Background

The Biden administration is reportedly considering launching a new Section 301 investigation of China’s industrial subsidies that could result in additional tariffs on imports from that country. Potentially affected companies wishing to express their views to the administration should contact Nicole Bivens Collinson at (202) 730-4956 or via email for assistance.

According to press reports, U.S. Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo met recently to discuss whether a new 301 probe should be initiated. A Wall Street Journal article reports that the potential investigation would seek to “identify the full panoply of help being offered” by the Chinese central government to the country’s manufacturers, “especially those practices that violate U.S. law or WTO rules.” The U.S. and others have long complained that China has failed to offer a full accounting of its industrial subsidies to the WTO, as it committed to when it joined that organization in 2001, and the U.S. may now be seeking to put that information together on its own, although some experts said such an undertaking could prove extremely difficult.

Experts added that a new Section 301 investigation may not be aimed at actually securing changes to China’s subsidization practices, given how central they are to Beijing’s economic strategy, but instead at increasing the U.S.’ trade leverage against China. The White House has still not concluded a months-long review of how to formulate trade policy with respect to China and a new investigation could ease some of the increasing pressure from businesses and lawmakers to wrap up that review. Some observers speculated that such an investigation could allow the administration to streamline the existing hodge-podge of actions (section 201 safeguards, section 232 and 301 tariffs, etc.) into a more cohesive and targeted action. Others said the administration may be looking for ways to bring China to the table for negotiations on a Phase 2 bilateral trade deal that covers issues excluded from the Phase 1 agreement. A new 301 probe could also give the U.S. more time to recruit the European Union, Japan, and other allies to an effort to present a more united front against Beijing on trade issues.

Given that China is unlikely to make significant changes to any objectionable subsidy practices identified in a potential investigation, the result could be additional tariffs on imports from China, but it remains unclear whether those would be in addition to or in lieu of the existing Section 301 tariffs. Businesses and lawmakers have in recent weeks increased their calls for the administration to ease the current tariffs and reinstate a process for obtaining exclusions from them, but there has been little indication so far what the administration’s response will be. Some press articles said a new investigation could be used as justification to lower tariffs on Chinese goods found not to be substantially subsidized and maintain or increase tariffs on those that are. On that point it is worth noting that those Section 301 tariffs first imposed in 2017 are statutorily required to be reviewed this month.

Copyright © 2021 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

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