On August 14, 2017, President Trump issued a Presidential Memorandum instructing United States Trade Representative (USTR) Robert Lighthizer to determine whether or not to investigate “any of China’s laws, policies, practices, or actions that may be unreasonable or discriminatory and that may be harming American intellectual property rights, innovation, or technology development” under Section 301 of the Trade Act of 1974. The Government of China is accused of not only lax enforcement against the direct theft of the intellectual property of American companies, but also of requiring American companies to form joint ventures with Chinese companies as a pre-requisite for access to the Chinese market. The joint venture system forces the American company to then transfer or disclose valuable intellectual property to its Chinese partner, even if the Chinese partner is most likely to become a competitor in the future. The Trump Administration has estimated that annual cost of Chinese theft of American intellectual property could be valued as high as $600 billion.
USTR responded quickly to President Trump’s memorandum and initiated the Section 301 investigation on August 18, 2017. USTR issued a Federal Register notice requesting written comments and scheduling a hearing. The deadline for filing written comments is September 28, 2017. The hearing will be held in the main hearing room of the U.S. International Trade Commission on October 10, 2017. USTR also solicited post-hearing rebuttal comments, which must be filed by October 20, 2017.
USTR will have 12 months to complete the investigation. The deadline for completion may be extended by multiple months, however, including in situations where USTR determines that the investigation is “complicated.” Ultimately, if USTR determines after an investigation that a violation of Section 301 has occurred, President Trump (acting through USTR) may “take appropriate and feasible action” to enforce the rights of the United States or halt the violating practice of the foreign government at issue.
Possible enforcement actions include: 1) suspending China’s rights vis-à-vis the United States under a trade agreement; 2) imposing duties or other import restrictions, fees, or restriction on services; or 3) restricting service sector agreements with China. The Government of China responded to the Presidential Memorandum by stating that it would not sit on its hands if USTR’s actions “inflict damage on the bilateral trading relationships” between China and the United States, and reserved the right to challenge any unilateral actions at the World Trade Organization.
It is unknown how, or even if, this investigation will tie into the still ongoing Section 232 investigations on the national security effects of imports of steel and aluminum, currently being carried out by the Department of Commerce. We will continue to monitor this investigation and provide additional analysis as developments warrant.
