US launches China trade probe

The United States government has formally launched a probe into China's intellectual property policies and practices just four days after President Donald Trump asked his top trade official to decide if an investigation was necessary.

US Trade Representative Robert Lighthizer initiated the investigation under Section 301 of the Trade Act of 1974, according to a statement posted on the USTR website on Friday.

"On Monday, President Trump instructed me to look into Chinese laws, policies, and practices which may be harming American intellectual property rights, innovation, or technology development," Lighthizer said in the statement.

"After consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation. I notified the President that today I am beginning an investigation under Section 301 of the Trade Act of 1974,"

The announcement came on the same day as the departure of Trump's chief strategist Steve Bannon was announced. Both Bannon and Lighthizer were regarded as hawks on China trade. Bannon had described China and the US as being in an "economic war" in an interview earlier this week.

China has warned the US that it will take all necessary and appropriate measures to protect its commercial and trade interests if the US government wrongly accuses China of alleged theft of US technology and intellectual property.

The US should cherish the currently sound Sino-US trade relationship and economic cooperation, it said. Any unilateral practices of trade protectionism from the US are doomed to damage the bilateral economic and trade relations and corporate interests on both sides, according to a statement from the ministry.

Foreign Ministry spokeswoman Hua Chunying said on Monday that "any member of the WTO should observe its rules in taking trade measures," a view expressed by China's Ministry of Commerce 10 days earlier.

"Given the increasingly converging China-US interests and the close-knit pattern of the two countries being mutually dependent, there will be no future or winner but only losers in a trade war," Hua warned.

Chad Bown, a senior fellow at the Peterson Institute for International Economics, described the use of Section 301 as dusting off an outdated US trade law that allows the US president to unilaterally impose tariffs on another country.

Section 301 of the US Trade Act of 1974 was used most by the Reagan administration, when the current USTR Robert Lighthizer served as deputy USTR.

Bown believes such a solution may only make matters worse. He believes the use of an ill-advised and obsolete US trade law is likely to shift attention away from China's actions toward Trump's own policies.

The US government has conducted 122 such Section 301 investigations between 1974 and today, but only one new one since 2001.

Bown noted that US trading partners have become increasingly unhappy with such an "aggressively unilateral" US approach, with the US government acting as police force, prosecutor, jury and judge.

He believes a decision to trigger a Section 301 today is problematic because it would provide additional fuel to the already simmering argument that the Trump administration is undoing the American commitment to rules-based trade and decades of work to establish international cooperation.

He said a Trump decision to operate outside of the rules will spur China to follow suit.

The fallout from Trump's rogue use of yet another outdated US trade law would be considerable," Bown wrote in an article posted on Peterson's website last week.