As the US-China trade frictions intensify, the Section 232 and 301 investigations are critical factors that underpin the bilateral, and global dialogue. Both investigations have drawn particular speculation from business leaders around the globe, and forced the global community to question who else risks the inquiry of these investigations, and by what other means, if any, could these trade issues be addressed. At June’s Monthly Executive Breakfast Briefing, Lester Ross, Partner at Wilmer Cutler Pickering Hale and Dorr LLP (known as WilmerHale), offered his professional insight into these issues and more.
China and the US are vital trade partners, and trade between the two undeniably benefits both countries. However, the Trump administration views a US $250 billion trade deficit – as well as unfair and discriminatory trade practices – as major threats to US national security. Ross highlighted that the trade deficit in terms of the trade of goods is often overemphasized due to its salience and political implications, and that a surplus in the US’s trade of services significantly diminishes the effective size of the deficit. Furthermore, Ross went on to emphasize that China has benefitted from trade far more than just in simple monetary terms, stressing that the value in terms of intangible skills and knowledge gained through the US-China bilateral trade over the years should not be understated.
Lester Ross refreshes the audience on the bottom line brass tacks of the US-China trade frictions.
The US’s concerns pertaining to IP theft and unfair trade practices are manifested in the 232 and 301 safeguard tariff investigations. Section 232 of the Trade Expansion Act authorizes the Commerce Department to conduct investigations to determine the effects of imports on national security. Under this provision, the US has imposed tariffs on steel (25%) and aluminum (10%) to bolster the domestic metal industry and secure material-supply for defense industry projects. Ross believes that the current administration is taking a much broader view of what constitutes a risk to national security than in the past, and that tariffs should be more targeted than they are currently.
Further tariffs imposed under Section 301 are related to China’s “unreasonable or discriminatory” trade practices with regards to IP rights. China is retaliating to these Section 301 tariffs on a ‘tit-for-tat’ basis given their effects upon industry, particularly in terms of the aircraft and spacecraft industries.
Ross's presentations was followed by a Q&A session where members expressed concerns about the effects of US tariffs on global supply chains and the efficacy of their implementations. Ross implicated that despite the dangers to global supply chains, historically, the threat of tariffs has been an effective measure to bring Beijing to the negotiating table. However, Ross went on to say that in this particular administration, such a tactic has proven ineffective and little meaningful dialogue has occurred as a result. Through the Q&A exchanges, Ross provided even more insight into an increasingly relevant topic as displayed by the members’ engagement.
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