China should prepare counter actions against the U.S. initiation of “Section 301” investigation, said a Chinese expert. The country could also resort to WTO dispute settlement mechanisms, since the section is still subject to the law, the expert added.
On Aug. 18 local time, the U.S. officially started an investigation of China under Section 301 of the Trade Act of 1974, seeking to determine whether acts, policies, and practices of China related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.
It is the first time for the U.S. to announce such investigation against China on its intellectual property practices, and also the first time for U.S. President Donald Trump to officially adopt a tough trade policy against China.
The investigation could negatively impact Chinese technology industries, such as those involved in communication equipment and integrated circuits. Experts believe that the rarely used Section is nothing but the first shot of a trade war meant to increase America’s bargaining power in future economic and political negotiations.
According to Yang Chen, senior partner of the Beijing-based law firm JT&N, the investigation is unlikely to see any immediate results. The investigation will take up to a year and involve negotiations with Beijing and public hearings.
“There won’t be a big impact on Chinese enterprises during the investigation phase, since the investigation focuses more on China’s macro policies and intellectual property laws,” Yang said, adding that the future influence is hard to tell, because the U.S. government has not yet taken clear action.
To reach agreement through negotiations or imposing sanctions on China are two possible outcomes of the investigation, said Liang Guoyong, Economic Affairs Officer at the Investment and Enterprise Division of the UN Conference on Trade and Development.
He said the sanctions might be implemented under the framework of WTO rules, so the investigation is indeed a competition between the two countries under the WTO dispute settlement mechanism.
It is noteworthy that the investigation, nominally carried out to probe China’s intellectual property practices, does not focus too much on the protection of intellectual property rights. Instead, it focuses on technology transfer, unfair restriction of imports, and the theft of U.S. business secrets.
In Yang’s opinion, the main objective is to protect American business secrets for national security reasons and to prevent China from gaining technology dominance.
Many Chinese experts have urged the Chinese government to respond to the investigation. In addition, China should rely on the WTO dispute settlement mechanism to seek an appropriate solution under the multilateral framework if the U.S. side imposes sanctions that violate WTO rules.