Trump to in­ves­ti­gate China trade vi­o­la­tions

Move might push China to do more on con­tain­ing North Korean threat

The Washington Post Sunday - - FRONT PAGE - BY ANA SWANSON AND SI­MON DENYER

The Trump ad­min­is­tra­tion an­nounced Sat­ur­day that it is plan­ning to launch an in­ves­ti­ga­tion into Chi­nese in­tel­lec­tual prop­erty vi­o­la­tions that could re­sult in se­vere trade penal­ties, an es­ca­la­tion that presents both op­por­tu­ni­ties and risks at a time when the United States needs China’s help to con­tain the North Korean nu­clear threat.

The pres­i­dent plans to sign an ex­ec­u­tive mem­o­ran­dum Mon­day af­ter­noon, di­rect­ing his top trade ne­go­tia­tor to de­ter­mine whether to in­ves­ti­gate China for harm­ing in­tel­lec­tual prop­erty, in­no­va­tion and tech­nol­ogy, se­nior ad­min­is­tra­tion of­fi­cials said in a con­fer­ence call Sat­ur­day morn­ing.

The mea­sure would seek to ad­dress what the U.S. busi­ness com­mu­nity has de­scribed as fladen, grant trade vi­o­la­tions by China, which employs a va­ri­ety of rules and prac­tices to wall its mar­ket off from for­eign com­pe­ti­tion and pres­sure U.S. com­pa­nies to part with valu­able prod­uct de­signs and trade se­crets — or to steal them out­right.

The in­ves­ti­ga­tion, which one U.S. of­fi­cial said could take as long as a year, may prove to be a source of lever­age to push China to do more to help con­tain a ris­ing se­cu­rity threat from North Korea, which counts Bei­jing as its only pow­er­ful ally.

At the same time, it could alien­ate China’s lead­er­ship, which is urg­ing the Trump ad­min­is­tra­tion to limit its con­fronta­tional lan­guage as it faces off against the regime in Py­ongyang.

“The re­la­tion­ship could spi­ral out of con­trol, par­tic­u­larly if the move­ment on the trade front is com­bined with grow­ing ten­sions over how to re­spond to North Korea,” said Scott Kennedy, a China ex­pert at the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies.

The an­nounce­ment fol­lowed a call Fri­day night be­tween Trump

and Chi­nese Pres­i­dent Xi Jin­ping. Dur­ing that call, Trump and Xi agreed that North Korea must stop its “provoca­tive and es­ca­la­tory be­hav­ior” and reaf­firmed their com­mit­ment to de­nu­cle­ariz­ing the Korean Penin­sula, ac­cord­ing to a White House state­ment.

Xi urged Pres­i­dent Trump to ex­er­cise re­straint over ten­sions with North Korea dur­ing a phone call, Chi­nese state me­dia re­ported. Xi urged both sides not to do any­thing that would ag­gra­vate ten­sions. Di­a­logue, ne­go­ti­a­tions and a po­lit­i­cal set­tle­ment are the fun­da­men­tal ways of solv­ing the Korean Penin­sula’s nu­clear is­sue, Xi said dur­ing the call, ac­cord­ing to China’s CGTN state tele­vi­sion net­work.

“The Chi­nese leader ex­pressed Bei­jing’s will­ing­ness to main­tain com­mu­ni­ca­tion with the U.S. to ap­pro­pri­ately re­solve the Korean Penin­sula nu­clear is­sue,” the net­work re­ported. Xi “stressed that China and the U.S. share the same in­ter­ests on the de­nu­cle­ariza­tion and peace on the Korean Penin­sula.”

On Sat­ur­day, ad­min­is­tra­tion of­fi­cials said the new trade mea­sure was “to­tally un­re­lated” to events in­volv­ing North Korea.

They added that the trade mea­sure would be car­ried out un­der the rules of in­ter­na­tional law and would not trig­ger greater con­flict with China.

But trade and na­tional se­cu­rity ex­perts widely noted that the ap­peared to have been de­layed un­til af­ter China joined the United States in vot­ing for sanc­tions against North Korea at a United Na­tions Se­cu­rity Coun­cil ses­sion on Aug. 5.

When asked about the de­lay dur­ing the Sat­ur­day call, the of­fi­cials did not ad­dress the ques­tion di­rectly. They said that U.S. com­pa­nies had long suf­fered of Chi­nese in­tel­lec­tual prop­erty vi­o­la­tions, and that they ex­pected Congress and the busi­ness com­mu­nity to sup­port the mea­sure.

“If Amer­i­cans con­tinue to have their best tech­nol­ogy and in­tel­lec­tual prop­erty stolen, or forcibly trans­ferred off­shore, the United States will find it dif­fi­cult to main­tain its cur­rent techno loan­nounce­ment po­si­tion and to re­main one of the world’s most in­no­va­tive economies. This is why the pres­i­dent has cho­sen to act now and to act boldly,” one ad­min­is­tra­tion of­fi­cial said.

Michael Wes­sel, a com­mis­sioner on the U.S.-China Eco­nomic and Se­cu­rity Re­view Com­mis­sion, called the mea­sure “a crit­i­cal ac­tion, and long over be­cause due.”

“China’s been en­gaged in the theft and forced trans­fer of U.S. tech­nolo­gies and in­tel­lec­tual prop­erty for years. Those ac­tiv­i­ties haven’t abated; they’ve ac­cel­er­ated as China seeks to be­come self-suf­fi­cient in new tech­nolo­gies and dom­i­nate world mar­kets,” he said.

If the in­ves­ti­ga­tion finds that China is harm­ing U.S. com­pa­nies, the Trump ad­min­is­tra­tion could re­spond by im­pos­ing tar­iffs, ne­go­ti­at­ing an agree­ment with China or other mea­sures, the of­fi­cials said.

The ad­min­is­tra­tion prob­a­bly is ea­ger to make progress on trade, one of Trump’s big­gest cam­paign is­sues, af­ter a re­cent se­ries of leg­isla­tive set­backs, trade ex­perts said. While Trump of­fi­cially with­drew the United States from the Trans-Pa­cific Part­ner­ship, an Obama-era trade deal, and will be­gin talks next week to rene­go­ti­ate the North Amer­i­can Free Trade Agree­ment, other planned trade mea­sures have been slow to ma­te­ri­al­ize.

The re­sults of three sep­a­rate in­ves­ti­ga­tions into trade deficits and the na­tional se­cu­rity threats posed by im­ports of steel and alu­minum, ini­tially ex­pected by the end of June, have yet to ap­pear. Mean­while, 100 days of trade talks with the Chi­nese car­ried out in past months re­sulted in a few trade gains but not the am­bi­tious changes the ad­min­is­tra­tion had hoped for.

Trade ex­perts and busi­ness lead­ers said the new in­ves­ti­gagy-lead­er­ship tion into in­tel­lec­tual prop­erty could be a sign that the trade agenda is shift­ing into the hands of a re­spected ne­go­tia­tor, U.S. Trade Rep­re­sen­ta­tive Robert E. Lighthizer, who dur­ing the Rea­gan ad­min­is­tra­tion helped im­ple­ment some of the most pro­tec­tion­ist trade poli­cies of re­cent decades.

Like the pres­i­dent, Lighthizer has crit­i­cized mul­ti­lat­eral venues such as the World Trade Or­ga­ni­za­tion for fail­ing to pro­vide ad­e­quate tools to ad­dress China’s eco­nomic vi­o­la­tions. In­stead, he is lead­ing the ad­min­is­tra­tion in dust­ing off a va­ri­ety of pow­er­ful and uni­lat­eral mea­sures un­der U.S. trade law, many of which the United States stopped us­ing af­ter the cre­ation of the WTO, which has its own mech­a­nisms to set­tle trade dis­putes.

The United States has pre­vi­ously com­plained at the WTO about Chi­nese trade poli­cies, in­clud­ing its “Made in China 2025” ini­tia­tive, which seeks to have Chi­nese-made ma­te­ri­als ac­count for 70 per­cent of man­u­fac­tur­ing in­puts within the next eight years. That ini­tia­tive sets forth a long-term plan for China’s dom­i­nance in a wide va­ri­ety of high­tech in­dus­tries, in­clud­ing elec­tric ve­hi­cles, ad­vanced med­i­cal prod­ucts and ro­bot­ics.

Denyer re­ported from Bei­jing. Anna Fifeld in Tokyo con­trib­uted to this re­port.

ALEX BRAN­DON/AS­SO­CI­ATED PRESS

Pres­i­dent Trump and Chi­nese Pres­i­dent Xi Jin­ping talk in April at Mar-a-Lago in Palm Beach, Fla.

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