The Trump administration announced Saturday that it is planning to launch an investigation into Chinese intellectual-property violations that could result in severe trade penalties, an escalation that presents both opportunities and risks at a time when the United States needs China’s help to contain the North Korean nuclear threat.
The president plans to sign an executive memorandum Monday afternoon, directing his top trade negotiator to determine whether to investigate China for harming intellectual property, innovation and technology, senior administration officials said in a conference call Saturday morning.
The measure would seek to address what the U.S. business community has described as flagrant trade violations by China, which employs a variety of rules and practices to wall its market off from foreign competition and pressure U.S. companies to part with valuable product designs and trade secrets – or to steal them outright.
The investigation, which one U.S. official said could take as long as a year, may prove to be a source of leverage to push China to do more to help contain a rising security threat from North Korea, which counts Beijing as its only powerful ally.
At the same time, it could alienate China’s leadership, which is urging the Trump administration to limit its confrontational language as it faces off against the regime in Pyongyang.
“The relationship could spiral out of control, particularly if the movement on the trade front is combined with growing tensions over how to respond to North Korea,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies.
The announcement followed a call Friday night between Donald Trump and Chinese President Xi Jinping. During that call, Trump and Xi agreed that North Korea must stop its “provocative and escalatory behavior” and reaffirmed their commitment to denuclearizing the Korean Peninsula, according to a White House statement.
Xi urged President Trump to exercise restraint over tensions with North Korea during a phone call, Chinese state media reported. Xi urged both sides not to do anything that would aggravate tensions. Dialogue, negotiations and a political settlement are the fundamental ways of solving the Korean Peninsula’s nuclear issue, Xi said during the call, according to China’s CGTN state television network.
“The Chinese leader expressed Beijing’s willingness to maintain communication with the U.S. to appropriately resolve the Korean Peninsula nuclear issue,” the network reported. Xi “stressed that China and the U.S. share the same interests on the denuclearization and peace on the Korean Peninsula.”
On Saturday, administration officials said the new trade measure was “totally unrelated” to events involving North Korea.
They added that the trade measure would be carried out under the rules of international law and would not trigger greater conflict with China.
But trade and national security experts widely noted that the announcement appeared to have been delayed until after China joined the United States in voting for sanctions against North Korea at a United Nations Security Council session on Aug. 5.
When asked about the delay during the Saturday call, the officials did not address the question directly. They said that U.S. companies had long suffered because of Chinese intellectual-property violations, and that they expected Congress and the business community to support the measure.
“If Americans continue to have their best technology and intellectual property stolen, or forcibly transferred offshore, the United States will find it difficult to maintain its current technology-leadership position and to remain one of the world’s most innovative economies. This is why the president has chosen to act now and to act boldly,” one administration official said.
Michael Wessel, a commissioner on the U.S.-China Economic and Security Review Commission, called the measure “a critical action, and long overdue.”
“China’s been engaged in the theft and forced transfer of U.S. technologies and intellectual property for years. Those activities haven’t abated; they’ve accelerated as China seeks to become self-sufficient in new technologies and dominate world markets,” he said.
If the investigation finds that China is harming U.S. companies, the Trump administration could respond by imposing tariffs, negotiating an agreement with China or other measures, the officials said.
The administration probably is eager to make progress on trade, one of Trump’s biggest campaign issues, after a recent series of legislative setbacks, trade experts said. While Trump officially withdrew the United States from the Trans-Pacific Partnership, an Obama-era trade deal, and will begin talks next week to renegotiate the North American Free Trade Agreement, other planned trade measures have been slow to materialize.
The results of three separate investigations into trade deficits and the national security threats posed by imports of steel and aluminum, initially expected by the end of June, have yet to appear. Meanwhile, 100 days of trade talks with the Chinese carried out in past months resulted in a few trade gains but not the ambitious changes the administration had hoped for.
Trade experts and business leaders said the new investigation into intellectual property could be a sign that the trade agenda is shifting into the hands of a respected negotiator, U.S. Trade Representative Robert E. Lighthizer, who during the Reagan administration helped implement some of the most protectionist trade policies of recent decades.
Like the president, Lighthizer has criticized multilateral venues such as the World Trade Organization for failing to provide adequate tools to address China’s economic violations. Instead, he is leading the administration in dusting off a variety of powerful and unilateral measures under U.S. trade law, many of which the United States stopped using after the creation of the WTO, which has its own mechanisms to settle trade disputes.
The United States has previously complained at the WTO about Chinese trade policies, including its “Made in China 2025” initiative, which seeks to have Chinese-made materials account for 70 percent of manufacturing inputs within the next eight years. That initiative sets forth a long-term plan for China’s dominance in a wide variety of high-tech industries, including electric vehicles, advanced medial products and robotics.
(c) 2017, The Washington Post · Ana Swanson, Simon Denyer