy, told the commission. “An investigation could be broad and include other Chinese digital/cyber sovereignty initiatives, such as discriminatory cybersecurity regulations.”

Beyond using Section 301 tools, the U.S. can work with “like-minded countries” to create a “collective ‘bill of particulars’ that enumerates the vast extent of Chinese innovation-mercantilist policies,” and does so “in great detail,” Ezell said. The U.S. and its allies “can also collaborate in advocating for improved transparency and surveillance” at the World Trade Organization, he said, “which matters because the lack of transparency in Chinese trade-related policymaking acts as a considerable, and growing, nontariff barrier to trade.”