Despite the Trump administration's pause (see 1805200002) in adding Section 301 tariffs on goods from China, it's too early to end efforts toward product exemptions, Baker & McKenzie lawyer Ted Murphy said in a blog post. "While this is a positive development, it is also subject to change," he said. "As a result, for now, we are recommending that companies continue to pursue exclusions just in case."
The Trump administration's decision to stop the implementation of Section 301 tariffs while the U.S. and China formalize a deal has left many wondering which country is coming out ahead. China economics expert Derek Scissors, an American Enterprise Institute scholar who briefly advised the Trump administration on the Section 301 investigation, thinks it's too early to say. "I didn’t think he would agree to a deal where we have nothing on the table. I’m shocked at that. I assume more is coming," he said. "Right now this is an IOU for a deal."
Proposed new tariffs on products from China will be put "on hold while we try to execute the framework" of a deal with China, Treasury Secretary Steven Mnuchin said in a May 20 interview on Fox News Sunday. "I'm pleased to report that we've made very meaningful progress and we've agreed on a framework, which is important to understand, and the framework includes their agreement to substantially reduce the trade deficit by increasing their purchasing of goods," he said.
The Section 301 tariffs list should not be used to "pick winners and losers in the free market," the American Apparel and Footwear Association announced just after the National Council of Textile Organizations testified to a review panel that it wants clothing added to the tariff list. In 2017, the U.S. imported nearly $100 billion more in apparel and textiles than it exported, the NCTO said in its submission to the panel, and Chinese exports in these categories account for about 12 percent of the overall bilateral trade deficit. China's exports are responsible for the loss of hundreds of thousands of mill and garment factory jobs, they said, and "the remaining vestiges" of the apparel industry won't ask for antidumping investigations because they are held hostage by their customers, who import the bulk of what they sell, the submission said.
Chinese drugmakers and device makers, U.S. device makers that import Chinese components, and the distributors who sell supplies to hospitals and government agencies all asked the Section 301 panel to spare the healthcare sector from 25 percent tariffs on Chinese imports. The testimony came on the last of three days of hearings by the Office of the U.S. Trade Representative as the panel works to refine a list of 1,300 tariffs on $50 billion worth of Chinese goods. Witnesses said these Chinese items do not necessarily follow China's industrial policy of forced tech transfer or its efforts to leapfrog into more advanced manufacturing. Linda Rouse O'Neill, vice president of government affairs for the Health Industry Distributors Association, said tariffs aren't just going to be an economic drag on the healthcare system. "It's really going to exacerbate product shortages," she said. "We already don't have enough personal protective equipment."
Trade groups representing the apparel, steel, grain and chemical industries largely agree that China is flouting World Trade Organization rules for trade, but there remains some debate over whether the use of tariffs is necessary. "I think somehow imagining that China after 17 years of noncompliance with WTO rules will somehow reverse and do it is the definition of insanity," said Scott Paul, president of the Alliance for American Manufacturing, which represents U.S. steelworkers. "We're sitting on an economy where corporations are getting $1.5 trillion in tax cuts, we have pretty robust economy growth, so in a lot of ways there's never been a better way to fight a trade war and this is a very targeted war," Paul said, speaking as a panelist at a May 17 Washington International Trade Association event.
More than 1,000 of the 1,300 tariff lines on the list of products that could be affected by Section 301 tariffs would impact General Electric's operations, but the company is asking for just 34 items to be removed from the list. On May 16, during the second day of the International Trade Commission's public hearing to help it refine the list of products subject to 25 percent tariffs, Karan Bhatia, who leads GE's government affairs and policy office, suggested the committee exclude intra-company inputs from owned and controlled Chinese factories because those don't involve forced technology transfer, something the Section 301 tariffs are meant to address. He suggested items that have high U.S. content by value that come from China also should be excluded.
International Trade Today is providing readers with some of the top stories for May 7-11 in case they were missed.
A wide range of industries asked to be spared -- or protected -- in the first day of the International Trade Commission's public hearing that will hear from more than 120 companies, a major union, and trade groups, including those from China. The panel is tasked with refining the list of products subject to 25 percent tariffs, which accounted for $50 billion in imports last year. The size of the action was shaped by an estimate of the cost to U.S. companies of forced tech transfer, market access restrictions and intellectual property theft.
The combination of World Trade Organization rules for Most Favored Nation treatment and bound tariff rates leave the U.S. at a disadvantage within trade negotiations, Commerce Secretary Wilbur Ross said during a May 14 speech at the National Press Club. "We are now constrained by two sides of a WTO pincer," he said. The MFN, which requires level tariff rates for countries the U.S. doesn't have free trade agreements with, and Bound Tariff Rates, the ceiling on allowed tariff levels, "prevent us from having reciprocal tariffs because, in most cases, our bound rate ceiling is at or near our very low MFN applied rate, while other nations have higher levels of both." President Donald Trump has mentioned the possibility of implementing a "reciprocal tax" (see 1802120034).