During a wide-ranging interview on trade with International Trade Today, Rep. Jackie Walorski, R-Ind., said she would like to advance Section 232 reform in the House, get the Generalized System of Preferences benefits program and the Miscellaneous Tariff Bill back in place, and, if warranted, weigh in with the U.S. trade representative on USMCA.
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.
Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, has expressed optimism that the House can pass a renewal of the Generalized System of Preferences benefits program and the Miscellaneous Tariff Bill that will match the amendment passed in the Senate as part of its China package. However, when asked by International Trade Today on June 11 if the House would include the anti-counterfeiting measures and the request to the Office of the U.S. Trade Representative to re-open Section 301 exclusions, Brady said he didn't know. He said there's always been bipartisan support for fighting counterfeits, and with regard to the exclusions, "there’s a very strong interest for both chambers and both sides of the aisle," he said.
Dan Ikenson, who spent decades in trade policy at the libertarian Cato Institute, said he defended China's behavior for years after it joined the World Trade Organization. "I was in favor of welcoming China into the trading system," he said. But now, Ikenson said during a June 9 webinar hosted by the R Street Institute, he has come to see that China's last 15 years of state-directed capitalism produced enormous externalities. He said some of those externalities include the rise of populism, the political rejection of free trade, and even, in part, the presidency of Donald Trump.
In the June 9 Customs Bulletin (Vol. 55, No. 22), CBP published a proposal to revoke and modify rulings on portable food allergen detection device, single-use pods and a starter kit.
The following lawsuits were filed at the Court of International Trade during the weeks of May 24 - June 6.
The China package once known as the Endless Frontier Act passed the Senate with 68 votes. The U.S. Innovation and Competition Act includes a trade amendment that authorizes a new Miscellaneous Tariff Bill, restarts applications for Section 301 tariff exclusions, adds an inspector general to the Office of the U.S. Trade Representative, renews the Generalized System of Preferences benefits program for more than five years and directs the CBP to increase inspections of imports with the aim of finding counterfeits. The bill passed the evening of June 8.
The administration issued a lengthy report after a 100-day review of supply chain vulnerabilities that recommends a lot of reshoring of manufacturing, in semiconductors, critical minerals and pharmaceutical ingredients, but also suggests a "trade strike force" to be deployed against unfair foreign trade practices that have hurt domestic companies that contribute to critical supply chains.
The immediate past U.S. trade representative criticized an amendment attached to a China package which would renew the Miscellaneous Tariff Bill, and restart the exclusions for Section 301 tariffs on Chinese imports. The amendment, which got more than 90 votes in the Senate, also renews the Generalized System of Preferences benefits program, but Robert Lighthizer was silent on that aspect of the bill.
According to the White House budget, importers are expected to pay $85 billion in tariffs in the current fiscal year, which ends Sept. 30. But the administration projects that duties collections will fall to $57 billion in fiscal year 2022, and to $45 billion in FY23. Alvaro Ferreira, a consultant to Sandler Travis law firm and an economist by training, said he doesn't know what assumptions the Office of Management and Budget used to make its projections, but he thinks "maybe the administration is thinking: Let’s not take the [Section] 301 tariffs for granted, [in case] there’s an adverse court ruling by the Court of International Trade."
A Japanese and a Korean economist said that trade tensions between their two countries are no longer really disrupting Korea's semiconductor industry, though they are still increasing costs for some of the Japanese exporters.