Existing Section 301 tariffs and potential other trade enforcement actions could be among the U.S.-China trade policy issues considered by Congress this year. Lawmakers are expected to intensify their scrutiny of both China’s actions and the Biden administration’s responses with Republicans now in control of the House of Representatives and a known China hawk (Rep. Jason Smith, R-Mo.) taking the reins of the chamber’s Ways and Means Committee (see related article this issue).
In 2018 the U.S. imposed higher tariffs on about $370 billion worth of imports from China following a Section 301 investigation concluding that China engages in forced technology transfer, cyber-enabled theft of U.S. intellectual property and trade secrets, discriminatory and non-market licensing practices, and state-funded strategic acquisitions of U.S. assets. (The Office of the U.S. Trade Representative is currently conducting a statutorily-required review of those tariffs; click here for more information.) China retaliated with a tariff hike on about $110 billion worth of imports from the U.S., and the vast majority of the tariffs on both sides remain in place.
The U.S. attempted to more fully address the underlying issues in January 2020 by negotiating the so-called phase one trade agreement, which included Chinese commitments in intellectual property, technology transfer, foreign investment, agricultural and financial services, and other areas and required China to increase its purchases of U.S. goods by $200 billion over a two-year period.
However, Beijing has not fully lived up to these commitments, and there has been an ongoing debate within the Biden administration over the past year about how to respond. Some have encouraged the U.S. to eliminate, reduce, or extend exclusions for some of the tariffs to provide relief for U.S. consumers and manufacturers and address inflation, while others argue that the tariffs should remain in place because they give the U.S. leverage in (as yet unscheduled) further talks with China and lifting them “could signal a lack of U.S. resolve and [an] unwillingness to bear costs associated with actions that address U.S. priorities.”
Congress may seek to influence this debate this year by taking a more active role in examining the phase one agreement and related issues. In doing so, a recent report from the Congressional Research Service said, there are a number of topics lawmakers may want to examine, include the following.
- given how difficult it was to secure China’s acknowledgement of its practices of concern and its limited commitments in these areas, whether the U.S. can reasonably expect additional talks to achieve better results or whether they might instead divert U.S. attention from efforts to develop and/or deploy new and more effective trade tools
- the Section 301 tariffs’ effects on U.S. firms and consumers, including the extent to which they are inflationary compared to other drivers such as food, energy, housing, labor and supply chain shortages
- whether existing or potential additional tariffs could help diversify China-based supply chains and counter China’s subsidies by raising costs vis-à-vis U.S. and third-market products or whether they would violate U.S. trade commitments and encourage others to follow suit
- other approaches and measures that might be needed in addition to or separate from tariffs; e.g., another Section 301 investigation addressing subsidies, efforts with Europe and Japan to address non-market economic distortions and subsidies, including China-focused provisions in free trade agreements, intensifying efforts to reform World Trade Organization rules, or joining and leading new plurilateral trade agreements that address gaps in WTO disciplines
In the meantime, efforts to ameliorate the impact of the Section 301 tariffs are continuing.
- ST&R is advocating for the renewal of all previously approved exclusions and the creation of a process allowing for new exclusion requests (for more information, please contact strdc@strtrade.com).
- There are a number of proven and legitimate ways to effectively avoid the tariffs or limit their impact (click here for more information).
- Importers of List 3 and 4A goods from China can still preserve their rights to possible refunds of tariffs paid on such goods by joining an ongoing court case (for more information, or assistance filing a claim, please contact us at 301Litigation@strtrade.com).
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