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New Report Claims Mainland China Has Not Altered Practices Targeted by Section 301 Tariffs

The Office of the U.S. Trade Representative claims in a 20 November report that the mainland Chinese government has not fundamentally altered the unfair, unreasonable and market-distorting practices that have led to the imposition of additional duties on some US$250 billion worth of U.S. imports from mainland China and instead appears to have taken "further unreasonable actions" in recent months. The report was released just days ahead of the 30 November-1 December G20 leaders’ summit in Argentina, where President Trump and President Xi are expected to have a high-stakes meeting on trade and other priority issues.

The report updates information on USTR’s Section 301 investigation of mainland China’s acts, policies and practices related to technology transfer, intellectual property and innovation. It discusses, among other things, how Beijing ostensibly continues its policy and practice of conducting and supporting cyber-enabled theft and intrusions into the commercial networks of U.S. companies and those of other countries, as well as other means by which mainland China attempts to illegally obtain information. USTR asserts that this conduct provides the mainland Chinese government with unauthorised access to IP, including trade secrets, or confidential business information, as well as technical data, negotiating positions, and sensitive and proprietary internal business communications.

The report also describes how, despite the relaxation of some foreign ownership restrictions and certain other incremental changes in 2018, the mainland Chinese government has persisted in using foreign investment restrictions to require or pressure the transfer of technology from U.S. companies to mainland Chinese entities. USTR notes that numerous foreign companies and other trading partners share U.S. concerns regarding mainland China’s technology transfer regime.

Also under scrutiny in the report are what USTR describes as mainland China’s discriminatory licencing restrictions. In addition, the report indicates that despite an apparent aggregate decline in mainland Chinese outbound investment in the United States this year Beijing continues to direct and unfairly facilitate the systematic investment in, and acquisition of, U.S. companies and assets by mainland Chinese entities in an effort to obtain cutting-edge technologies and IP and generate large-scale technology transfer in industries deemed important by state industrial plans.

Earlier in November, U.S. Trade Representative Robert Lighthizer was forced to deny rumours that future Section 301 tariffs on mainland Chinese products were on hold. According to a 15 November report by Inside U.S. Trade, Lighthizer said “the plan for the tariffs as covered in the Federal Register notice dated Sept. 21, 2018 has not changed at all”, insisting that “any reports to the contrary are incorrect.”

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