On March 22, 2018, the United States Trade Representative (USTR) issued a report outlining the findings of its Section 301 investigation into China’s practices related to technology transfer, intellectual property, and innovation. USTR concluded that the acts, policies, and practices of the Chinese government are unreasonable or discriminatory and result in at least $50 billion in harm to the U.S. economy every year. In particular, the report concluded that:

(i) China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to force or pressure technology transfers from American companies.

(ii) China uses discriminatory licensing processes to transfer technologies from U.S. companies to Chinese companies.

(iii) China directs and facilitates investments and acquisitions, which generate large-scale technology transfer.

(iv) China conducts and supports cyber intrusions into U.S. computer networks to gain access to valuable business information.

To respond to the practices described above, in a Presidential Memorandum released on March 22, 2018, President Trump directed: (i) USTR to publish, by April 6, 2018, a proposed list of Chinese goods which might receive tariff increases; (ii) USTR to pursue dispute settlement in the World Trade Organization to address China’s discriminatory licensing practices; and (iii) the Secretary of the Treasury to propose executive branch action designed to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States. With respect to the second and third items, USTR and the Secretary of Treasury are required to provide a report to the President by May 21, 2018.

As of the publication of this article, USTR has not published the proposed list of Chinese goods, however, statements from USTR and by Peter Navarro, President Donald Trump’s Senior Trade Advisor, indicate that the proposed list of goods will target those firms and industries highlighted in the Made in China 2025 plan, a 2015 report issued by the Chinese government describing economic objectives for the next decade. Industries highlighted in the Made in China 2025 include new and advanced technology, automated machine tools & robotics, and new-energy vehicles and equipment.

While the actions of USTR and the President have received a public backlash from China, recent reports indicate that China and the United States may have begun engaging in private talks to improve U.S. access to Chinese markets.

We will provide further analysis as developments warrant.