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The Trump administration is reportedly considering self-initiating a Section 301 investigation of China’s forced technology transfer policies. If this investigation were to determine that these policies are imposing unreasonable or discriminatory restrictions on U.S. commerce, the president could impose additional tariffs on imports from China, rescind licenses for Chinese companies to do business in the U.S., or take other measures. However, the administration has reportedly postponed further action due to its efforts to secure China’s help in imposing tougher economic sanctions against North Korea (see related story this issue).
Section 301 procedures were used more than 100 times before the World Trade Organization was established in 1995 but have been used only once since 2001. The Peterson Institute for International Economics states that this is because the WTO’s dispute settlement system offers a more effective means of opening foreign markets. However, President Trump, U.S. Trade Representative Robert Lighthizer, and Commerce Secretary Wilbur Ross have been critical of the WTO and expressed interest in seeking other means to resolve longstanding trade concerns.
According to press reports, Chinese state-run media responded to the news of a potential Section 301 investigation by warning that it could “spark a trade war” between the two countries. Press sources also noted that China could file a complaint against such an investigation at the WTO, where special flexibility afforded China in its 2001 accession agreement could give it a leg up.