Posts Tagged ‘unfair trade practices’

China’s Faux Comparative Advantage

April 16, 2018

The economics textbooks don’t anticipate a state-directed economy that disregards the rule of law.

Container ships at a port in Qingdao, China.
Container ships at a port in Qingdao, China. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

In textbook economics, trade is a win-win: Two countries trade freely based on comparative advantage and share the resulting gains, improving welfare in both countries. America’s trade with China is as far from that model as the Earth is from Mars.

Historically, the U.S. has had a comparative advantage in manufacturing because of its high rates of technological innovation, correspondingly high rates of capital investment and worker productivity, strong protections for intellectual property, and wide availability of low-cost energy. Yet since joining the World Trade Organization in 2001, China has come to dominate traditional manufacturing. By 2015 it accounted for 28% of global production of autos, 41% of ships, more than 50% of refrigerators, more than 60% of televisions, and more than 80% of computers and air conditioners.

As is evident in government documents such as China 2025, China increasingly threatens to dominate the industries of the future: artificial intelligence, autonomous vehicles, blockchain systems, robotics, high-tech ship manufacturing and more. These technologies have profound strategic implications.

In large part because of China’s dominance in manufacturing, the U.S. last year ran a bilateral trade deficit in goods of $375 billion, or more than $1 billion a day. Contrary to the textbook model, whereby currency adjustments help rebalance trade, the U.S. trade deficit with China has been persistent—more than $4 trillion cumulatively since 2002—and growing.

Why is the textbook model failing? The answer is that China’s faux comparative advantage is the result of its state-directed investments, nonmarket economy, and disregard for the rule of law.

The problem’s taproot is Chinese intellectual-property theft and the forced transfer of foreign technology as a condition of accessing China’s market. These illicit practices, including widespread cyberespionage, allow Chinese companies to move rapidly up the innovation curve at much lower cost than their foreign competitors, which must recoup the cost of research and development through higher prices.

Other forms of economic aggression contribute to China’s faux comparative advantage. To protect its market, China erects high tariff barriers—e.g., its auto tariff is 10 times that of the U.S. China has high nontariff barriers, too, including intrusive licensing requirements and foreign-ownership restrictions that keep the playing field tilted in favor of Chinese companies.

To gain global market share, China showers its state-owned and state-financed enterprises with subsidized land and capital, myriad export subsidies, and lucrative tax preferences. To prevent the adjustments predicted by the textbook model of trade, China has historically undervalued its currency.

Most broadly, China’s “going out” strategy involves leveraging sovereign-wealth funds to capture the industries of the future. Three of the world’s 10-largest SWFs are from China, and China Investment Corp. has close to $1 trillion. These funds regularly scour technology-rich communities like Silicon Valley, Boston and Austin, Texas, seeking to purchase the crown jewels of American innovation. Since its founding in 2009, for example, Sinovation has accumulated $1.2 billion in total capital and has invested in almost 300 startups.

While the U.S. welcomes foreign capital, China perverts the investing process by targeting American companies based on strategic and military goals rather than pure economic considerations. Because high-technology acquisitions often generate spillover benefits for the Chinese military, its SWFs are often willing to pay distortive prices, far above what the free market would dictate.

At times the brazenness of China’s economic aggression has been breathtaking. In 2006 China’s State Nuclear Power Technology Corp. signed an $8 billion joint venture that resulted in the transfer by Westinghouse of more than 75,000 construction and technical documents on its signature AP1000 nuclear reactor. Meanwhile, Chinese cyber operatives allegedly were illegally penetrating Westinghouse’s Pennsylvania computers and information systems to acquire technical documents from its extensive R&D efforts.

By 2015 China had broken ground on a plant to construct its cloned Westinghouse reactor, the CAP1400. Today, as Westinghouse has struggled to stay out of bankruptcy, China is constructing reactors in Pakistan and Romania, is scheduled to build them in Argentina, Britain and Iran, and is bidding on projects in Saudi Arabia, South Africa and Turkey.

The biggest threat China’s faux comparative advantage poses is to the global trading system itself. The gains from trade will not accrue to all the partners when one of the largest is engaged in such market-distorting behavior.

It is in the name of fair, reciprocal and ultimately free and prosperous trade that President Trump is standing up to China’s intellectual-property theft and other unfair trade practices. The president has the backs of American workers, farmers and businesses. He deserves the support of a world now being victimized by China’s economic aggression.

Mr. Navarro is assistant to the president for trade and manufacturing policy and director of the White House National Trade Council.

https://www.wsj.com/articles/chinas-faux-comparative-advantage-1523817868

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Donald Trump brands China a military rival in US reboot of great power strategy

January 31, 2018

Beijing stresses the two countries have common interests as US president insists that the stakes with China are not just economic

By Catherine Wong
South China Morning Post

PUBLISHED : Wednesday, 31 January, 2018, 9:29pm
UPDATED : Wednesday, 31 January, 2018, 9:55pm
 Image may contain: 1 person, stripes

US President Donald Trump named China as a major US competitor on both economic and military fronts in his first state-of-the-union address, another sign that Washington is putting great power rivalry at the heart of its national strategy.

Analysts said Trump’s explicit references to China contrasted with Beijing’s view of the Sino-US relationship and those of his predecessors who saw China as a partner despite their economic competition.

In response to the speech, Beijing called on Washington to abandon the “cold war” approach to their ties and for the two nations to respect each other.

“Even though there are differences, the two countries still share more mutual interests than differences,” Chinese foreign ministry spokeswoman Hua Chunying said on Wednesday. “History and reality shows that cooperation is the only correct choice.”

Chinese Premier Li Keqiang also played down concerns over rising confrontation between Beijing and Washington, stressing that both sides have a lot of common interests.

“I hope the United States can have a comprehensive and objective view of the Sino-US relationship, expand our common interests and manage our differences,” Li said.

In an annual address to a joint session of the US Congress, Trump vowed to boost American defences to counter threats from China and Russia.

“Around the world, we face rogue regimes, terrorist groups, and rivals like China and Russia that challenge our interests, our economy, and our values,” Trump said.

“In confronting these dangers, we know that weakness is the surest path to conflict, and unmatched power is the surest means of our defence.

“For this reason, I am asking the Congress to end the dangerous defence sequester and fully fund our great military.”

Trump also said the US must “modernise and rebuild” its nuclear arsenal, although the US would “hopefully never having to use” such weapons.

He also highlighted the need for fair and reciprocal trade relationships, and promised to take action to defend the country’s intellectual property.

“And we will protect American workers and American intellectual property through strong enforcement of our trade rules,” he said.

Trump’s reference to China as a direct threat on all fronts is a departure from the take of his three immediate predecessors.

In 2000, then US president Bill Clinton talked about the importance of engaging China and appealed to Congress to back the US’ effort to bring China into the World Trade Organisation.

Six years later, president George W Bush referred to China as one of the “new competitors” along with India on the economic front.

In 2016, US president Barack Obama said only that the United States must not let China write the rules of global commerce.

Trump’s focus on China as a broader threat reflects a major shift in US defence priorities outlined in US Defence Secretary Jim Mattis’s National Defence Strategy released in January. The document says the US will refocus on China and Russia after a decade of fighting terrorism in the Middle East.

Trump has also signed into law a sweeping defence policy bill authorising a US$700 billion budget for the military, but it still needs lawmakers’ approval.

Wu Xinbo, director of Fudan University’s Centre for American Studies, said Trump was playing up the threat from China and Russia to back his call for a big increase in the military budget.

“[But] China has yet to pose a direct military threat to the US,” Wu said.

Teng Jianqun, director of the US studies department at the China Institute of International Studies, said there was a huge discrepancy in how China and the US viewed their relationship.

Chinese analysts and officials tended to be optimistic about bilateral ties, while those in the US were pessimistic, Teng said.

“If we do not pay attention to this perception gap, there could be miscalculations from both sides,” he said.

Jie Dalei, assistant professor of international relations at Peking University, said that even though Trump had clearly named China as one of his country’s greatest rivals, it would be difficult for the US to follow through on a strategy to contain China.

“The [US’] Indo-Pacific strategy is still a concept rather than a plan for execution,” Jie said. “Without economic assistance or other support, Trump won’t be able to achieve any more than Obama.”

Additional reporting by Wendy Wu and Liu Zhen

http://www.scmp.com/news/china/diplomacy-defence/article/2131445/donald-trump-brands-china-military-rival-us-reboot

IMF chief Christine Lagarde finds common cause with Donald Trump

January 26, 2018

IMF chief Christine Legarde found common ground with US president Donald Trump on encouraging fair trade and protecting intellectual property rights. (AP)

LONDON: International Monetary Fund (IMF) Managing Director Christine Lagarde found at least some common cause with US President Donald Trump on Friday in supporting the global fight against intellectual property (IP) theft.

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Speaking on a panel at the World Economic Forum in Davos, Lagarde echoed a similar sentiment delivered by Trump earlier in the day, stating that he would not “tolerate” IP theft.
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Lagarde also stressed that it was important to tackle “unfair” trade practices.
“We need to have more, better trade and fair trade, but for this we need international cooperation,” she said. “We need a reset, we need to look at IP rights, but it needs to be looked at in a cooperative way. The World Trade Organization is a forum where this should happen.”
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The IMF expects global economic growth of about 3.9 percent this year and next year. “We are in a sweet spot and we should celebrate,” said Lagarde.
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She said this was the result of good policies, but there were risks, including excessive inequalities and lack of international cooperation.
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The IMF chief stressed that a lack of international cooperation could lead to “significant” geopolitical risks. She added that “lagging productivity” could be boosted with more investment into R&D to facilitate innovation.
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“We need more trade not less,” she said. “And the fight against corruption is vital to give more hope and encourage our economies.”
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Speaking on the same panel, Mark Carney, governor of the Bank of England, told the WEF audience that more investment relative to savings was leading to monetary “normalization.”“For central banks, there is a regime shift toward normalization,” he said.
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Carney added: “UK banks have five times more capital than before the 2008 crisis and the Bank of England is confident it can withstand the shock of the hardest of hard Brexits.”
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Trump, Xi Push Opposing Views on Trade

November 11, 2017

At Asia summit, U.S. president disavows multilateral agreements that ‘tie our hands’

In Asia, Trump Delivers Message of Economic Nationalism
President Donald Trump laid out an economic nationalist agenda Friday, saying that the U.S. had been treated unfairly by global trade practices and that he wouldn’t allow the country to be “taken advantage of anymore,” in his address to business leaders from 21 countries at the Asia Pacific Economic Cooperation summit in Da Nang, Vietnam. Photo: Reuters

DA NANG, Vietnam—President Donald Trump delivered his vision for a new American economic relationship with Asia here Friday, one that eschews big trade deals the U.S. has long favored for country-to-country bargaining.

Moments later, Chinese President Xi Jinping took the same stage at a Pacific Rim summit and praised the kind of multicountry treaties that have underpinned American influence in the region for decades.

https://www.wsj.com/articles/trump-declares-new-world-trade-order-1510300438

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Bloomberg

Xi, Trump Offer Dueling Visions of Globalization at Asia Forum

  
Chinese President Xi Jinping and U.S. President Donald Trump laid down starkly contrasting visions for Asia’s future Friday, with Xi pledging a new era of globalization propelled by his nation’s economic might as Trump offered America’s largess only to those who play by his rules.
  • The two leaders speak in back-to-back addresses in Vietnam
  • Trump says play by the rules, Xi says get on the China train

China’s Xi on Economy and Globalization

Chinese President Xi Jinping and U.S. President Donald Trump laid down starkly contrasting visions for Asia’s future Friday, with Xi pledging a new era of globalization propelled by his nation’s economic might as Trump offered America’s largess only to those who play by his rules.

In back-to-back speeches to business leaders at the Asia-Pacific Economic Cooperation summit in Vietnam, Xi and Trump in effect competed for the region’s economic affections, with divergent blueprints of what the 21st Century economy should look like.

Speaking moments after Trump told the same audience the U.S. would not seek multilateral trade deals and wanted to make the system fairer for Americans, Xi painted a picture of a global order that would bring collective benefits, saying, “let more countries ride the fast train of Chinese development.”

The speeches represent contrasting pitches for leadership in a region suspicious of China’s intentions and unsure about America’s staying power. Xi’s speech glossed over regional unease over China’s rising clout while pledging free trade and stability. Trump dwelled on regional flash points while criticizing the World Trade Organization and offering trade on America’s terms.

Trump’s speech cataloged the ills of globalization, saying too many countries had flouted the rules for years with impunity, harming American workers and U.S. companies. “We are not going to let the United States be taken advantage of anymore,” Trump said.

Trump Seeks Robust Trade Relationships Rooted in Fairness

Xi, on the other hand, said “the concept of globalization should pay more attention to openness and tolerance, while the direction should focus on balance.” China will “continue to build an open economy and work hard to achieve mutual benefits,” he added. “Opening up will bring progress and those who close down will inevitably lag behind.”

China Doubts

The comments signal a continuation of Xi’s drive to cast himself as a champion of global free trade as the Trump administration challenges China’s barriers to access for foreign companies. Earlier this year, Xi launched his push-back against protectionism in a speech to billionaires and government officials gathered at the World Economic Forum in Davos, Switzerland.

Still, while Xi has spoken strongly in support of the global trading order this year there’s been little tangible evidence of Beijing following through.

In a January survey of 462 U.S. companies by the American Chamber of Commerce in China, more than 60 percent expressed little or no confidence that China would open its markets in the next three years. China still ranks 59th out of 62 countries evaluated by the Organization for Economic Cooperation and Development in terms of openness to foreign direct investment.

In a major speech aimed at domestic audiences at China’s 19th Party Congress in October, Xi’s language on reform stuck closely to previous pledges while promising to make sure that China’s Communist Party “leads everything.”

Trump’s Plan

Trump too laid out a path for how other countries could boost their economy: He offered economic partnerships with the U.S. but only through bilateral trade pacts, and he pledged never to again join a multilateral deal like the Trans-Pacific Partnership, which would have bound the U.S. to 11 countries as a bulwark against China.

“I will make bilateral trade agreements with any Indo-Pacific country that wants to be our partner and will abide by the principle of fair and reciprocal trade,” Trump said.

Nations already have doubts about the U.S. commitment under Trump. After Asian countries tied up with America on TPP, Trump tore up the deal — leaving them wondering if Trump was turning his back on the region as he pursued an “America First” agenda.

When the U.S. enters into a trade relationship, Trump said, “we will from now on expect that our partners will faithfully follow the rules, just as we do. We expect that markets will be open to an equal degree on both sides and that private industry, and not government planners, will direct investment. For too long and in too many places, the opposite has happened.”

Power, Patronage

Trump also said those who play by the rules will be the U.S’s closest economic partners and that the U.S. is seeking friendly ties in the region. “We don’t dream of domination,” Trump said. “We will not make decisions for the purposes of power or patronage.”

“I doubt Trump will have many takers for bilateral deals, particularly given that he defines fair trade as the absence of a deficit,” said David Skilling, director of Singapore-based advisory firm Landfall Strategy Group. “Apart from Singapore, most Asian economies run sizable trade surpluses with the U.S.,” he said.

“It is not a very well thought-out strategy. A transactional, zero-sum ‘America First’ approach won’t do much to advance U.S. interests in the region,” he said.

Trump and Xi have very different visions for the world

Xi’s remarks came after he pledged during a state visit to China by Trump to further open his economy to foreign investors. Following the visit, China announced a plan to open its financial sector by removing ownership limits on its banks and asset-management companies.

‘Continuous Progress’

Xi vowed to continue opening the Chinese economy to foreign players and to undertake structural reforms, echoing remarks he delivered in Beijing on Thursday. “In the next fifteen years, China wants to set up a new platform for the cooperation of all parties in entering the Chinese market,” Xi said.

Xi called on the region to make “continuous progress” toward what would be known as the Free Trade Area of the Asia-Pacific and to quickly complete negotiations on a 16-nation Asia trade pact known as the RCEP.

During Trump’s visit to Beijing on Thursday, Xi didn’t respond directly to Trump’s charges of unfair trade practices, but said he was committed to opening up China’s economy. He cited new deals with U.S. companies as “great examples” of the potential “win-win nature” of ties.

— With assistance by Jason Koutsoukis

Trump optimistic on trade, North Korea after China talks

November 9, 2017

By JILL COLVIN and JONATHAN LEMIRE

Donald Trump, Xi Jinping

BEIJING (AP) — President Donald Trump on Thursday criticized the “very one-sided and unfair” trade relationship between the U.S. and China, but stopped short of castigating Chinese President Xi Jinping by saying he doesn’t blame the country for having taken advantage of the U.S.

Speaking after the announcement of new business deals between U.S. and Chinese companies, Trump said China “must immediately address the unfair trade practices that drive” what he said is “shockingly” large trade deficit, along with barriers to market access, forced technology transfers and intellectual property theft.

“But I don’t blame China,” he said. “After all, who can blame a country for being able to take advantage of another country for the benefit of its citizens?”

To applause, Trump said: “I give China great credit.”

Trump’s comments came during his second day in China and after lengthy meetings with Xi. The day included announcements that the U.S. and China had signed agreements valued at more than $250 billion for products including U.S.-made jet engines, auto parts, liquefied natural gas and beef.

Such contract signings are a fixture of foreign leader visits to Beijing and are intended to defuse foreign complaints about China’s trade policies.

President Donald Trump commented at a business event in Beijing on Thursday that he does not blame China for the trade deficit with the US. Instead, he said he blames previous US administrations. (Nov. 9)

Many of the contracts signed Thursday appeared to represent purchases that Chinese mobile phone makers, airlines and other customers would have made anyway, but were saved to be announced during Trump’s visit. It was unclear if the pledges extend beyond a U.S.-China trade agreement announced in May that featured LNG and beef exports to China.

The deals are “a way of distracting from the fact that there’s been no progress in China on structural reform, market access or the big issues that the president has tried to make progress on with regard to China,” said Elizabeth Economy, the Asia studies director at the Council on Foreign Relations.

Trump had made narrowing the multibillion-dollar U.S. trade deficit with China a priority for his administration. During the presidential campaign, he accused China of “raping our country” on trade and pledged to minimize the countries’ trade imbalance.

China’s trade surplus with the United States in October widened by 12.2 percent from a year earlier, to $26.6 billion, according to Chinese customs data released Wednesday. The total surplus with the United States for the first 10 months of the year rose to $223 billion.

For his part, Xi promised a more open business environment for foreign companies in China and said his country was committed to further opening its economy to foreign investment.

“China will not close its doors” and will open them “even wider,” he said, pledging that foreign companies in China, including American ones, would find the market “more open, more transparent and more orderly.”

The United States and other trading partners have been pressing Beijing to give their companies more access to its state-dominated economy. But it remains unclear how far China will go to fulfill its pledges. Previous U.S. administrations have hailed market-opening promises only to be left disappointed.

Xi also described U.S.-China relations as standing at a “new historic starting point,” and declared: “The Pacific Ocean is big enough to accommodate both China and the United States.”

Before arriving in China, Trump had delivered a stern message to Beijing, using an address to the National Assembly in South Korea to call on China, North Korea’s biggest trade partner, to do more to confront and isolate the antagonistic nation. That included calling on China to fully implement U.N. Security Council resolutions aimed at depriving the North’s government of revenue for its nuclear and ballistic missile programs

“You cannot support, you cannot supply, you cannot accept,” he said.

Trump on Thursday appeared far more conciliatory, thanking China for its efforts and saying he’d been encouraged by his conversations.

“China can fix this problem easily. And quickly. And I am calling on China and your great president to hopefully work on it very hard,” Trump said. “If he works on it hard it will happen. There’s no doubt about it.”

It was an optimistic tone that Trump stuck throughout the day. Earlier, he’d said he looked “forward to many years of success and friendship working together to solve not only our problems, but world problems, and problems of great danger and security.”

“I believe we can solve almost all of them, and probably all of them,” he said.

China is increasingly disenchanted with North Korea’s nuclear weapons development, but remains wary of using its full economic leverage over its traditional ally. It fears triggering a collapse of the North’s totalitarian regime that could cause an influx of refugees into northeastern China and culminate in a U.S.-allied unified Korea on its border.

Before the meetings, China rolled out the red carpet for Trump, treating him to an elaborate welcome ceremony on the plaza outside the Great Hall of the People before the leaders turned to their private talks.

Trump looked on approvingly as a Chinese honor guard played the national anthems of both countries, cannons boomed and soldiers marched. He clapped and smiled as children waving U.S. and Chinese flags and flowers screamed and jumped wildly.

The day before, Trump and first lady Melania Trump spent the first hours of their visit on a private tour of the Forbidden City, Beijing’s ancient imperial palace. It’s usually teeming with tourists but was closed to the public for the presidential visit.

Trump said Thursday the welcome “was truly memorable and impressive and something I will never forget.”

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Associated Press writers Christopher Bodeen in Beijing and Darlene Superville and Ken Thomas in Washington contributed to this report.

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Follow Colvin on Twitter at http://twitter.com/@colvinj and Lemire at http://twitter.com/@JonLemire

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Donald Trump sends tough signal to China on unfair IP, tech practices

August 15, 2017

WASHINGTON – The United States in effect served notice on China on Monday (Aug 14) by opening an investigation into unfair trade practices focused on intellectual property (IP) and advanced technology.

But punitive action is still about a year away, and conclusions may also depend on the outcomes of the current international pressure campaign on North Korea led by the US, but in which China has a key role as the Pyongyang regime’s economic lifeline.

While the US administration has not linked trade issues with progress on North Korea, the President has explicitly linked the two. China insists that any action on trade must conform to World Trade Organisation (WTO) rules, and must not be linked to North Korea, where it says Beijing’s influence is limited.

Mr Trump’s memo directs US Trade Representative Robert Lighthizer to determine whether to launch an investigation – which in turn could give the President authority to take measures under Section 301 of its Trade Act, against China if it finds that country is damaging American interests by stealing IP or unfairly forcing transfer of technology.

For the US, this has long been a major bone of contention with China. A 2017 report of the US’s IP Commission on “The Theft of American Intellectual Property” estimated that in 2015 “anywhere from US$58 billion to US$118 billion of counterfeit and pirated tangible goods may have entered the United States.”

Yet the US business community is not entirely united, analysts say.

“Some see the potential for retaliation the Chinese could take against their commercial or market access issues wholly unrelated to IP” Amy Celico, a former senior director for China at the USTR and currently head of the China team at the consultancy Albright Stonebridge Group, told The Straits Times.

“But other industries feel they are facing an existential threat to their ability to operate in the Chinese market and they agree that something has to happen, the administration has to stand up to China on unfair trade practices.”

Mr Trump told journalists at a brief event where he signed the memo “Washington will turn a blind eye no longer.”

“I’m directing the United States Trade Representative to examine China’s policies, practices, and actions with regard to the forced transfers of American technology and the theft of American intellectual property.”

“We will stand up to any country that unlawfully forces American companies to transfer their valuable technology as a condition of market access. We will combat the counterfeiting and piracy that destroys American jobs, we will enforce the rules of fair and reciprocal trade that form the foundation of responsible commerce” he said.

Left unsaid was the question of North Korea. The US has been pressing Beijing which accounts for some 90 per cent of North Korea’s trade, to pull the plug on Pyongyang to force the regime to stop its nuclear missile programme.

On August 11 Mr Trump said “We lose hundreds of billions of dollars a year on trade with China. They know how I feel. It’s not going to continue like that but if China helps us, I feel a lot differently toward trade.”

“Certainly it seems the administration is trying to use every possible tool in dealing with this critical issue of North Korea” Ms Celico said in a phone interview.

“The Chinese have come out quite forcefully as they see it as a stick the administration is using to get China to be more aggressive in dealing with North Korea, and they are disavowing any kind of linkage as destabilising for the bilateral relationship.”

“The problem for President Trump is he’s the one who linked these two issues. Looking into launching an investigation rather than launching an investigation, would seem to be responsive to Chinese pressure.”

Ms Yun Sun, a Fellow at the Stimson Centre in Washington, told The Straits Times: “It’s an investigation at this stage, it could take a year.”

“With the Party Congress coming up President Xi Jinping does not want any major instability in foreign affairs. Also, Jared Kushner and Ivanka Trump are supposed to visit China to pave the way for President Trump’s visit.”

“I think the Chinese will appear to be angry but I don’t see any substantive retaliation on trade” she said.

 

 http://www.straitstimes.com/world/united-states/trump-sends-tough-signal-to-china-on-unfair-ip-tech-practices

Trump close to decision on addressing Chinese trade practices

August 2, 2017

Steve Holland

Reuters

WASHINGTON (Reuters) – U.S. President Donald Trump is close to a decision on how to respond to what he considers China’s unfair trade practices, a senior Trump administration official said on Tuesday.

Trump is considering encouraging U.S. Trade Representative Robert Lighthizer to initiate an investigation of Chinese trade practices under the 1974 Trade Act’s section 301, the official said. An announcement could come as early as this week, the official said, speaking on condition of anonymity.

Section 301 of the Trade Act of 1974 allows the president to unilaterally impose tariffs or other trade restrictions to protect U.S. industries from “unfair trade practices” of foreign countries, such as trade agreement violations, or “discriminatory” actions that burden U.S. commerce.

The United States has a long list of grievances about China on trade, including accusations of steel dumping and theft of U.S. intellectual property.

China has said that trade between China and the United States benefits both sides and that Beijing is willing to work with Washington to improve their trade relationship.

Trump has long been a critic of Chinese trade practices but his interest in penalizing Beijing has risen because of his concern at what he perceives to be Chinese inaction on reining in increasingly belligerent North Korea.

The United States has pressed China to exert more economic and diplomatic pressure on North Korea to help rein in its nuclear and missile programs. Beijing has repeatedly said its influence on North Korea is limited and that it is doing all it can.

A senior Chinese official said on Monday there was no link between North Korea’s nuclear program and China-U.S. trade.

Susan Thornton, acting assistant secretary of state for East Asia, told a congressional hearing on Tuesday that new U.S. sanctions aimed at curbing North Korean’s weapons programs, including measures aimed at Chinese financial institutions, could be expected “fairly soon.”

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China Shipping containers sit on a ship in the Port of Los Angeles after being imported to the U.S., California, Oct. 7, 2010. Reuters photo

Section 301 was used extensively in the 1980s to combat Japanese imports of motorcycles, steel and other products – an era during which Lighthizer served as deputy U.S. trade representative.

The statute has been little used since the World Trade Organization was launched in 1995.

The WTO provides a forum for resolving trade disputes, but Lighthizer and Commerce Secretary Wilbur Ross have complained that it is extremely slow, often taking years to reach a conclusion, and that the Geneva-based organization has an inherent anti-U.S. bias.

Both China’s Foreign Ministry and Commerce Ministry did not respond immediately to requests for comment.

FILE PHOTO: Chinese national flags are flying near a steel factory in Wu’an, Hebei province, China, February 23, 2017. REUTERS/Thomas Peter/File Photo

Chinese Premier Li Keqiang met Michigan’s governor Rick Snyder in Beijing on Tuesday, where he said the common interests of China and the United States were bigger than any disputes.

“China welcomes U.S. states, including Michigan, to … enhance bilateral trade and investment, … and consolidate and expand cooperative consensus to create better development opportunities and jobs for both countries’ peoples,” Li told Snyder, according to a Chinese government statement

“The Trump administration believes in free and fair trade and will use every available tool to counter the protectionism of those who pledge allegiance to free trade while violating its core principles,” Ross said in a Wall Street Journal opinion piece on Tuesday.

He tried to refute arguments that the Trump administration was taking a protectionist stance, saying that both China and Europe were more protectionist because they subsidized export industries and had “formidable tariff and non-tariff trade barriers against imports.”

“China is not a market economy. The Chinese government creates national champions and takes other actions that significantly distort markets,” Ross wrote. “Responding to such actions with trade remedies is not protectionist.”

Additional reporting by David Lawder in Washington and Michael Martina in Beijing; Editing by Andrew Hay, Peter Cooney & Shri Navaratnam

U.S. Plans Trade Measures Against China

August 2, 2017

Trump administration aims to force Beijing to crack down on intellectual-property theft and ease market access

A cargo ship is loaded at a port in Qingdao, in eastern China's Shandong province. China had a $347 billion trade surplus with the U.S. last year.
A cargo ship is loaded at a port in Qingdao, in eastern China’s Shandong province. China had a $347 billion trade surplus with the U.S. last year. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

WASHINGTON—The Trump administration is planning trade measures to force Beijing to crack down on intellectual-property theft and ease requirements that American companies share advanced technologies to gain entry to the Chinese market.

The administration is considering invoking a little-used provision of U.S. trade law to investigate whether China’s intellectual-property policies constitute “unfair trade practices,” according to people familiar with the matter.

That would pave the way for the U.S. to impose sanctions on Chinese exporters or to further restrict the transfer of advanced technology to Chinese firms or to U.S.-China joint ventures.

American business frustration with Chinese trade and market-access practices has mounted in recent years, with U.S. business groups urging the government to take a tougher trade line with China. Many organizations have complained that the Trump administration hasn’t pushed hard enough in areas like intellectual property, as it has focused more on Chinese manufacturing and China’s $347 billion trade surplus with the U.S. last year.

That discontent has intensified as China’s economy continued to expand and its computer and software sectors became bigger competitors internationally. Western firms fear China will use the regulations to bar foreign investments in areas that Beijing targets for investment, including semiconductors, advanced-machine tools and artificial intelligence.

One big question hanging over the White House review is whether the administration pursues any complaint through the World Trade Organization, or whether it chooses to impose penalties on its own without first seeking permission from the international body, which some Trump advisers have argued is incapable of dealing with China’s trade practices. Trump aides have regularly vowed to pursue a more unilateral approach to trade but have so far done little along those lines.

It is unclear how long the administration’s internal review will take before an announcement is made. Officials at one point had signaled that an announcement could come as soon as this week.

A White House spokeswoman declined to comment on the prospect of trade sanctions.

The White House has been wrestling in recent weeks with how to navigate trade relations with China following a stalemate during mid-July bilateral economic talks that yielded no concrete progress. President Donald Trump in recent days has also expressed open disappointment with Chinese efforts to curb North Korea’s nuclear program and administration officials have been increasingly outspoken in their criticism of Chinese trade practices.

Mr. Trump’s commerce secretary, Wilbur Ross, wrote an op-ed in Tuesday’s Wall Street Journal blasting China, as well as the European Union, for “formidable nontariff trade barriers” and vowing to “use every available tool” to fight those limits.

The White House expects that a crackdown on alleged Chinese intellectual-property expropriation would have widespread support among U.S. businesses, which have complained about Chinese business practices.

The response may be more divided, say industry officials. Those U.S. companies that want to keep their most advanced technology from Chinese hands would probably back the move, while others that want to license technology to Chinese firms could find the measures a hindrance.

China could also retaliate by blocking U.S. investments or making life tougher for U.S. companies in China.

Still, any action on Chinese intellectual property is bound to be more popular with the business sector than other trade moves the president has made, including his decision to withdraw from the Trans-Pacific Partnership as well as his threats to pull out of the North American Free Trade Agreement and to impose tariffs on steel imports.

Treasury Secretary Steven Mnuchin, Chinese Vice Premier Wang Yang and Commerce Secretary Wilbur Ross
Treasury Secretary Steven Mnuchin, Chinese Vice Premier Wang Yang and Commerce Secretary Wilbur Ross.  PHOTO: BRENDAN SMIALOWSKI/AGENCE FRANCE-PRESSE/GETTY IMAGES

The Trump administration’s exploration of new trade remedies against Beijing is significant in that they might involve dusting off long-ignored or little-used powers. In this case, one option under discussion is to use Section 301 of the Trade Act of 1974, which gives the U.S. government the authority to investigate alleged wrongdoing by trading partners and decide by itself the relevant penalty—to act, in the eyes of critics, as judge, jury and executioner.

Another option under discussion would be to invoke the International Emergency Economic Powers Act, a 1977 law that gives the president broad powers to regulate commerce after declaring a “national emergency.”

Widely used in the 1970s and 1980s, Section 301 cases have largely disappeared since the 1995 creation of the WTO, which has its own dispute-settlement process. A main goal of the Geneva-based institution was to curb such unilateral trade actions and to have them handled by a more neutral international arbiter. U.S. administrations over the past two decades have decided to steer nearly all trade complaints through the WTO and have rarely touched Section 301.

But Trump aides have often said they didn’t consider WTO rules sufficient to deal with Chinese practices and have indicated they may resort to pre-WTO unilateral practices.

“If any other administration self-initiated a Section 301 investigation, I would have found it highly unusual,” said Chad Bown, a trade-remedy expert at the Peterson Institute for International Economics. “But with Trump’s administration of U.S. trade policy, it appears that even the most obscure and unused U.S. law on the books is fair game.”

In May, more than four dozen U.S., European and Asian trade associations wrote a letter to the Communist Party group overseeing cybersecurity, for instance, complaining about a new law that the associations felt would require their companies to place data centers in China, find Chinese partners and transfer technology to the joint ventures. Beijing generally argues that it is trying to protect itself from efforts by Western intelligence services to tap into Chinese computer systems.

“All countries have legitimate concerns over privacy and national security, but China is the principal country addressing these concerns by requiring foreign companies to transfer their technology and to surrender their brand and operating control in order to do business,” the group wrote.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and Bob Davis at bob.davis@wsj.com

Appeared in the August 2, 2017, print edition as ‘U.S. to Press China on Trade.’

https://www.wsj.com/articles/u-s-plans-trade-measures-against-china-1501635127?mod=e2fb

Trump, South Korea’s Moon to Show United Front Despite Trade Differences

June 29, 2017

WASHINGTON — President Donald Trump and South Korean President Moon Jae-in may present a unified front over North Korea at the White House on Thursday and Friday, but tension over trade could puncture their effort to strengthen the U.S.-South Korea relationship.

Moon, making his first trip to the United States since becoming his country’s leader, will join Trump and his wife, Melania, for dinner in the White House State Dining Room Thursday night ahead of meetings on Friday that are expected to touch on North Korea’s nuclear program, China’s role in the region and the U.S. military’s THAAD missile defense system.

Both men have an interest in building a strong relationship.

Image result for Moon Jae-in, u.s. chamber of commerce, photo

South Korean President Moon Jae-In in Seoul on May 10, 2017.  Jung Yeon-Je—AFP/Getty Images

Moon wants to form a friendship with the former New York businessman and find common ground on ways to resolve the crisis over North Korea’s nuclear and missile programs.

Trump wants to build ties with an important leader in the region as he grows frustrated with Beijing’s failure to rein in Pyongyang, despite his relationship with Chinese President Xi Jinping.

“If President Trump and I make strong personal ties of friendship and trust and if we were to try to resolve the North Korean nuclear issue on the basis of these personal ties, then I believe we will be able to achieve the resolution of the North Korean nuclear issue,” Moon told Reuters last week.

Trade could affect that relationship-building process.

In an interview with Reuters in April, Trump called the five-year-old KORUS trade pact between the United States and South Korea “horrible” and “unacceptable” and said he would either renegotiate or terminate it.

“I think they’ll have a friendly and frank discussion about the trade relationship,” a White House official told reporters on Wednesday, noting concerns about barriers to U.S. auto sales and surplus Chinese steel that arrives in the United States via South Korea.

The U.S. goods trade deficit with South Korea has more than doubled since KORUS took effect in 2012, from $13.2 billion in 2011 to $27.7 billion in 2016. It was forecast to boost U.S. exports by $10 billion a year, but they were $3 billion lower in 2016 than in 2011.

During remarks at the U.S. Chamber of Commerce on Wednesday, Moon said unfair trade practices would be eradicated and factors that limited competition, such as market entry barriers and price regulations, would be “reevaluated” under his administration.

Another potential sticking point in their talks could revolve around the Terminal High Altitude Area Defense (THAAD) system that the United States deployed in South Korea in March.

Moon, who has advocated a more moderate approach toward Pyongyang, expressed shock late last month upon learning that four more launchers for the controversial system had been brought into the country. He ordered a probe after his Defense Ministry failed to inform him of the move.

The system, whose installation irritated China, is meant to counter the threat from North Korea’s missile program. The White House said it did not expect THAAD to be a major point of conversation.

Despite potential areas of disagreement, the two leaders are expected to express common resolve over threats from North Korea.

“The similarities in our approaches are already evident,” the White House official said, noting that both men had expressed willingness to engage with Pyongyang under the right conditions. “Even once the conditions may present themselves, to enter into dialogue we must maintain and actually increase pressure on North Korea. That’s President Moon’s approach; it’s President Trump’s approach.”

(Reporting by Jeff Mason and David Brunnstrom; Editing by Leslie Adler)

*******************************************

South Korea’s Moon Jae-In Vows to Stand With President Trump on North Korea

(WASHINGTON) — South Korea’s new leader vowed Wednesday to stand firmly with President Donald Trump against North Korea, playing down his past advocacy of a softer approach toward the nuclear-armed nation as he made his first visit as president to Washington.

President Moon Jae-in offered an emotional tribute to Marines who fought in a fierce battle in the Korean War that helped in the mass evacuation of Korean civilians, including his own parents. Moon said that without those American sacrifices, he would not be here today.

“Together we will achieve the dismantlement of North Korea’s nuclear program, peace on the Korean Peninsula and eventually peace in Northeast Asia,” Moon said, after laying a wreath at a Marine Corps base in Quantico, Virginia, as he began his first overseas trip since taking office last month.

A monument at Quantico commemorates the 1950 Battle of Chosin Reservoir, when heavily outnumbered American forces fought a rearguard action against advancing Chinese communist troops that bought time for about 100,000 Korean civilians to be shipped out to safety — 14,000 of them on a single vessel that ferried out Moon’s parents. Moon was born in South Korea in 1953.

Moon was underscoring his personal commitment to the U.S.-South Korean alliance in the face of questions over whether his inclination toward engagement with North Korea despite its rapidly advancing nuclear capability could lead to strains in relations with Washington.

Moon’s conservative predecessor, who was impeached in a bribery scandal, took a hard line toward North Korea, similar to Trump. Despite Moon’s softer stance, the North’s rapid tempo of missile tests has continued, deepening U.S. fears that the American mainland could soon be within range.

Trump’s National Security Adviser H.R. McMaster said Wednesday that the U.S. is preparing “all options” for North Korea, “because the president has made clear to us that he will not accept a nuclear power in North Korea and a threat that can target the United States.”

The talks between Moon and Trump, which begin with dinner on Thursday night and then formal talks on Friday, come amid intense wrangling over North Korea.

China is pushing the United States to start negotiations with the North. That prospect appears unlikely as Trump grows frustrated over Beijing’s level of economic pressure on the North, its wayward ally.

North Korea shows no sign of wanting to restart talks on abandoning its nuclear weapons program.

Although Moon hopes to forge a personal bond with Trump, there’s little in common between them: one a brash American tycoon-turned-populist president, the other a former human rights lawyer who received an elite education but opted for grassroots activism.

Moon sought to allay concerns over differences with Trump in interviews before his visit. He described his approach to the North as consistent with the U.S. administration strategy of “maximum pressure and engagement.”

The White House is also playing down differences.

Moon told The Washington Post that North Korean leader Kim Jong Un is “unreasonable” and “very dangerous” and that pressure was necessary. But Moon said sanctions alone would not solve the problem, and dialogue was needed “under the right conditions.”

Six prominent former U.S. officials, including former Defense Secretary William Perry and former Secretary of State George Shultz, on Wednesday also called for dialogue. They wrote to Trump, urging him to establish communication with North Korea “to avoid a nuclear catastrophe.”

Missile defense is another contentious topic.

Earlier this month, Moon surprised U.S. officials by delaying the full deployment of a U.S. system intended to protect South Korea and the 28,000 U.S. forces based there against North Korean missiles. Seoul’s previous government supported the deployment despite local opposition and Chinese objections.

Moon’s government has ordered an environmental review before allowing additional launchers for the Terminal High-Altitude Area Defense system. South Korean officials say that does not mean they are placating China or reversing the decision, which risks angering Washington.

The U.S. has stepped up shows of military force near the Korean Peninsula under Trump, and outrage in Washington over North Korea has only grown since the death last week of U.S. university student Otto Warmbier. He had spent 17 months in detention in the totalitarian nation for stealing a propaganda poster and returned home this month in a coma. Three other Americans and six South Koreans are still being held in the North.

Moon’s visit will not be all about North Korea. Addressing the U.S. Chamber of Commerce late Wednesday, he called for further expansion of trade and economic ties. He even looked forward to a time when peace on the divided Korean Peninsula would open up business opportunities inside North Korea.

During the election campaign, Trump criticized a 2012 U.S.-South Korea free trade agreement because of a large South Korean trade surplus for merchandize. The U.S. enjoys a surplus in services exports. Total two-way trade totaled $144.6 billion last year, with the U.S. running a $17 billion deficit.

The White House official said Trump would call for the lifting of barriers to U.S. auto sales in South Korea and voice concern over steel exports from China that reach the U.S. via South Korea.

Donald Trump’s rise sparks alarm in Japan — Polls Show Trump Can Win Florida, Maybe Ohio Today

March 15, 2016
Robin Harding

As polls open for US primaries in Ohio and Florida, the political elite in Tokyo is starting to confront a disconcerting idea: that their indispensable US ally could actually elect Donald Trump as president.

The controversial businessman, now favorite for the Republican nomination, hits Japan regularly in his stump speeches for supposedly unfair trade practices and freeriding on US military protection.

According to a number of officials, Tokyo is still fairly relaxed about Mr Trump’s views on security, regarding the US-Japan alliance as strong enough to cope, but they are becoming increasingly alarmed by bipartisan attacks on the Trans-Pacific Partnership, a trade deal crucial to Prime Minister Shinzo Abe.

“To start with they just thought ‘he’s funny’,” said Masatoshi Honda, a professor of politics at Kinjo University. “But recently they’re starting to worry — what happens if Trump wins?”

Like the political establishment in Washington, Tokyo has been slow to take Mr Trump seriously, not least because his rhetoric seems stuck in the 1980s, before Japan suffered two decades of economic stagnation and its population began to decline.

“I will take his remarks seriously when he is elected president,” said Kuni Miyake, head of the Foreign Policy Institute in Tokyo.

“Media overreaction creates people like Trump, who represent the dark side of the US,” he added. “I believe in the western democracies — in the end they’ll come up with a healthy outcome.”

But Tokyo is realizing that even if Mr Trump loses, his rhetoric is seeping into the popular consciousness, and other US politicians are changing their positions in response.

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Japan regards the US military presence as crucial to its long-run security position given China’s rise, and counts on the US nuclear umbrella to deter attack by the regime in North Korea.

“Still fresh in our memory is the tremendous damage another Washington outsider, Jimmy Carter, did to East Asia’s security equation,” said one foreign policy figure with ties to the Abe government. “Had Carter indeed withdrawn US troops from the Korean peninsula at the peak of the cold war, the world as we know it might well not have existed.”

Foreign policy officials take some comfort from improvements in the US relationship under Mr Abe, as well as efforts to expand Japan’s friendships to Australia, India and beyond, making its security dealings with Washington more multilateral than in the past.

On TPP, however, they worry that Mr Trump’s rhetoric will make it hard for Congress to ratify the deal, whoever wins. As well as the direct benefits from greater trade, the Abe administration regards TPP as one of its best tools for forcing the Japanese economy to reform in areas such as agriculture.

“When did we beat Japan at anything? They send their cars over by the millions, and what do we do? When was the last time you saw a Chevrolet in Tokyo? It doesn’t exist, folks. They beat us all the time,” Mr Trump said when he announced his candidacy last year.

Hillary Clinton, the likely Democratic nominee, recently toughened her rhetoric on TPP after losing the Michigan primary to rival Bernie Sanders. She wants tougher “rules of origin” standards, which specify where motor parts must come from for a vehicle to enter the US tax-free.

Tokyo regards access to the US car market as its main gain from TPP. “I don’t think there is any chance of renegotiating over car tariffs,” says Naohiro Yashiro, a professor at Showa Women’s University in Tokyo.

The growing threat that TPP will fail in the US casts a shadow over Japan’s own debate about ratification, which is due to start after the budget passes this month.

“There is opposition to TPP in Japan as well,” said Mr Honda. “If Japan passed it and then it didn’t go through in the US it’d do huge damage to the Abe administration.”

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