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1 [1] (September 18, 2018)

handle is hein.crs/crsmthzzbon0001 and id is 1 raw text is: ,' Congressional Research Service ~Informing the legiative debate since 1914 Updated September 18, 2018 Enforcing U.S. Trade Laws: Section 301 and China Overview Concerns over China's policies on intellectual property (IP), forced technology transfer, and innovation policies, and their impact on the U.S. economy, led the Trump Administration to launch a Section 301 investigation of those policies. In March 2018, the United States announced plans to implement increased 25% tariffs on $50 billion worth of imports from China. These were implemented in two stages on July 6 and August 23 and China retaliated in kind. On September 17, President Trump announced plans to implement increased 10% tariffs on $200 billion worth of Chinese products and warned that he would target another $267 billion worth of products if China retaliated. These actions threatened to disrupt U.S.-China commercial ties. What Is Section 301 and How Does It Work? Sections 301 through 310 of the Trade Act of 1974, as amended, are commonly referred to as Section 301. It is one of the principal statutory means by which the United States enforces U.S. rights under trade agreements and addresses unfair foreign barriers to U.S. exports. Since 1974, the USTR has initiated 125 Section 301 cases, retaliating in 17 instances. Section 301 procedures apply to foreign acts, policies, and practices that the USTR determines either (1) violates, or is inconsistent with, a trade agreement; or (2) is unjustifiable and burdens or restricts U.S. commerce. The measure sets procedures and timetables for actions based on the type of trade barrier(s) addressed. Section 301 cases can be initiated as a result of a petition filed by an interested party with the USTR or self-initiated by the USTR. Once the USTR begins a Section 301 investigation, it must seek a negotiated settlement with the foreign country concerned, either through compensation or an elimination of the particular barrier or practice. For cases involving trade agreements, such as those under the Uruguay Round (UR) agreements in the World Trade Organization (WTO), the USTR is required to use the formal dispute proceedings specified by the agreement. For Section 301 cases (except those involving a trade agreement or IPR issue) the USTR has 12 to 18 months to seek a negotiated resolution. If one is not obtained, the USTR determines whether or not to retaliate (which usually takes the form of increased tariffs on selected imports) at a level equivalent to the estimated economic losses incurred by U.S. firms from the foreign barrier or practice After the United States implemented the UR agreements and joined the WTO is 1995, the USTR still sometimes began Section 301 investigations but then brought the issues at hand to the WTO for dispute resolution. After 2010, the USTR brought all trade disputes involving WTO members directly to the WTO for adjudication. The Trump Administration's use of Section 301 against China is a departure from past U.S. practices. Section 301 and WTO Dispute Settlement A central goal of the United States during the UR negotiations was strengthening the trade dispute mechanism that existed under the General Agreement on Tariffs and Trade (GATT), the WTO's predecessor. Under the GATT, members could delay or block the dispute settlement panels and reports and the GATT had no real authority to enforce its decisions. At the time, the United States claimed that it was often forced to rely on unilateral Section 301 action because of the lack of an effective multilateral dispute settlement process. However, many U.S. trading partners criticized Section 301 as unfair. The WTO dispute mechanism established in the UR agreements prevents members from blocking panel decisions and can authorize retaliation if a member fails to implement a WTO dispute settlement body's ruling. The United States has been the largest user of the WTO dispute settlement process, including 23 cases against China. Past Section 301 Use and China Prior to the UR agreements, China was a major target of Section 301 actions. In April 1991, the USTR designated China as a Special 301 Priority Foreign Country and self- initiated a Section 301 investigation against China's alleged inadequate protection of IPR. When negotiations did not produce an agreement, the USTR threatened to increase tariffs on $1.5 billion worth of Chinese imports. In January 1992, the two sides reached a memorandum of understanding (MOU) in which China committed to taking a number of specified steps to strengthen its IPR enforcement regime. However, in April 1994, the USTR said that China's implementation of the MOU was inadequate. In June 1994, the USTR again designated China as a priority foreign country and threated to impose sanctions, which prompted China to agree to a new IPR enforcement plan. In October 1991, the USTR self-initiated a broad-based Section 301 investigation with respect to certain import barriers imposed by China on U.S. products. In August 1992, the USTR determined that negotiations had failed to resolve the trade dispute, and later threatened to impose $3.9 billion in U.S. trade sanctions against China-the highest amount ever issued by the USTR under a Section 301 case. China threatened counter retaliation, but an agreement was reached in October 1992, which committed China to a wide range of market-opening measures. In October 2010, the USTR launched a Section 301 investigation into Chinese policies affecting trade and investment in green technologies and in December 2010, brought a WTO dispute settlement case against China, but only in regards to its wind power subsidies. In March 2012, the USTR initiated a WTO dispute case against China's exports restrictions on rare earth elements (used in a number of green technology products). The United States largely prevailed in these two cases. www.crs.gov 1 7-5700

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