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.

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