U.S. Criticizes China, Other Trading Partners in Report (1)

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By Len Bracken

U.S. companies continue to face a barrage of unfair Chinese trade and investment practices, according to a March 30 report from the Office of the U.S. Trade Representative (USTR).

The National Trade Estimate report on Foreign Trade Barriers covers 64 countries, territories, and regional associations, but it highlights Beijing’s efforts to obtain U.S. technology through investment restrictions and efforts to promote domestic Chinese industries.

USTR has said it will propose by April 6 Chinese products that could be subject to U.S. tariffs to counter these efforts. The tariffs would follow a public comment period and further analysis by USTR.

“China uses a range of measures, including industrial plans such as ‘Made in China 2025,’ to engineer the transfer of foreign technology to China,” a fact sheet on major developments in the report said.

These measures include “massive subsidies” to high-technology manufacturing industries, as well as denial of financial and regulatory incentives to companies that don’t own their intellectual property in China, conduct large amounts of research and development in China, or manufacture products in China.

“China also conditions foreign investment approvals on technology transfers to Chinese entities; mandates adverse licensing terms on foreign intellectual property licensors; uses anti-monopoly enforcement to extract technology on unreasonable terms; and subsidizes acquisitions of foreign high-technology firms to bring technology to Chinese parent companies,” the fact sheet said.

Restraints, Bans

Other problems posed by China include export restraints and import bans, excess industrial capacity, and cybersecurity measures that would impose restrictions on a wide range of U.S. information-and-communications technology products.

Cloud-computing restrictions, web filtering and blocking, and restrictions on cross-border data flows are among the China-related problems outlined in a separate fact sheet on barriers to digital trade.

Section 181 of the Trade Act of 1974, as amended, requires USTR to make an annual “inventory” of foreign trade and investment barriers. This inventory “enhances awareness of these trade restrictions and facilitates negotiations aimed at reducing or eliminating these barriers,” the report said.

Canada, Mexico

The annual National Trade Estimate report provides details on problems U.S. negotiators would like to solve with Canada and Mexico through talks to update the 1994 North American Free Trade (NAFTA) agreement.

The Canadian issues include:

  •   regulations on composition standards for cheese that limit the amount of dry milk protein concentrate;
  •   proposed requirements for front-of-package labeling on prepackaged foods deemed high in sodium, sugars, and saturated fat;
  •   supply-management systems to regulate the dairy, chicken, turkey, and egg industries;
  •   the low, roughly $15, maximum threshold below which no duty or tax is charged on imported items; and
  •   provincial taxes that inhibit Canadians from importing U.S. alcoholic beverages when returning from short visits to the United States.
The Mexican issues include:
  •   the prohibition on the shipment of U.S. fresh potatoes beyond a 26 kilometer zone along the U.S.-Mexico border;
  •   the prohibition on the shipment of raw milk for pasteurization to Mexico;
  •   weak intellectual property rights protections concerning pirated films; and
  •   the availability of counterfeit goods in Mexico City and Guadalajara.
The National Trade Estimate report noted that Mexico is considering changes to its system of protection of intellectual property involving the names of agricultural products from certain regions, known as “geographical indications.” These changes are tied to trade agreement talks with the European Union, the report said. The geographical indications were a major point of contention between the U.S. and the EU when the Obama administration was negotiating the Transatlantic Trade and Investment Partnership with the European Commission.The National Trade Estimate report noted areas of improvement in agricultural market access for U.S. producers, such as potatoes to Japan, beef to China, and poultry to South Korea. It also cited lower technical barriers to trade in Indonesia with regard to regulatory review; in South Africa with regard to standards for information technology products; and in Taiwan with regard to cosmetics.

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

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

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