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NFTC Weighs In On China 301 Investigation

In letter, NFTC President asks Congress to urge the Administration to take a measured approach in its Section 301 Investigation on China. 
 
Washington D.C. – The National Foreign Trade Council (NFTC) today asked Congressional leaders to urge the Administration to take a measured, multilateral approach to deal with China’s discriminatory trade practices. 
 
In a letter, sent earlier today to the Chairmen and ranking members of the House Ways and Means and Senate Finance Committees, NFTC President Rufus Yerxa outlined his membership’s agreement with the Administration’s proposed findings that China is imposing unreasonable and discriminatory restrictions on U.S. businesses, but raised major concerns about premature imposition of unilateral tariffs on a wide array of imports from China, as apparently contemplated by USTR. 
 
The letter suggests that use of unilateral actions before outlining the specific actions demanded of China and engaging in a period of real negotiations would be contrary to historical use of Section 301. NFTC companies believe this course of action would enable other countries to gain advantages in the Chinese market and make U.S. companies less competitive in the global economy, all without dealing with China’s problematic approach to technology transfer, intellectual property and innovation.
 
“I think The Administration has not really sought much business input before deciding its likely actions,” Yerxa noted, “so my members felt a need to raise a warning flag with Congress prior to this week’s hearings.”
 
Full text of the letter:
 
March 20, 2018
 
Senator Orrin Hatch 
Chairman
Committee on Finance
United States Senate
219 Dirksen Senate Office Building
Washington, DC 20510
 
Senator Ron Wyden
Ranking Member
Committee on Finance
United States Senate
221 Dirksen Senate Office Building
Washington, DC 20510
 
The Honorable Kevin Brady
Chairman
Committee on Ways of Means
United States House of Representatives
1102 Longworth House Office Building 
Washington, DC 20515
 
The Honorable Richard Neal
Ranking Member
Committee on Ways of Means
United States House of Representatives
341 Cannon House Office Building
Washington, DC 20515
 
Dear Chairmen and Ranking Members:
 
As your committees prepare to conduct hearings this week on the trade policy agenda, we would like to share with you our organization’s views about the Administration’s Section 301 investigation into China’s acts, policies and practices related to technology transfer, intellectual property and innovation.
 
NFTC member companies have significant concerns about China’s growing use of trade and investment policies, including those designed to promote “indigenous technologies.” These practices deny national treatment and create discriminatory burdens that are unreasonable for American companies, innovators and workers.
 
While NFTC supports efforts to investigate and address these discriminatory practices, the Council and its member companies are interested in a strong, multi-pronged effort aimed at improving the ability of U.S. companies to compete in China rather than making things worse. Our observations are directed at this fundamental goal.
 
The overall focus of the Section 301 investigation should be to bring China to the negotiating table for a meaningful resolution of specific, sector-by-sector issues with the ultimate goal of removing the offending practices and policies. Premature, unilateral sanctions alone are unlikely to achieve this objective. It is critical that the United States work with our allies and major trading partners to identify and outline the specific actions we seek from China, and to devise a strategy to increase pressure in order to guarantee all of our exporters and investors fair treatment in these areas. Multilateral pressure and a consensus with our allies will be key to maximizing leverage over China’s practices.
 
The Council is particularly concerned with reports that the Administration is considering immediate imposition of tariffs on up to 100 categories of products including consumer electronics, toys, IT products, furniture and sporting goods, as a potential remedy prior to any coordinated negotiating effort. This runs contrary to the long history of successful use of Section 301 as a carefully managed device to obtain foreign compliance rather than a pretext for import protection. 
 
Unilateral imposition of tariffs prior to any meaningful negotiations with China will raise charges that the U.S. has ignored its WTO commitments and will turn the focus from China’s unjust behavior to the legitimacy of our own action. This will, in turn, alienate many of the trading partners we are relying upon to support our cause and may embolden China to resist our efforts. It will provoke retaliation by China against major U.S. exports, causing significant harm to key U.S. industries and agricultural interests and increasing the likelihood that competitors from Europe, Japan and elsewhere supplant American businesses, innovators and farmers as suppliers in China’s market. 
 
Higher tariffs on a broad range of consumer goods will increase the shopping bill for all Americans, while tariffs on components will harm U.S. productivity in all sectors and U.S. manufacturing exports by making it more expensive and challenging to procure key inputs. At a time when the U.S. economy is enjoying a resurgence thanks to tax and regulatory reform, these tariffs run the risk of stifling our own growth while making our exporters less competitive in the global economy. In combination with the tariff increases already announced on steel and aluminum, these additional taxes will be even more harmful to domestic manufacturers. 
 
Finally, it is reported that the Administration is also considering measures to impose “reciprocal investment restrictions” on Chinese investors in the United States as part of its response under Section 301. Efforts to develop new investment restrictions on China should be the subject of extensive consultations with U.S. companies, as it is vital to consider existing U.S. investment interests that could be adversely affected if the matter is not handled appropriately. Furthermore, as with other possible Section 301 remedies, proposed investment restrictions should not be imposed immediately, but should be used as leverage to obtain the far more desirable goal of fundamental changes in China’s investment and IP regimes.
 
We urge your committees to impress upon USTR the importance of a strategy to address Chinese policies and practices in a manner that will achieve maximum benefits for U.S. trade and investment interests and avoid unintended effects that may cause greater harm than good to U.S. economic interests.
 
Sincerely,
 
Rufus Yerxa
President

To download the full text of the letter, click here.  
 
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About the NFTC

Serving America's Global Businesses Since 1914- The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules- based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York.
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