China will get a last chance to avoid the January 1 tariff increase, but don’t hold your breath.
President Trump and Chinese President Xi Jinping are set to meet in Argentina at the G20 Summit this week to discuss ways to end the tit-for-tat tariffs imposed by both countries, but the U.S. and China are showing no signs of settling their trade differences. While the Trump Administration has expressed a cautiously optimistic view that the meeting in Argentina would ease tensions between the two countries, some trade experts are less optimistic.
The U.S.-China Economic and Security Review Commission (USCC) stated in its annual report to Congress (click here to review the full report) that China is showing no sign of ending its unfair trade practices which provoked the tariffs in the first place, including technology transfer requirements, protections, subsidies to local Chinese companies for development and expansion abroad, and restrictions on foreign ownership that impose barriers on foreign companies seeking access to the Chinese market.
The report went on to state “The Chinese government continues to resist—and in some cases reverses progress on—many promised reforms of China’s state-led economic model… Repeated pledges to permit greater market access for private domestic and foreign firms remain unfulfilled… The Chinese government’s state-driven industrial policies repeatedly violate its WTO commitments and undermine the multilateral trading system, and China is reversing on numerous commitments.”
The USTR reiterated those sentiments in its own follow-up report on its Section 301 investigation, released on November 20. The report states that “China shows no sign of ceasing its policy and practice of conducting and supporting cyber-enabled theft and intrusions into the commercial networks of U.S. companies”. This conduct enables the Chinese government to gain unauthorized access to intellectual property, trade secrets, confidential business information, technical data, negotiating positions, and sensitive and proprietary internal business communications. The report goes on to say that “China’s cyber-enabled theft against the United States has increased in frequency and sophistication since the March 2018 issuance of USTR’s [Section 301] findings.”
“The Chinese government continues to direct and unfairly facilitate the systematic investment in, and acquisition of, U.S. companies and assets by Chinese entities, to obtain cutting-edge technologies and intellectual property and generate large-scale technology transfer in industries deemed important by state industrial plans. Chinese outbound investment is increasingly focused on venture capital (VC) investment in U.S. technology centers such as Silicon Valley, with Chinese VC investment reaching record levels in 2018.” The report cited references to a September 2018 report by the Wall Street Journal which provides case-specific examples of Chinese actions to obtain technology from five major U.S. companies, including General Electric and DuPoint. The USTR said China’s tactics include “include pressuring U.S. partners in joint ventures to relinquish technology, using local courts to invalidate American firms’ patents and licensing arrangements, dispatching antitrust and other investigators, and filling regulatory panels with experts who may pass secrets to Chinese competitors.
Commerce Secretary Wilbur Ross told Bloomberg that even if the meeting goes well, the U.S. is unlikely to put a formal deal in place with China in time to defer the January 1 duty increase from 10% to 25% on $200 billion worth of Chinese goods. Ross went on to say that the meeting “is going to be big picture, but if it goes well, it’ll set the framework for going forward… We certainly won’t have a full formal deal by January. Impossible.”
And, if the meeting doesn’t go welI? If no deal is made, President Trump has threatened that new import duties are “ready to go” on another $267 billion worth Chinese goods, the rest of China’s imports to the U.S. This fourth list of duties would include consumer goods, such apparel, Apple iPhones and laptop computers with a 10% or 25% tariff.
Rumors Run Wild
Rumors have spread that the CBP will issue a “grace period” of up to 5 days for vessels carrying List 3 goods that do not meet their scheduled January 1 arrival in U.S. ports. The National Customs Brokers & Forwarders Association of America, Inc. (NCBFAA) has confirmed that these rumors are not true, and that the CBP has not engaged in any such discussions. It should also be noted that the CBP does not have the authority to grant such grace periods. The Federal Register states that the higher duties will be in effect on all 301 goods imported on or after January 1, 2019.
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Sources
- Freight Waves
- National Customs Brokers & Forwarders Association of America, Inc. (NCBFAA)
- Bloomberg
- Washington Examiner
