Thursday, May 19, 2022

Congress Shouldn’t Weaken China Tariffs in a Bill Meant to Counter Chinese Economic Policy

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The provision that would tie the U.S. Trade Representative’s hands is a bad idea.

It’s getting close now: The conferees from the House and Senate will soon meet to resolve differences in the industrial policy bill, versions of which both chambers passed. The bills aren’t exactly the same – that’s why there’s a conference to resolve differences – and there are provisions in each that will be important to include or scratch before the final bill heads to President Biden’s desk. We’ve outlined those the Alliance for American Manufacturing (AAM) supports in a letter to congressional leadership.  

There’s a provision, however, that should be immediately loaded onto a catapult and fired into the Potomac: One in the Senate’s bill that would order the U.S. Trade Representative (USTR) to reinstate all of the exclusions to the Section 301 tariffs against Chinese imports that were originally granted during the Trump administration.

No more reviews of these tariff exclusions, just an order: Remove the tariffs on these Chinese imports. Right now!

Suffice it to say, this is a bad idea.

In light of China’s failure to abide by the “Phase 1” trade deal and its failure to improve its intellectual property (IP) protections for foreign companies, this provision makes little sense. But as part of a big legislative effort meant to bolster the competitiveness of domestic manufacturing and counter predatory Chinese trade and economic practices – which is precisely what this industrial policy bill is about – this provision makes no sense at all.

A quick recap is in order: These tariffs went up in 2018 after President Trump’s USTR concluded an investigation into the Chinese government that (correctly) found its practices and policies around forced technology transfer, IP protection, and cyber espionage have abused American businesses and workers. After lots of petitioning by importers and consumers who claimed some of the products imported from China couldn’t be found anywhere else, the Trump administration granted 549 tariff exclusions. These exclusions cover all kinds of things from retail goods like consumer electronics, apparel, and furniture, to industrial components, car parts, chemicals, and medical supplies.

In March President Biden’s USTR announced that – after public comments late last year and a careful review based on market conditions and the ongoing supply chain crisis brought on by the coronavirus pandemic – it would renew approximately two thirds (352 of 549) of those exclusions.

That’s more than reasonable. But it’s not good enough for those in Congress who apparently just don’t like tariffs, period.

As Congress gets this conference committee underway, Sen. Pat Toomey (R-PA) has put forward a motion to instruct (MTI) conferees to include this anti-Section 301 provision in their final report. MTIs, if they’re accepted, are important tools in shaping the contours of legislation – and it would greatly increase the chances that this bad provision is burrowed into the final bill.

USTR should be allowed to continue its fact-based exclusion process without congressional mandates that predetermine an outcome.

Including it would seriously chip away at the tariffs that Chinese imports richly deserve, and it would reward the Chinese government for effectively ignoring the commitments it’s made in trade deals with the United States.

It still has incredibly porous IP protections. It still engages in industrial espionage on behalf of its own industries. It has strengthened its state-owned enterprises, and it still has supply chains that use forced labor. This shouldn’t be encouraged, and USTR should be allowed to continue its fact-based exclusion process without congressional mandates that predetermine an outcome.

USTR, for its part, says including this Senate provision in the larger bill will “reduce the leverage needed to encourage China to change its practices involving the theft of U.S. technology, and would support China’s goal of obtaining a reduction in the tariffs.”

And it’s not wrong. AAM opposes this provision, and we hope lawmakers will have the sense to oppose it too.

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