US formally initiates investigation of China despite worries about potential harms to bilateral trade ties

WASHINGTON — US Trade Representative (USTR) Robert Lighthizer on Friday formally initiated an investigation of so-called China's intellectual property practices under Section 301 of the Trade Act of 1974, despite worries about potential harms to China-US trade ties.

"The investigation will seek to determine whether acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict US commerce," the USTR's Office said in a statement.

The move comes after President Donald Trump on Monday signed an executive memorandum directing Lighthizer to consider the possible initiation of an investigation.

China has urged the United States to objectively evaluate China's progress in protection of intellectual property rights (IPR) and resolve the differences with China through dialogue and consultation.

"The United States should treasure the current sound Sino-US economic and trade ties and cooperation momentum. Any US trade protectionism move will surely damage bilateral ties and the interests of companies from both countries," China's Ministry of Commerce said in a statement on Tuesday.

Section 301, once heavily used in the 1980s and the early 1990s, allows the US president to unilaterally impose tariffs or other trade restrictions against foreign countries. But the United States has rarely used the trade tool since the WTO came into being in 1995.

"It became no longer necessary really for the United States that they have to use that law, because now we have an effective dispute settlement system under the WTO," Chad Bown, a senior fellow at the Washington-DC based Peterson Institute for International Economics (PIIE), told Xinhua in a recent interview.

Meanwhile, "the legal timeline of the process under Section 301" doesn't work well with the rules of the WTO, said Bown, who previously worked as a senior economist in the White House Council of Economic Advisers and the World Bank.

Senior administration officials told reporters last week that the United States would first consult with China if Lighthizer decided to go ahead with an investigation, and the investigation process could take as long as a year.

Jeffrey Schott, another trade expert and senior fellow at the PIIE, told Xinhua that the purpose of the investigation is "to find out what the facts are and to use the process of investigation to expand bilateral consultations with China" so that there is a better understanding of each country's practices.

Schott didn't see "any immediate restrictions" being imposed on China by the United States as the USTR has to do "a lot more study" on this case.

"Whether there are restrictions or not will depend on how the study proceeds and how the bilateral consultations between the United States and China unfold over the next few months," he said.

If the US side fails to respect basic facts and multilateral trade rules, and takes measures that harm bilateral economic and trade relations, "China will definitely not sit by, but take all appropriate measures to resolutely safeguard its legitimate rights and interests," warned China's Ministry of Commerce.

Michael Froman, former USTR under the Obama administration, has also warned that the United States could face retaliation by other trading partners, if the Trump administration moves away from resolving trade disputes through the WTO and instead starts taking unilateral actions.