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USTR Possibly Considering Labour-Based Section 301 Action Against Mainland China

With the Democrats about to become the majority in the U.S. House of Representatives, the Trump administration continues to press its international trade agenda. Early press reports indicate that the Office of the U.S. Trade Representative is considering the possibility of launching a labour-based Section 301 case against mainland China. If these press reports are accurate, USTR could choose to self-initiate such an investigation – as it did in August 2017 with respect to mainland China’s acts, policies and practices related to technology transfer, intellectual property and innovation – or let U.S. labour unions pursue such a case on their own. Any new Section 301 case would generally include a public comment period and a hearing before the imposition of any new tariffs.

Section 301 is the mechanism that has been used by the administration to establish penalty tariffs on US$250 billion worth of mainland Chinese products based on the discretionary authority afforded by that statute on IPR issues. Section 301 also has discretionary authority provisions on “unreasonable” labour practices as the basis for taking tariff actions. Labour concerns listed in Section 301 include a persistent pattern of conduct that (i) denies workers the right of association, (ii) denies workers the right to organise and bargain collectively, (iii) permits any form of forced or compulsory labour, (iv) fails to provide a minimum age for the employment of children, or (v) fails to provide standards for minimum wages, hours of work, and occupational safety and health of workers.

In 2004 and 2006, the largest U.S. labour union federation (the AFL-CIO) filed petitions against mainland China based on Section 301. At the time, the AFL-CIO made very clear that its concern was not only the rights of mainland Chinese workers but also the effect that competition from mainland China had on U.S. workers. In its 2004 petition, the AFL-CIO claimed that “if China did not violate workers’ rights, the petition finds that the price of Chinese manufactured goods would rise by 12 to 77 percent.” The labour group further insisted that “this 43 percent cost advantage (that arises through the repression of Chinese workers’ rights) translates into a reduction of 268,345 to 727,130 U.S. jobs.” However, these Section 301 petitions were not accepted by USTR in 2004 or 2006. 

Current and future Democratic members of the House have typically worked more closely with labour union supporters than have Republican members, so a renewed focus on labour issues by USTR could be one way to develop bi-partisan support in the House for its trade agenda, which includes the ratification of the U.S.-Mexico-Canada Agreement. Leading House Democrats have repeatedly demanded additional changes to the USMCA, which already has new labour language on wage rates, union organising and other labour rights.

The front page of the AFL-CIO website claims that “unions made the difference in the 2018 midterm elections,” noting that union members knocked on 2.3 million doors and made half a million phone calls in support of their endorsed candidates. However, the AFL-CIO website’s international trade page does not reference mainland China at all and instead focuses on the USMCA along with other free trade agreements and various other international trade issues. 

The Congressional-Executive Commission on China’s annual report for 2018 also includes language criticising worker rights in mainland China. The report blasts many other mainland Chinese policies in the areas of minority rights, freedom of religion and freedom of expression, along with worker rights and various other issues.

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