Allies Continuing to 'Backfill' Items Under US Trade Controls on China, Industry Official Says

Allen, speaking on a May 21 panel with Brian Janovitz, Office of the U.S. Trade Representative chief counsel, and Sara Schuman, a USTR official on temporary detail with the House Select Committee on China, said U.S. technology companies are increasingly losing Chinese market share to competitors in Europe, Japan and elsewhere. Although Janovitz and Schuman said the administration is prioritizing coordinating its trade measures with allies, Allen said that strategy hasn’t yet worked.

“I appreciate Brian and Sarah's comments about bringing third countries in, but it's not going very well,” Allen said during the panel discussion, held during an annual international trade conference hosted by Georgetown University.

American companies doing business in China -- along with Chinese companies doing business in America -- are facing challenges “that companies from third countries don't face in both markets, and those respective challenges are large and growing larger,” Allen said.

He specifically pointed to restrictions affecting the U.S. semiconductor industry, including the Commerce Department’s October controls that placed new licensing requirements on advanced chips and chip tools (see 2310170055). “There's a lot of grinding away by both governments, and that horrible moment that we all dread, a conflict of laws, appears to be getting closer and closer and closer and closer due to changes in the law,” Allen said. “What is legal on Tuesday might not be legal on Wednesday.”

Allen also said many of these trade measures appear to be “noncompatible” with World Trade Organization rules, which “makes it really hard” for businesses to predict the next set of restrictions. “We're leaving a relatively well-known world,” he said, “and stepping into a world where arbitrary government action can deeply impact your business.”

Janovitz, USTR’s chief counsel for trade enforcement strategy and competitiveness, said he was “disheartened” by Allen’s comments, adding that he believes the administration has been making progress with allies. But he acknowledged that the process can be “slow work,” partly because other countries have different legal systems and bureaucracies that may prevent them from quickly introducing new trade controls.

“We do have to be flexible in order to get that coordination,” he said.

Janovitz, as an example, pointed to the EU’s process for initiating trade defense measures; the bloc in October began a countervailing duty investigation on Chinese electric vehicles (see 2403150047 and 2310040012).

"If it makes sense to them to start with an antidumping or countervailing duty investigation, that's fine," he said. “But what's important is that we are consistent on what the threat is, and we are united in our resolve to try to address it effectively.”

Allen acknowledged that the EU has “made a lot of adjustments recently,” but he also said the bloc still lags behind the U.S. restrictions.

“What I see is they'll tell the Americans what the Americans want to hear, and then they'll tell the Chinese what they want to hear, and then they’ll sell as much as they can,” Allen said. “And that seems to be where we are.”

He also said efforts to curb sales of certain sensitive goods to China haven't yet been reflected in European trade statistics. “If you look at the trade numbers in aircraft or in semiconductor manufacturing equipment,” he said, “I think we still have a little bit of work to do to convince the Europeans.”

Any new export controls or investment restrictions, without buy-in from allies, will only “asymmetrically hurt American companies and our long-term competitiveness,” Allen said. “The Europeans and the Japanese rejoice at the opportunity to sell their products and to backfill behind us.”