CTA Trade Exec to ITC: Make the Section 301 Tariffs ‘Go Away’

The Section 301 tariffs on Chinese imports are causing “a tremendous amount of pain and anguish” for consumer tech companies, and “we prefer to see the tariffs go away,” Ed Brzytwa, CTA vice president-international trade, told an International Trade Commission virtual hearing Friday. The $32 billion that CTA estimates the consumer tech industry paid Customs and Border Protection in Chinese tariffs from their 2018 inception through the end of 2021 “is nothing to sniff at,” he said.

The ITC completed three days of public hearings Friday for its Tariff Act Section 332 investigation into the economic impact on U.S. industries of the Section 301 tariffs on Chinese imports and the Section 232 duties on aluminum and steel. A report to Congress on ITC's findings is due March 15.

Consumer tech companies are buckling under “a wide range of opportunity costs” from the Section 301 tariffs, Brzytwa told ITC Commissioner Amy Karpel. “If you’re a small company and you have to pay a tariff, that means you’re not hiring someone,” he said. It also means “you’re probably not spending as much money on designing the next iteration of your product,” he said.

The ITC has “tools that never were used” as an alternative to the Section 301 tariffs imposed by USTR to curb Chinese intellectual property theft and forced technology transfer, including “prohibiting the imports of products that have seen intellectual property theft,” said Brzytwa. U.S. trade policy under the Trump administration, and maintained under the Biden administration, was that the tariffs "could solve all the problems when it comes to intellectual property theft and forced technology transfer," he said. "Frankly, from our perspective, the tariffs didn’t work on either of those fronts, and those are still problems.”.

CTA acknowledges the Chinese commit “unfair trading practices,” said Brzytwa under questioning from ITC Chairman David Johanson. “If you’re asking if the tariffs in particular caused China to stop its IP theft practices, the answer is probably no,” he said. “We’ve heard so many different messages from the administration that the tariffs are leverage in negotiations that would then stop China from those practices,” he said. “I can’t tell whether or not there are ongoing negotiations with China in this area.”

The tariffs did have some impact on reducing imports from China, but only “to a point,” diverting some supply chains to Taiwan, Malaysia, Thailand and especially Vietnam, Brzytwa told Johanson. But the tariffs “reached their limit in terms of motivating U.S. companies” to move their supply chains out of China, he said. Many CTA member companies he canvassed “chose to stay in China because they trusted their suppliers,” he said. “It was a more certain situation for them to pay the tariffs than to relocate their supply chains, and I think that’s why you’re seeing that flatlining.”

“It was incredibly difficult" for CTA members that did try to relocate their sourcing, said Brzytwa. The process was “time-consuming, and they’re still working on qualifying the inputs that go into their products,” he said. Brzytwa joined CTA in December after trade-related roles with the Information Technology Industry Council and the American Chemistry Council (see 2112140055).

ITI member companies “haven’t seen any benefit” to the Section 301 tariffs on Chinese goods, said Naomi Wilson, ITI vice president-policy, Asia, when asked by Johanson for suggestions on how the duties can be made “more workable” because, he said, they’re likely to remain intact indefinitely. “We’ve provided comments and input and alternative recommendations for other courses of action to potentially change Chinese behavior and policy, which was the thrust of the Section 301 report” in March 2018, she said. “We have been less than satisfied with USTR’s response heeding our concerns.”

ITI doesn’t buy the “notion” that the tariffs can be “pared down” to make them “less harmful” to the U.S. tech sector, said Wilson. Doing so wouldn’t “achieve the stated objective of changing Chinese behavior and making U.S. companies more competitive,” she said. Wilson hears the arguments of other sectors that the tariffs “leveled the playing field for them,” she said. “But from the tech sector perspective, these have been deleterious, and there’s no reason for them to remain in place.”