U.S. Launches Section 301 Probe of China’s Compliance with Phase I Deal

The Office of the U.S. Trade Representative has announced its initiation of a Section 301 investigation of China’s implementation of the Phase I trade agreement it reached with the U.S. in December 2019.

USTR noted that under this agreement China “agreed to make structural changes to correct distortive acts, policies, and practices in the areas of intellectual property, technology transfer, agriculture, and financial services.” It also committed to make “substantial additional purchases of U.S. goods and services.”

However, USTR stated, “despite repeated U.S. engagement with China to address implementation concerns” over the last five years, China “appears not to have lived up to its commitments under the Phase One Agreement, including commitments on IP, forced technology transfer, agriculture, and financial services. In addition, official U.S. export data appears to show that China’s purchases of U.S. goods and services fell short of its commitments by more than $217 billion in the aggregate.”

USTR said it will therefore examine whether China has fully implemented its commitments, the burden or restriction on U.S. commerce resulting from any non-implementation, and what action, if any, should be taken in response. USTR is seeking public input on related issues, including concrete examples of non-implementation of specific commitments as well as the level and scope of potential retaliatory measures such as import tariffs, import restrictions, or fees or restrictions on Chinese services.

USTR will hold a hearing in connection with this investigation on Dec. 16. Written comments and requests to appear at the hearing may be submitted starting Oct. 31 and are due no later than Dec. 1.

However, at least one press source is reporting that President Trump raised the possibility that this investigation could be dropped as part of a trade agreement he appears to be seeking to reach with China later this week.