U.S.-China Trade Issues Page: 2 of 2
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U.S.-China Trade Issues
The United States has largely prevailed in most WTO case
brought against China, although in some instance, Chinese
compliance has been lacking.
Foreign Direct Investment (FDI). U.S.-China FDI flows
are relatively small given the high level of bilateral trade,
although estimates of such flows differ. The U.S. Bureau of
Economic Analysis (BEA) is the official U.S. agency that
collects and reports FDI data. BEA estimates the stock of
Chinese FDI in the United States through 2016 at $27.5
billion, and the stock of U.S. FDI in China at $92.5 billion.
BEA's data on U.S. flows to China, and Chinese FDI flows
to the United States in 2016 were $9.5 billion and $10.3
billion. Some analysts contend BEA's balance of payment
methodology for measuring FDI significantly undercounts
the level of actual U.S.-China FDI, in large part because it
does not capture all FDI that is made through other
countries, territories (such as Hong Kong), or tax havens
(such as the British Virgin Islands), as well as acquisitions
made by U.S. affiliates of foreign firms. The Rhodium
Group (RG), a private advisory firm, uses a "bottom-up
approach" by tracking Chinese FDI in the United States
when the investor is a Chinese entity and U.S. FDI in China
when the actual investor is a U.S. entity, regardless where
the investment funds originate. RG's data on U.S.-China
FDI are much higher than BEA's data. For example, RG
estimates the stock of China's FDI in the United States
through 2016 at $110.1 billion and the stock of U.S. FDI in
China at $242.6 billion. RG estimates China's 2016 FDI
flows to the United States and U.S. FDI flows to China at
$46.2 billion and $13.8 billion, respectively.
Figure 2. BEA and RG Estimates of the Stock of U.S-
China Bilateral FDI through 2016 ($billions)
BEA: Stock of U.S. RG: Stock of U.S. BEA: Stock of RG: Stock of
FEDI in China FED in China Chinese FDI in the Chinese FEDI in the
Sources: BEA and the Rhodium Group.
China's largest U.S. acquisition to date has been HNA
Group's 2017 purchase of CIT Group for $10.3 billion.
Some Chinese acquisitions have raised concerns by some in
Congress, in large part because of the Chinese investor's
possible links to the Chinese government. Several bills have
been introduced in Congress that would expand the types of
commercial transactions reviewable by the Committee on
Foreign Investment in the United States (CFIUS) for
national security purposes. Although China is the world's
third largest recipient of FDI, it imposes numerous
restrictions on the level and of types of FDI allowed in
China, many of which appear to relate to China's industrial
policies. According to the U.S.-China Business Council,
China imposes ownership barriers on nearly 100 industries.
Tariffs on Steel and Aluminum. On March 8, 2018,
President Trump issued a proclamation increasing U.S.
import tariffs on steel (by 25%) and aluminum (by 10%),
based on "national security" justifications ( 232 of the 1962
Trade Act). In response, China, on April 2 raised tariffs by
15% to 25% on $3 billion worth of imported U.S. products,
and on April 5, it initiated a WTO dispute settlement case
against the United States over its Section 232 tariffs.
Section 301 Case on China's IPR Policies. On August 14,
2017, President Trump issued a memorandum directing the
USTR to determine if China's policies on IPR protection
and forced technology requirements "may be harming
American intellectual property rights, innovation, or
technology development," and thus warranted a Section 301
investigation. On August 18th, the USTR launched a
Section 301 investigation, and on March 22, President
Trump signed a Memorandum on Actions by the United
States Related to the Section 301 Investigation. It listed four
IPR-related policies that justified U.S. action, including
China's forced technology transfer requirements, cyber-
theft of U.S. trade secrets, discriminatory licensing
requirements, and attempts to acquire U.S. technology to
advance its industrial policies. The United States said it
would propose to boost tariffs by 25% on about $50 billion
worth of Chinese goods, initiate a WTO dispute settlement
case against China's discriminatory licensing policies
(which it did on March 23) and impose new restrictions
against certain Chinese investment in the United States. In
response, China on April 4 released a list of retaliatory
sanctions on U.S. products and initiated a WTO dispute
settlement case against the United States for its Section 301
actions. The next day Trump called on the USTR to
propose an additional $100 billion in tariffs against China.
On May 19, the United States and China released a joint
statement announcing that that progress was made on a
number of trade issues, including a Chinese commitment to
"significantly increase purchases of United States goods
and services," including U.S. agricultural and energy
products. On May 21, U.S. Secretary of the Treasury
Steven Mnuchin stated that both sides had suspended
threatened trade sanctions. However, on May 29, the White
House announced that it planned to move ahead with the
proposed Section 301 sanctions against China by imposing
25% ad valorem tariffs on $50 billion worth of imports
from China, including those related to the Made in China
2025 initiative; and (2) implementing new investment
restrictions and enhanced export controls on Chinese
entities and persons in regards to the acquisition of
"industrially significant technology" for national security
purposes. On June 15, the USTR announced a two-stage
plan to impose 25% ad valorem tariffs on $50 billion worth
of Chinese imports. Under the first stage, tariffs would be
increased on 818 tariff lines, on roughly $34 billion worth
of Chinese products on July 6. Under the second stage, the
USTR proposed increasing tariffs on 228 tariff lines on $16
billion worth of Chinese imports, mainly targeting China's
industrial policies. China on June 16 issued its own two-
stage retaliation list of equal value against the United
States. On June 18, President Trump directed the USTR to
come up with a an additional list of products worth $200
billion that would be subject to 10% ad valorem tariffs if
worth of Chinese products to be imposed if Chinese tariff
retaliation takes place, and on August, 1 he asked USTR to
raise that level to 25%.
Wayne M. Morrison, wmorrison @ crs.loc.gov, 7-7767
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Morrison, Wayne M. U.S.-China Trade Issues, report, August 2, 2018; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1228556/m1/2/: accessed March 26, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.