Obama, Xi to Discuss Protectionist Laws

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By Len Bracken

Sept. 1 — Protectionist Chinese laws that affect companies in the information communications technology (ICT) sector are likely to be on the agenda when President Barack Obama meets with Chinese President Xi Jinping, a U.S. Chamber official told Bloomberg BNA Sept. 1.

Not only will the two discuss progress on a bilateral investment treaty and the problem of steel overcapacity, they're also likely to talk about China's draft Cybersecurity Law, since it affects ICT companies doing business in China and all foreign companies that rely on ICT and data flows, the official said.

The bilateral meeting Sept. 3 comes just before the two-day Group of 20 (G-20) leaders' summit in Hangzhou, where China is expected to balk at culpability for excess capacity in the steel industry.

The ICT sector refers to the combination of manufacturing and services industries that capture, transmit and display data and information electronically.

The Chamber singled out China in a new study of ICT-related laws that advantage domestic companies and push out foreign competition, often in the name of national security. In August U.S. industry groups wrote to a senior Chinese official seeking revisions to the Cybersecurity Law.

Monopolies

Also up for discussion will be China's Anti-Monopolization Law, the official said, noting U.S. concerns regarding China's intellectual property (IP) rights policies under the law. The law is intended to encourage fair competition in accordance with World Trade Organization (WTO), but it has resulted in discriminatory treatment toward foreign companies through investigations by China's National Development and Reform Commission.

All advanced manufacturing industries that are IP-intensive, such as chip manufacturers, pharmaceutical companies and software companies, are concerned about this law because it could result in their IP being taken to support a Chinese company, he said.

Bilateral Treaty, Steel

China's steel overcapacity, agricultural biotechnology approvals and the U.S.-China Bilateral Investment Treaty talks are also likely to be on the agenda, he said.

“There have been a series of BIT rounds in the lead-up to the G-20 and the two leaders would like to announce there has been substantial progress at the G-20, even though there would still be a lot of work to do to bring those negotiations to a conclusion,” the official said, noting that has been preparing a new offer in the run-up to the G-20 summit.

Obama won’t have much leverage with Xi on the steel overcapacity issue because U.S. imports of Chinese steel have remained low for the past decade, according to Chad Bown of the Peterson Institute for International Economics. Bown said the global nature of the steel commodity market makes it necessary for the U.S. to pursue the issue with leaders from Japan, Korea and other countries to jointly press China at the Sept. 4-5 G-20 Summit.

Although there continues to be a global glut in steel, U.S. trade remedy laws against the dumping of steel in the U.S. market at below fair prices and against the use of unfair subsidies have managed to push up the price of steel in the U.S., Bown told Bloomberg BNA. He noted that cases have been brought against a host of countries, not just China.

Structural Reforms

Bown, who was formerly the lead economist at the World Bank, said the U.S. will encourage China to implement its structural reforms aimed at transforming a more market-oriented economy, particularly in the steel sector. But he doesn't foresee the U.S. granting China the market economy status it is seeking later this year in accordance with its WTO accession protocol.

China wants countries such as the U.S. to stop using an alternative, nonmarket economy calculation method in antidumping investigations against China after Dec. 11, 2016 (01 ITD, 1/4/16).

To contact the reporter on this story: Len Bracken in Washington at lbracken@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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