From The Editor

Simple Trade Math: Is 301 Bigger Than 232?

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MCN Editor Dan Markham

Today, the United States is on the precipice of a trade war with China. Seventy-five years ago, the country was in a very different kind of war with another Asian nation. Yet one of the solutions to both problems is the same, said ABC Metals President Dan Kendall following a 232 discussion at last month’s CBSA Annual Convention in Bonita Springs, Fla.

During World War II, the Japanese conquered several Southeast Asian nations that were the chief suppliers of rubber, a crucial product in the war effort. One of the responses to that challenge was to develop artificial rubber products to stand in for the choked-off supply of the natural resource.

Kendall says that kind of spirit is crucial to winning on the battlefields of the global marketplace. “We’ve got to innovate our way out of this.”

And, oddly, it’s that very concept that is the crux of another ongoing three-digit trade case, one that might be even more important to the future of the economy than steel and aluminum tariffs. In August 2017, under much less fanfare, the Trump Administration initiated an investigation against China under Section 301 of the Trade Act of 1974. 

The case involves “the government of China’s acts, policies, and practices related to technology transfer, intellectual property and innovation.” According to the government’s findings, China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to force or pressure technology transfers from American companies. 

The U.S. also alleges China is using discriminatory licensing processes to transfer technologies from U.S. companies to Chinese companies; directs and facilities investments, which generate large technology transfers; and supports cyber intrusions into U.S. companies. By the calculations of an interagency team of experts and economists, the impact of such actions is estimated at a minimum of $50 billion per year. 

In response to the findings, the U.S. is proposing 25 percent tariffs on up to 1,300 Chinese products, with an annual value commensurate with the harm caused to the U.S. economy. The product list doesn’t include steel, aluminum or red metals products, but includes many that contain such materials, including aerospace, information, and communication technology and machinery.  

The president has also directed his administration to respond to Chinese investment demands aimed at obtaining key U.S. technologies.  Relevant departments and agencies will work with the Treasury Department to propose measures addressing China’s investment practices involving the acquisition of sensitive technologies, according to the USTR. 

Final determinations on the 301 investigation should be released later this spring. 

If innovation is one of the key elements to American success in manufacturing and other commercial ventures, then protecting the fruits of that research and development is crucial to driving the innovation that leads to such wealth-creating technologies.