America weighing up third front in China trade war
The US is examining ways to retaliate against Beijing’s restrictions on American providers of cloud computing and other hitech services, effectively opening a new front on its trade offensive against China.
According to individuals familiar with the administration’s thinking, the US Trade Representative’s office is putting together a fresh trade complaint, probably under section 301 of the Trade Act of 1974, arguing that Beijing unfairly restricts US trade in these hitech services.
The Trade Representative has yet to decide whether to go ahead with the complaint, the individuals said, which would be in addition to recent moves to ratchet up pressure on China, including the imposition of tariffs on $US150 billion ($193bn) in Chinese imports. But USTR, which has taken the lead in the trade fight, views China’s restrictions on cloud computing as providing a clear-cut example that might garner public support.
Beijing requires US cloudcomputing firms such as Amazon. and Microsoft to form joint operations with Chinese companies and license their technology to Chinese partners. The USTR has said in reports on Chinese trade practices that Beijing withholds licenses that would allow US firms to operate independently in China.
As a result, US companies can’t market their cloud-computing services in China or sign up customers directly. Chinese firms, such as Alibaba, by comparison, are allowed to operate in the US without restriction.
“Some non-Chinese companies are reluctant to participate in China’s cloud market due to the number of restrictions,” said KC Swanson, director of global policy for the Telecommunications Industry Association. “Meanwhile the US has no restrictions on foreign participation in our markets; it’s a clear-cut reciprocity issue.”
Cloud-computing firms deliver computer services, including storage, software and analytics, over the internet, a service that is considered one of the most promising, high growth parts of the tech industry. A spokeswoman for USTR declined to comment.
Should USTR go ahead with the complaint, it would become the third major action the US has taken to further open the Chinese market — and would increase the risk of retaliation from Beijing.
The US has levied tariffs on imports of Chinese steel and aluminium, which has resulted in China hitting about $US3bn in US imports to China with tariffs.
The administration is also now pursuing another proceeding under section 301, focused on alleged Chinese infringement on US intellectual property. In that action, the US has threatened $US50bn of Chinese imports with 25 per cent tariffs and plans to release soon a second list of another $US100bn of Chinese imports that could be hit with levies.
In response, Beijing has said it would target $US50bn in US imports to China for tariffs and take other unspecified actions.
In what many see as further Chinese retaliation for the US actions, Beijing is slowing reviews of multi-billion-dollar takeover deals being pursued by Qualcomm Inc and Bain Capital.
Chinese officials have argued that China’s trade and investment practices are not discriminatory and have quietly tried to get the US to start negotiations to head off a trade war. So far, there have been exchanges of letters between the two sides but no full-scale talks.
The Trump administration says past rounds of negotiations haven’t produced much and has tried to maximise pressure before agreeing to any full-scale negotiations. Last week, Chinese President Xi Jinping outlined a fourstep plan for further opening the Chinese market, which Beijing viewed as offering an olive branch to the White House.