The weekly report by our trade correspondent, L.C., follows
Trade decisions loom. What to do?
January is a decision month with respect to China, NAFTA, and the World Trade Organization (WTO). It brings several opportunities for presidential action under US trade law Sections 301, 201, and 232. Many analysts speculate that President Trump will use one or more of these to take the sort of unilateral action he pledged as a candidate. The most benign from the standpoint of the global trading system — and probably most effective course among the opportunities before him — would be to move under Section 301 to take two specific actions targeting China that he could tout as fulfilling his promises.
One would be to take up the offer by Japan and the EU – to which the US agreed in December – to act collectively at the WTO by jointly filing a complaint based on the results of the Section 301 investigation. That investigation will almost surely determine that China’s
- enabling and encouraging of intellectual property infringement,
- its abusive tech transfer practices,
- its unfair subsidies,
- and its state-owned enterprises
amount to illegal discrimination and violation of WTO rules.
In keeping with US law and US promises to the WTO regarding how Section 301 will be used, it should result in WTO complaints on one or more of the identified issues. Since Tokyo and Brussels have already pushed for joint action on these matters, they should join in – making the case more powerful and also removing the perception that it is simply a US-China (or worse, a US-WTO) standoff. This would test the ability of the WTO to deal with crucial 21st century issues targeted by the Section 301 investigation. It would thus likely strengthen the WTO, while crimping Beijing’s ability to push ahead unchecked with plans for technological hegemony based on walling off its economy while expropriating US innovations.
Although the US-Japan-EU December agreement also identified excess capacity as a problem to be addressed, the Trump Administration has not availed itself of opportunities to do so, having declined to send US Trade Representative Robert Lighthizer to the ministerial meeting of the Global Forum on Excess Capacity and declined to even respond to Beijing’s proposal to cut capacity as part of larger US-China talks. Of course, there were few indications that either effort was likely to be successful. But it remains possible that a WTO case against subsidies and state-owned enterprises (SOEs) that spur overcapacity might be effective, so this issue could also be a subject for US-EU-Japan joint action.
Second, the President could also announce in reaction to the Section 301 investigation that his Administration will be working on its ow