24 Jan 2019
Business Groups Decry Tariffs on Mainland Chinese Products, Seek Structural Changes in On-going Talks
The U.S. Chamber of Commerce and the American Chamber of Commerce in China have submitted detailed recommendations on the outcomes the United States should seek in its on-going trade negotiations with mainland China. The chambers acknowledge that mainland China’s “long-standing intellectual property rights violations, forced technology transfers, and state interventions in the economy” are problems that require “permanent, verifiable and enforceable solutions.” However, they also point out that mainland China “remains a critical market for American companies,” a majority of which “reported revenue and profit growth there” in 2018.
As a result, the chambers oppose the “untargeted, punitive tariffs” the Trump administration has imposed on imports of mainland Chinese goods, which they say “undermine American competitiveness, escalate a counterproductive cycle of retaliation, and lead to unintended, damaging consequences.” Instead, the chambers recommend that the following three objectives guide U.S. negotiators.
- The United States should prioritise outcomes that address systemic issues in the mainland Chinese economy, such as industrial policies and the subsidies that underpin them, that result in unfair competition and non-market outcomes. Reducing the trade deficit and purchases of U.S. exports are a secondary concern.
- The United States should take a holistic approach to the “interlocking set of policies” mainland China maintains on forced technology transfer, which include “not only caps on foreign equity ownership but more importantly procedures related to administrative licensing, standards, procurement, data localization, and competition and security reviews.” This approach should seek specific and concurrent changes to laws, regulations and standards across mainland China’s policy landscape.
- The United States should seek to remove all forms of data localisation policies, which limit access to the burgeoning mainland Chinese market for U.S. digital products and services, and ensure mainland China applies national security requirements precisely and narrowly so as not to discriminate against foreign companies and undermine competition.
In addition, the chambers recommend a two-step process to support verification of mainland China’s commitments as well as enforcement where differences may arise. First, explicit changes to mainland Chinese normative guidance, laws and regulations that comprise the regulatory structure used to force technology transfer should be secured and clear benchmarks, timelines and intensive monitoring to ensure these changes are lasting should be established. Additionally, new disciplines should be negotiated with mainland China to bind and limit its ability (in practice) to apply laws, regulations and policies in a manner that results in discriminatory treatment against U.S. companies in the mainland, and an independent arbitration mechanism should be established to ensure strong deterrence and, when needed, fair and effective enforcement.