2018 China–United States trade war

Director Peter Navarro addresses President Declaring American Economic Independence on 6/28/2016) in the Oval Office with Vice President Mike Pence and Secretary of Commerce Wilbur Ross before President Trump signs Executive Orders regarding trade[1][2]

China and the United States are engaged in a trade war as each country continues to dispute tariffs placed on goods traded between them. US President Donald Trump had promised in his campaign to fix China's "longtime abuse of the broken international system and unfair practices". The United States filed a request for consultation to the World Trade Organization, in regard to concerns that China was violating intellectual property rights.[3]

In adding various tariffs, the U.S. administration is relying partly on Section 301 of the Trade Act of 1974 to prevent what it claims are unfair trade practices and theft of intellectual property.[4][5] This gives the president the authority to unilaterally impose fines or other penalties on a trading partner if it is deemed to be unfairly harming U.S. business interests.[6] In August 2017, the U.S. had opened a formal investigation into attacks on the intellectual property of the U.S. and its allies,[7] which cost the U.S. alone an estimated $225–600 billion a year.[8][9][10][11]

The result is that the U.S. believes Chinese laws undermine intellectual property rights by forcing foreign companies to engage in joint ventures with Chinese companies, which then gives the Chinese companies access and permission to use, improve, or copy their technologies. The U.S. also claims that China fails to recognize legitimate patents and copyrights, and discriminates against foreign imported technology.[11] And that China has instituted numerous non-tariff barriers which has insulated sectors of the Chinese economy from international competition.

Background

China as an autocratic market-distorting system

Under Socialist-market economic system and autocratic ruling, China's state-owned and party-controlled industries with massive subsidies have driven vast amounts of overcapacity not only in aluminum and steel, but also in coal, glass, solar and other industries, and it is moving swiftly into sectors like semiconductors, robotics, and other high-tech industries aim at foreign market share and bankrupt competitors through dumping. With character of communist party directed planned economy, Chinese state-owned enterprises and crony capitalism princelings groups gain most benefits in most activities including the Belt and Road Initiative and Made in China 2025.[12][13][14][15][16] With all kinds of distortion, the U.S., Japan, Canada, Mexico, E.U. countries among others don't recognize China as a market economy.[17][18][19]

Former White House chief strategist Steve Bannon call China a totalitarian mercantilist regime and it is in an economic war with the West.[20][21] Director of the White House National Trade Council and Director of Trade and Industrial Policy Peter Navarro who call China as a totalitarian regime states that China’s unfair trade policies are economic aggression and a direct result of its autocracy. He emphasizes economic security is national security and discusses trade in a broader geopolitical arena.[22][23][24][25][26][27] The White House criticizes China's market-distorting policies within China and in the globe. The WH report and Vice President Mike Pence's speech both notes the forced installation of communist party committees in all companies, state-owned, non-state-owned, and the joint venture foreign companies, influnences and even forms veto power in hiring and investment decesion process.[28] President Trump's China issues advisor Michael Pillsbury says the administration’s demands challenge all the core elements of China’s economic system and its links to the constitution of the communist party.[29]

Chinese theft of intellectual property, technology and trade secrets

U.S. Senator Mark Warner, the Vice Chair of the Senate Intelligence Committee, called Huawei a threat to U.S. national security.[30]

Richard Trumka, president of the AFL-CIO, which represents over 12 million active and retired workers, said that China has stolen U.S. intellectual property[a] and "bullied its way into acquiring critical U.S. advances in technology." He stated in March 2018 that "Tariffs aren’t an end goal, but an important tool to end trade practices that kill American jobs and drive down American pay."[31]

Many countries and companies have accused Chinese spies and hackers of stealing technological and scientific secrets through the planting of software bugs and by infiltrating industries, institutions, and universities. China also benefits itself from stealing foreign designs, flouting of product copyrights and a two-speed patent system that discriminates against foreign firms with unreasonably longer times.[32][33][34][35][36][37][38][39][40][41] Chinese intelligence service assist Chinese companies by stealing company secrets.[42][43]

Chinese spies and hackers have stolen sensitive and top US military technology including B-2 stealth bomber, C-17 transport aircraft, F-117 stealth attack aircraft, F-22 and F-35 stealth fighters, aircraft engine, military helicopter, unmanned aerial vehicle, unmanned underwater vehicle, destroyer, air-cushioned landing craft, submarine, missile, weapons system, softwares among almost all types of armaments.[44][45][46][47][48][48][49][50][51][52][53][54][55]

National security experts say Chinese hackers have consistently stolen trade secrets from U.S. defense contractors. This prompted former Director of the National Security Agency Keith B. Alexander to called Chinese cyber theft of intellectual property as "the greatest transfer of wealth in history." He states:[8][56]

Chinese spies have gone after private defense contractors and subcontractors, national laboratories, public research universities, think tanks and the American government itself. Chinese agents have gone after the United States’ most significant weapons, such as the F-35 Lightning, the Aegis Combat System and the Patriot missile system; illegally exported unmanned underwater vehicles and thermal-imaging cameras; and stolen documents related to the B-52 bomber, the Delta IV rocket, the F-15 fighter and even the Space Shuttle. President Trump’s action on Monday acknowledges the broad scope of the challenge.[8]

"Competitors branded Huawei a cut-rate vendor of copycat equipment, and companies including Cisco Systems and Motorola filed lawsuits over alleged trade secret theft."[57] "U.S. intelligence agencies allege that Huawei is linked to China’s government and that its equipment could contain “backdoors” for use by government spies."[57]

In August 2017, the US opened a formal investigation into attacks on the intellectual property of the U.S. and its allies,[7] which cost the U.S. alone an estimated $225–600 billion a year.[8][9]

Forced technology transfer from US companies to Chinese entities

China requires technology transfer through foreign direct investment (FDI)[58] regime and required joint ventures: In many cases, technology transfers are effectively required by China’s Foreign Direct Investment (FDI) regime, which closes off important sectors of the economy to foreign firms. In order to gain access to these sectors, China forces foreign firms to enter into joint ventures with Chinese entities they do not have any connection.[59][60]

A number of experts have focused on what they consider China's "theft" of intellectual property, and that it forces U.S. firms that want to do business there into transferring its confidential technology and trade secrets before having access to their market. Although that kind of transfer is disallowed by the WTO, the negotiations are usually conducted in secret to avoid penalties.[61]

The Commission on the Theft of American Intellectual Property states “Just agreeing to manufacture in China opens yourself” to theft or forced technology transfer. It requires a U.S. response based on “strength and leverage.”[62]

In 2018 the American Chamber of Commerce in China learned that over half its members thought that "leakage of intellectual property" was an important concern when doing business there.[61] Similarly, the EU Chamber of Commerce has also complained that European companies wanting access to the Chinese market often had to agree to transfer vital technology.[63]

Congress urges real and tough actions against China

Before the Trump Administration takes concrete measures against China in late March 2018, Democratic leaders in both chambers of Congress have continuously criticized President Trump has been a total paper tiger and done virtually nothing on trade but study it. They pressed the President to focus more on China rather than allies and take real punishments such as fulfill his own campaign commitments to label China a currency manipulator on his first day in office and stop China from pressuring U.S. tech companies into giving up intellectual property rights. Senate Democratic Leader Chuck Schumer said "China has stolen millions of jobs and trillions of dollars" but "administrations from both parties haven't been strong enough to fight back". Schumer, Senators Ron Wyden, Sherrod Brown and Joe Manchin among others vowed to roll out a China-related trade package that included creating a "trade prosecutor" to supplement the work of the U.S. trade representative. House Democratic Leader Nancy Pelosi said "human rights are also integral to a fair trading relationship in countries like China that exploit prison labor, engage in other unfair labor practices, and stifle free speech and dissent." She also urge Trump must take a strong stand against unfair market barriers.[64][65][66][67][68][69][70][71][72][73][74][75]

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