US Planning To Open "Third Front" In China Trade Spat

In news that broke (conveniently, we should add) shortly after the market closed on Monday, the Wall Street Journal is reporting that the White House is gearing up for what would be the third front in its nascent trade spat with China.

As the paper points out, Trade Representative Robert Lighthizer is preparing a fresh trade complaint - again under Section 301 of the Trade Act of 1974 - the same section of the trade act under which the US filed its complaint about China's intellectual property abuses, aka the first salvo in the US's trade war.

This time, Lighthizer is aiming at China's unfair restrictions on US companies trying to establish a foothold in China in high-tech industries like cloud computing. As a general rule, China requires foreign firms to partner with a domestic firm in a "revenue-sharing agreement" before they can gain entry to the Chinese market. By comparison, the US allows Chinese firms like Alibaba to function almost totally unfettered.

China

To be sure, Lighthizer has yet to decide whether to go ahead with the complaint, leaving the tariffs on steel and aluminum and the investigation into IP abuses as the only concrete actions that the White House has taken to hold China accountable for what Trump has described as decades of abuses on trade (threatening to impose tariffs on $150 billion in goods doesn't count).

The trade representative has yet to decide whether to go ahead with the complaint, the individuals said, which would be in addition to recent moves to ratchet up pressure on China, including the imposition of tariffs on a total of $150 billion in Chinese imports. But USTR, which has taken the lead in the China trade fight, views China’s restrictions on cloud computing as providing a clear-cut example that might garner public support.

Beijing requires U.S. cloud-computing firms, such as  Amazon.com Inc. and Microsoft Corp. to form joint operations with Chinese companies and license their technology to the Chinese partners. The USTR has said in reports on Chinese trade practices that Beijing withholds licenses that would allow U.S. firms to operate independently in China.

As a result, U.S. companies can’t market their cloud-computing services in China or sign up customers directly. Chinese firms, such as Alibaba Group Holding , by comparison, are allowed to operate in the U.S. without restriction.

“Some non-Chinese companies are reluctant to participate in China’s cloud market due to the number of restrictions,” said K.C. Swanson, director of global policy for the Telecommunications Industry Association. “Meanwhile the U.S. has no restrictions on foreign participation in our markets, it’s a clear-cut reciprocity issue.”

Cloud-computing firms deliver computer services, including storage, software and analytics, over the internet, a service that is considered one of the most promising, high growth parts of the tech industry.

A spokeswoman for USTR declined to comment.

Should USTR go ahead with the complaint, it would become the third major action the U.S. has taken to further open the Chinese market—and would increase the risk of retaliation from Beijing. The U.S. has levied tariffs on imports of Chinese steel and aluminum, which has resulted in China hitting about $3 billion in U.S. imports to China with tariffs.

After reaffirming that China is on a "watch list" of possible currency manipulators (an issue that President Trump has suddenly taken up, ignoring a number of factors), WSJ says the Treasury is putting together restrictions on Chinese investment that could also be employed to prohibit Alibaba from offering cloud-computing services in the US or block the company's expansion in another way.

Of course, Beijing has another edge in the burgeoning US-China trade war: US business groups, which have vehemently opposed the White House's measures as counterproductive and akin to a tax on US businesses and consumers.

Last week, Trump applauded Chinese President Xi Jinping for touting several planned market liberalizations, including allowing automotive companies to operate in China without a domestic partner - a measure that had previously been touted by China's top finance minister, Liu He.

While China has said this wasn't intended as a "concession" to Trump, it's possible that China could expand these liberalizations to include tech firms without losing face. Though that remains a big "if".

If the recent past is any guide, expect to hear a response from China in the not-too-distant future (read tonight).

Comments

nope-1004 Mon, 04/16/2018 - 17:59 Permalink

. . . US companies trying to establish a foothold in China in high-tech industries like cloud computing.

 

Code for Surveillance, otherwise cloud computing (and clouds in general) are limited by national boundaries.

Can't make this shit up.  I lol everyday at the idiocy.

HillaryOdor nuubee Mon, 04/16/2018 - 18:45 Permalink

This crazy double standard of protectionists.

When our companies go over there we are helping their people. 

When their companies come over here we are helping their companies.

Get over yourselves.  All businesses help their consumers so long as the exchange is voluntary.

 

And IP is not property.  The world will be a better place when the idea of owning an idea is a distant memory, but nobody else is allowed to think this.  I have patented the idea.  It belongs to me.

In reply to by nuubee

Posa nuubee Mon, 04/16/2018 - 18:52 Permalink

Or maybe stop off-shoring production. If you're building products in China, the Chinese will see detailed drawings and source code... The US Predator Class was always willing to surrender IP demands from the Chinese as long as they could arbitrage labor rates and pocket the difference. No one put a gun to the American head. US multinationals were hyper-greedy and would accept any business/ trading terms form the Chinese...which is now the undoing and bankruptcy of America.

In reply to by nuubee

redd Mon, 04/16/2018 - 17:59 Permalink

연기하다평화 회담새로운 미국 대통령이 선출 될 때까지위험한덫
推迟和谈直到新的美国总统当选危险陷阱

CrabbyR Mon, 04/16/2018 - 18:04 Permalink

" we now own your pictures" waiting for cloud computing to start charging for people to access their own stuff...buy your own hard drive and be free, but sheeple are so easy to steer

JibjeResearch Mon, 04/16/2018 - 18:23 Permalink

To beat China, don't compete in China.

Win in S. America, Africa, Europe, ASEAN, and Central Asia.

Our MAGA is too dumb to figure this out!

 

It's sad ....

Omen IV Mon, 04/16/2018 - 18:39 Permalink

The Chinese will just claim national security - which is completely plausible -

JV's are not unusual requirement  to operate in any country - the fact that the US doesn't require that protocol is meaningless

 

Germany is the classic example - lost WWII and their major companies post war are substantially owned or controlled by US companies and they have lost the ability to determine national policy

z530 Omen IV Mon, 04/16/2018 - 19:36 Permalink

Do all countries that mandate JV also require the companies to turn over all proprietary IP, like bills of materials, source code and design specs...because that's what China requires of every single company that wants to do business there.

I would say that the US should just do the same thing to them and require joint venture agreements and turn over all IP as well but the simple fact is that China doesn't innovate. The only IP they'd be turning over is IP they've already stolen.

In reply to by Omen IV

haruspicio Tue, 04/17/2018 - 04:21 Permalink

There are unbelievable restrictions on Chinese companies in the US. The authorities block any takeovers of US companies when the Chinese try to spend the useless US $ they have earned selling shit to the US. Alibaba operating without any restrictions....yeah like the NSA don't want to know who is buying what?