FOR ALL his talk during the 2016 campaign about taking on China for “stealing” American jobs, President Trump has hardly launched the trade war against Beijing that many feared. He has not slapped across-the-board tariffs on Chinese goods; he has delayed what once seemed an imminent crackdown on aluminum and steel imports; he has declined to brand Beijing a “currency manipulator.” Rather than trade, Mr. Trump’s approach to China has emphasized enlisting President Xi Jinping’s help in defusing the crisis over North Korea’s nuclear weapons.
Given that, Mr. Trump’s announcement Monday — that he is ordering his special trade representative to determine “whether to investigate any of the acts, policies, or practices of China that may be unreasonable or discriminatory and that may be harming American intellectual property, innovation, and technology” — strikes us as a variation on a theme, not necessarily a portent of dangerous new trade tensions. China’s state-run English-language newspaper suggested that the move could “poison” bilateral relations, and that it was “impossible” not to see Mr. Trump’s announcement as some kind of payback for Beijing’s failure, thus far, to rein in Pyongyang. But if Mr. Trump is trying to signal China that it can’t use the North Korea issue to get its way on trade, this is a relatively low-risk way of making that point. He did not order an investigation, but rather an investigation of whether an investigation is needed, which could take months, and its actual policy result under the relevant statute, Section 301 of the Trade Act of 1974, might not be evident until well after that.
In fact, Mr. Trump’s order Monday targeted legitimate issues that have troubled presidents before him: Beijing’s habit of tolerating massive theft of American software, and its requirement that U.S. and other foreign businesses transfer technology in return for permission to invest directly in China. Fast-growing Chinese direct investment in the United States faces no reciprocal obstacles (though it does face reviews when national security is potentially involved). There is bipartisan agreement that China has turned these areas of its relationship with this country into a one-way economic street, contrary to the spirit of the World Trade Organization (WTO) to which it acceded with U.S. support more than a decade and a half ago. Yet Beijing plays U.S. companies off one another — a collective-action problem that can be solved, if at all, only if companies get support from Washington.
Controversially, Mr. Trump’s decision could ultimately lead to retaliatory tariffs or other measures under Section 301, which broadly authorizes such steps against countries found to be persistently and unfairly harming U.S. interests — but which previous administrations have generally eschewed in favor of seeking remedies at the WTO. This is indeed strong medicine and would invite WTO litigation, if not a stronger response from China, and so it would be better not to use if at all avoidable. Mr. Trump’s order gives China plenty of time to head off Section 301 penalties by meeting the United States’ reasonable concerns in negotiations. It would be in China’s best interest to do so.
Read more here: