A recent report could set Congress on a path toward more aggressive action on U.S.-China trade issues ahead of presidential and congressional elections next fall.
Citing longstanding complaints that allowing China into the World Trade Organization “has failed” to open China’s economy and foster political reforms and that instead Beijing “has pursued a multi-decade campaign of economic aggression” against the U.S., the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party adopted recently a strategy for pursuing the U.S.’ “economic and technological competition” with China that puts U.S. “national security, economic security, and values” at the core of the bilateral relationship.
The strategy seeks to “reset” the U.S.-China economic relationship, asserting that China’s economic system is “incompatible” with the WTO and undermines U.S. economic security because China uses “an intricate web of industrial policies, including subsidies, forced technology transfer, and market access restrictions, to distort market behavior, achieve dominance in global markets, and increase U.S. dependency on PRC imports.” It also aims to reform U.S. export controls, which “have been slow to adapt to rapid changes in technology and attempts by adversaries to blur the lines between private and public sector entities.” Further, it identifies the need to reduce supply chain reliance on China, particularly for items like critical minerals, pharmaceuticals, and medical devices.
To advance these goals the committee offers nearly 150 policy recommendations, including the following.
Tariffs
- move China to a new tariff column “that restores U.S. economic leverage” and phase in this shift over “a relatively short period of time” (press reports indicate that this language was adopted to avoid explicitly mandating a wholesale repeal of permanent normal trade relations status for imports from China but could effectively result in such a change nevertheless)
- reduce the de minimis threshold for duty-free shipments into the U.S. and direct U.S. Customs and Border Protection to strengthen its enforcement of transshipments from China using the de minimis rule
- reauthorize the Generalized System of Preferences, modernize it to accelerate supply chain shifts outside China, and enhance rules of origin to limit transshipment through China
- renew the China-specific Section 421 safeguard mechanism (which expired in 2013), which would allow additional tariffs or other restrictions on imports from China
- use money from increased tariffs to find alternative markets for U.S. exports
- impose import tariffs on foundational semiconductors from China
Customs
- enact legislation to implement the 21st Century Customs Framework and secure funding to modernize the U.S. customs system
Export Controls
- negotiate the establishment of a new plurilateral export control regime focused on preventing China and other foreign adversaries from gaining access to critical and emerging technologies with dual-use applications
- give the Bureau of Industry and Security more resources to carry out its national security mission, paired with “necessary reforms”
- adopt country-wide export controls for specific technologies going to foreign adversaries and establish a policy of denial for export licenses for items with national security controls
- quickly establish general export controls on critical and emerging technology to foreign adversaries
- expand export license requirements to subsidiaries of foreign adversary entities on the Entity List
- conduct a comprehensive review of all items classified as commercial (EAR 99) to determine if they should be subject to export controls
- establish a cloud computing end-use rule to prevent remote access to export-controlled technologies
- adopt a policy of denial for all U.S. technology exports to Chinese firms involved in espionage campaigns against the U.S. and revoke any existing licenses
- negotiate expanded multilateral export controls on biotechnology, quantum computing, artificial intelligence, aerospace, and space-based technologies
- require U.S. research institutions to obtain an export control license if they intend to use any export-controlled item that has a clear and distinct national security nexus during the course of research collaboration on critical and emerging technologies with any foreign adversary entity
Trade Agreements
- strengthen rules of origin in existing trade agreements to prevent China from “using our trading partners as a backdoor” to the U.S. market
- set negotiating priorities and a process for congressional consideration of comprehensive bilateral trade agreements, starting with Taiwan and potentially including Japan and the United Kingdom
- encourage sectoral agreements with key trading partners and allies with strong rules of origin and high standards on critical minerals and other critical goods
- negotiate trade agreements to reduce U.S. dependencies on China for medical and pharmaceutical goods
Forced Labor
- strengthen safeguards against imports of products made with forced labor in China
- expand the rebuttable presumption in the Uyghur Forced Labor Prevention Act to include certain Chinese seafood products
Trade Remedies
- allow the imposition of Section 232 trade remedies on products or components from China while limiting their applicability to allies and partners
- allow the use of Section 337 import restrictions against a wider range of unfair trade practices
- enact H.R. 3882, which would strengthen trade remedy laws
- initiate a dumping investigation on permanent magnets and rare earth elements
Investment
- generally prohibit investment in Chinese companies included on key U.S. government sanctions and red flag lists
- codify restrictions on U.S. investment in areas related to China’s critical and emerging technologies, military capabilities, and human rights abuses
- expand the definition of “critical technology” in the Foreign Investment Risk Review Modernization Act
- require filings with the Committee on Foreign Investment in the U.S. for additional types of potential investments
- streamline CFIUS reviews involving companies from allied countries that do not pose substantial national security risks
Enforcement
- appropriate more funding for trade enforcement capacities, including the Trade Fraud Task Force
- allow the president to ban technology products and services critical to national security (e.g., quantum computing, biotechnology, artificial intelligence) from the U.S. market if they are owned, controlled, or developed by a foreign adversary
Other
- mandate country of origin labeling for goods purchased online
- require the Food and Drug Administration to develop an expanded list of key pharmaceutical products used widely in the U.S. and maintain a database tracking the supply chains for those products
- amend the Lacey Act to allow for up to a three-year emergency ban on imports of invasive and injurious wildlife that poses imminent threats to human health and a ban of new species imports until they are found to not be invasive in the U.S.
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