US’ trade policy shows it seeks to be both player and referee

The United States launched a Section 301 investigation into China’s technology transfer and intellectual property policies and practices last week, raising more concerns about the trade policy of the Donald Trump administration, which is increasingly unilateral, protectionist and rules-breaking.

While the action may reflect the views of some trade hawks in the Trump administration, many US economists have opposed reviving the outdated Section 301 of the US Trade Act of 1974.

The reason is clear. With its Section 301 investigation the US is trying to be a player and the referee at the same time. The dispute settlement mechanism of the World Trade Organization, set up in 1995, is the right place to address such issues.

The US is violating its WTO commitment with its Section 301 investigation. The implication of this is serious. If the US takes the lead in breaking WTO rules, it would set a bad precedent for others to follow suit.

Although the investigation, which might take a year, does not equate to a declaration of a trade war, it is moving in that direction. A trade war between the world’s two largest economies, or just tit-for-tat retaliation between them, would be calamitous to not only themselves, but also the global economy, especially those in the Asia-Pacific supply chains.

And the unilateral action, whatever its purpose, is a setback to the progress made between China and the US over the past seven months.

A trade war between the world’s two largest economies, or just tit-for-tat retaliation between them, would be calamitous to not only themselves, but also the global economy, especially those in the Asia-Pacific supply chains.