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US to probe China's trade breaches

August 15, 2017

US President Donald Trump has asked his trade office to examine the alleged theft of American technology and intellectual property in China. It is the first direct trade measure by his administration against Beijing.

USA Donald Trump und Xi Jinping
Image: picture alliance/AP Images/A. Brandon

US President Trump returned to Washington from his 17-day vacation in New Jersey to sign an executive order to launch the probe. He suggested that further steps could be taken against China on trade issues.

US Trade Representative Robert Lighthizer will examine whether a formal Section 301 investigation into Chinese trade policies on intellectual property should be launched.

Section 301 of the 1974 Trade Act allows the president to unilaterally impose tariffs or other trade restrictions to protect US industries from "unfair trade practices" of foreign countries.

Trump holds the signed memo to start the review of trade issues with China
Trump holds the signed memo to start the review of trade issues with ChinaImage: Reuters/J. Ernst

The White House has accused China of harming US business interests and jeopardizing jobs. Trump administration officials have estimated that the cost of theft of intellectual property by China could be as high as $600 billion (510 million euros).

China's response

China responded with a statement on Tuesday from the commerce ministry saying it would "not sit idle" if the US took actions that impaired trade ties and would respond with "all appropriate measurse." It voiced "serious concern" and warned any US trade protectionism would "definitely harm bilateral trade relations."

The state news agency Xinhua said the move "like all the other unilateral moves by Washington, will hurt not only China, but the United States itself in the long run." It added that China was willing to resolve any disputes between the two sides through dialogue.

'Very big move'

Trump said the inquiry was "a very big move" while China has repeatedly rebuffed attempts by previous US administrations to take action against its trade practices. The state-run China Daily newspaper said that the investigation would "poison" bilateral relations, warning the Trump administration not to make any rash decisions.

The Communist Party linked Global Times warned: "The Trump administration should have second thoughts about putting pressure on China on trade and avoid a full-blown trade war," adding that Beijing "should make use of the WTO mechanism to sue the US for trade protectionism."

North Korea Missile Tests
Trump would like to see China on his side over North Korea but his actions might alienate Chinese President Xi JinpingImage: Getty Images/AFP/E. Jones

Ally or enemy?

US technology giants such as Microsoft, Apple and Google hope that China will take the administration's announcement seriously. However, beyond economics, there are some key political and diplomatic considerations as well:

The memo comes at a time of heightened tensions between Washington and Beijing over North Korea's nuclear ambitions. The investigation is likely to cast a shadow over relations with China, the largest US trading partner, just as Trump is asking Beijing to step up pressure against Pyongyang.

Lighthizer has a year to decide whether a formal investigation of China's trade policies on intellectual property should be launched which could eventually lead to the US imposing trade sanctions on China.

If an investigation were to find against China, the president could unilaterally impose tariffs, sanctions or other trade restrictions to protect US industries.

ss/jm (AP, Reuters)