Senior administration officials today outlined the White House’s plan to pressure China over policies that “force or coerce” American companies to hand over valuable technology to do business there — but they denied the effort was motivated by the crisis over North Korea.
President Donald Trump is slated to take a break from his New Jersey vacation to return to Washington on Monday to announce an executive action that could lead to an investigation over alleged violations of U.S. intellectual property rights. The move delays for as long as a year any decision on actions that could stem from a probe, such as U.S. tariff increases or other punishing unilateral actions.
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But the high-profile announcement the administration is planning carries symbolic as well as practical ramifications, and serves to ratchet up trade pressure on Beijing amid a deepening foreign policy crisis. Trump has responded in bellicose terms over the progress of North Korea’s nuclear missile program and threats to launch an attack on the U.S. territory of Guam, where the U.S. has a military installation.
During a media briefing on Saturday, administration officials rebutted the suggestion the trade action was intended to pressure China — North Korea’s main trading partner and economic lifeline — to do more to rein in Pyongyang, even though Trump himself has said he would go easier on trade concerns with Beijing if they agreed to help put the squeeze on North Korea.
“These are totally unrelated events,” a senior administration official told reporters. “Trade is trade. National security is national security. All parts of this administration, within the White House and the Cabinet agencies, are fully engaged on this issue and fully united on this issue.”
But as the North Korea crisis began to dominate headlines earlier this week, Trump fueled the impression that how hard he pressures Beijing on trade depends on its cooperation on the North Korea question. “I think China can do a lot more” to help curb North Korea, “and I think China will do a lot more,” Trump told reporters at his golf course in Bedminster, N.J., on Thursday. “If China helps us, I feel a lot differently toward trade.”
Additional evidence of a connection between the trade action and the North Korea crisis comes from the fact the executive memorandum Trump will sign on Monday was originally expected more than a week ago. It was apparently put on hold while the U.S. lobbied China and other U.N. Security Council members to impose new sanctions on North Korea. That effort passed by a 15-0 vote.
Trump’s trade action reflects his frustration that the U.S. and China were not able to make more progress on U.S. intellectual property concerns as part of the so-called 100-day plan to improve trade between the two countries — a period that ended earlier this summer — as well as during high-level talks last month in Washington, the administration official said.
But, the official added: “I don’t think we’re headed toward a period of greater conflict. This is simply business between two countries.”
Trump’s order will initiate a two-stage process for confronting China over a variety of “laws, policies, practices or actions” that require American companies to transfer valuable technology or other proprietary information to get permission to do business in China.
American companies “should not be forced or coerced to turn over the fruits of their labor,” a second administration official said. “The current trajectory is unsustainable. Innovation in the U.S. economy should not be put at risk by policies that force companies to turn over their proprietary technologies and intellectual property.”
The executive memorandum will also target trade-secret theft, which costs the U.S. economy as much as $600 billion a year, the second administration official said. “China is widely recognized to be the biggest source of the problem,” the official added.
Trump’s memo will highlight those concerns, but leave it to U.S. Trade Representative Robert Lighthizer to determine whether to launch an investigation — a move that is seen as giving the administration more time to cajole China and gather support from the business community and other trading partners for any eventual action.
Should Lighthizer decide to launch such an investigation, “he will have at his discretion broad powers to use all applicable measures, including, but not limited to, Section 301 of the Trade Act of 1974, which provides a basis for addressing technology transfer practices that may be harming the U.S. economy, exports and American jobs,” an administration official said.
The Section 301 provision is a powerful trade tool that has not been used in recent years. It allows an industry to ask USTR to investigate whether a foreign country is unfairly restricting its sales and to use the threat of sanctions to reach a negotiated settlement. It also allows USTR to self-initiate an investigation, but once a probe is launched a clock starts ticking that requires action within a year.
Lighthizer is well versed in Section 301 from his stint as deputy USTR in the Ronald Reagan administration, when it was more frequently used. However, the U.S. pledged in the mid-1990s to settle disputes through the World Trade Organization dispute settlement system rather than by taking unilateral action.
Administration officials emphasized Saturday that they are a long way from deciding what, if any, action to take if a Section 301 is launched and finds that China has engaged in unfair trade practices.
There are “a wide variety of potential responses. There could be tariffs, there could be some sort of negotiated settlement, there could be a number of other things that are out there — and, obviously, we haven’t made any decision on that at this point,” a third administration official said.
Any investigation could take as long as a year once it is formally launched, and will likely include a public comment period and a hearing, the official said. The administration could also decide to use the information gathered in a Section 301 probe to file a case against China at the World Trade Organization, rather than acting unilaterally, the official added.
“An important question going forward will be whether U.S. companies and trade associations who have highlighted the problem will actually come forward and assist our government in the investigation,” said Michael Wessel, a member of the U.S.-China Economic and Security Review Commission, a watchdog group established by Congress.
It is possible that affected U.S. companies “will hide the facts, fearful that our government won’t follow through, that the Chinese will retaliate against their interests or that they’ll have to admit what’s happened to their critical assets,” Wessel added. “The time has come to say enough is enough — and this action is a vital first step in that effort.”
Administration officials said they expected support from both the business community and Congress for the action, and hope to get cooperation from other countries whose companies face the same problems in China.
Sen. Ron Wyden, top Democrat on the Senate Finance Committee, has already urged Lighthizer to launch an investigation of China’s forced technology practices. “The administration has been unable to make progress on these issues in dialogues with China, including as part of the Comprehensive Economic Dialogue,” Wyden said previously.