Experts frown on US trade action talk

By Chen Weihua in Washington | China Daily USA | Updated: 2017-08-08 11:23

US experts are raising their eyebrows at news reports that the Trump administration will announce the initiation of a Section 301 probe against China.

US news media reported last week that the Trump administration might announce on Aug 4 a broad inquiry into China's trade policies, especially on intellectual property rights.

Later reports suggested that it was postponed for another date.

Wayne Morrison, a specialist in Asian trade and finance at the Congressional Research Service, said that if the US Trade Representative began a Section 301 case against China, and then initiated a WTO dispute settlement case against it, that would not be a big deal, because that is the right of every WTO member.

"However, if the United States did not use the WTO dispute settlement process, and at some point imposed sanctions against China, that might generate concerns that the US was undermining the very process it fought to create when the WTO was established," he told China Daily on Monday.

"China could also challenge the US use of unilateral sanctions in the WTO or might respond with its own sanctions against the United States, which could threaten to cause a trade war," he added.

Chad Bown, a senior fellow at the Peterson Institute for International Economics, described the possible action by the Trump administration as dusting off an outdated US trade law that allows the US president to unilaterally impose tariffs on another country.

Section 301 of the US Trade Act of 1974 was used most by the Reagan administration, when the current USTR Robert Lighthizer served as deputy USTR.

Bown said Trump's proposed solution may only make matters worse. He believes the use of an unadvised and obsolete US trade law is likely to shift attention away from China's actions toward Trump's own policies.

The US government has conducted 122 such Section 301 investigations between 1974 and today, but only one new one since 2001.

Bown noted that US trading partners have become increasingly unhappy with such an "aggressively unilateral" US approach, with the US government acting as police force, prosecutor, jury and judge.

Bown also believes a decision to trigger a Section 301 today is problematic because it would provide additional fuel to the already simmering argument that the Trump administration is undoing the American commitment to rules-based trade and decades of work to establish international cooperation.

He said a Trump decision to operate outside of the rules will spur China to follow suit.

"The fallout from Trump's rogue use of yet another outdated US trade law would be considerable," Bown wrote in an article posted on Peterson's website.

David Dollar, a senior fellow at the John L. Thornton China Center of the Brookings Institution, pointed out the volatility of US President Donald Trump's attitude toward China.

"This volatility gives new meaning to 'ping-pong diplomacy'," he told China Daily on Monday. "The attitude of the US administration is likely to ping-pong back and forth between hostility and friendship."

In an article posted on the Brookings website on Aug 3, Dollar and his colleague Ryan Hass pointed out that the Trump strategy appears to rest on two assumptions about US leverage over China.

The Trump administration assumes that China is highly dependent on the US export market to sustain its economic expansion. But in reality, China's exports to the US account for less than 5 percent of China's GDP, and roughly 3 percent when only value added is measured, according to the article.

They also believe that while the Trump administration assumes that the Chinese need stability in the US-China relationship, it seems that there are limits to the price China is willing to pay for the appearance of stable US-China relations, and the limits appear to be below Washington's expectations.

Dollar and Hass, both of whom served in the Obama administration, also stressed that a protectionist policy would hurt the US economy as much as China's.

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