Latest US trade actions may amount to unilateral, crowbar measures
A rogue elephant on the run is not a welcome development. And more so in global trade and politics where things could go out of control. Over the past week, there has been no dearth of bellicose threats and reckless brinkmanship. Pronouncements such as the one that North Korea risks “fire and fury” from a “locked and loaded” America to talk of “military intervention” in Venezuela, and, last but not the least, stoking a trade war with China do not suggest the normal behaviour of a global hegemon.
Of course, this is not something new for a nation that has all along believed in plucking a ripe pear by any means. Starting with the annexation of the Hawaiian Islands at the end of the 19th century, the US continued to adopt violent strategies for securing market access, writes the historian Howard Zinn in his book A People’s History of the United States. But times have changed and the responses of those targeted by Uncle Sam may prove to be catastrophic.
“Under Donald Trump, America looks like a dangerous nation,” wrote Gideon Rachman of the Financial Times on Monday.
“The president may exploit an overseas conflict to distract from problems at home,” wrote Rachman, the paper’s lead commentator on international issues. Trumps’ emergence, according to Rachman, is a symptom of a wider crisis in American society. There are several Trump equivalents in other countries. As compared to other leaders, who refused to denounce violence and mayhem that took place on their watch, Trump finally bowed down to criticism. In a statement that was seen as too little and too late by critics, which failed to equate what happened in Charlottesville (Virginia) on 10-11 August with domestic terrorism a la radical Islamic terrorism, Trump merely said “the neo-Nazis, Ku Klux Klan, and white supremacists” who triggered the violence in Charlottesville were repugnant to American values and must be dealt with.
Coming to the trade war with China which has been in the offing for the past several months, Trump has finally launched a major trade action to investigate the alleged theft of US intellectual property and trade secrets. By initiating this action, the Trump administration is starting a formal investigation under the rarely used Section 301 trade remedy law, which could end up with the retaliatory tariffs, according to a report in Washington Trade Daily of 14 August.
Under this controversial provision, the office of the United States trade representative will examine “whether any of China’s laws, policies, practices or actions may be unreasonable or discriminatory and may be harming American intellectual property, innovations, and technology.”
The patent system, according to Abraham Lincoln, has added “fuel to the fire of genius.” That patent system has suffered a loss to the tune of $600 billion a year, almost 3% of the American gross national product, says Wilbur Ross, the US commerce secretary. In a signed article in the Financial Times on 14 August, Ross catalogued a range of unfair trade practices adopted by China and its companies. He says much of the loss suffered by American companies is largely due to a systematic violation of patent rules by Chinese companies.
Further, China—which has embarked on a grand plan called “Made in China 2025”—aims to dominate areas of frontier technology, including artificial intelligence, biotechnology and drones, among other areas. The US, which is going to face fierce competition from China in state-of-the-art technologies has also maintained that Beijing is adopting carrot-and-stick strategies to force American companies that set up shop in the Middle Kingdom to share their proprietary technology and intellectual property.
By forcing foreign companies, including the American giants to enter into joint ventures, and by limiting foreign ownership to below 50% with conditions such as technology transfer, China is creating a fertile ground for its companies to flourish and dominate the global market, the US Commission on the Theft of American Intellectual Property has claimed. Further, a host of insidious practices are apparently adopted by China which target the tech start-ups in the US that are seeking access to the vast Chinese market. Besides, the Chinese courts have also enabled their companies in invalidating the patents claimed by the American companies under antitrust provisions.
“Through this action,” according to Ross, President Trump has taken “the necessary strategic step to protect the base of innovation that has fuelled American productivity and undergirded our national security for decades. We will protect our intellectual property first, but will also lead in restoring the rules-based free and fair economic system,” the US commerce secretary maintained.
On a separate front, the US will start negotiations with Mexico and Canada to rejig the provisions concerning rules of origin in the North American Free Trade Agreement (NAFTA). Effectively, as part of the “Made in America” agenda, the US is going to ensure that its steel and other industries regain their share in the NAFTA market through complex rules of origin. The Trump administration is also considering invoking national security provisions to rebuild the national industrial base.
In short, the Trump administration’s latest bout of trade actions would amount to unilateral and crowbar measures. Washington could have easily opted for resolving the allegedly illegal/unfair practices adopted by China by taking recourse to a rules-based system it had created in the form of the General Agreement on Tariffs and Trade and subsequently, the World Trade Organization. That would have lent credibility to the US actions.
China will certainly stand up to American bullying and threats on the trade and other fronts. It could even call the US bluff. The same may not be the case with Antigua and Barbuda which won a trade dispute against the US but could not secure any relief. By resorting to threats and unilateral measures, the US is forcing countries to join hands against Washington’s desperate trade agenda.