Trump demanded the investigation, signing a memorandum asking the US Trade Representative, Robert Lighthizer, to examine whether the country should be investigated for alleged IP malpractice under Section 301 of the Trade Act of 1974.
He had promised some form of action during his election campaign, heralding that “just enforcing intellectual property rules alone could save millions of American jobs”.
On 18 August, only four days after the memorandum was signed, Lighthizer agreed to institute an investigation.
Lighthizer was part of President Ronald Reagan’s administration when Section 301 was used to broker a semiconductor deal with Japan.
The investigation will determine whether acts, policies and practices of the Chinese government related to technology transfer, intellectual property and innovation are unreasonable or discriminatory and burden or restrict US commerce.
Lighthizer said he had consulted with stakeholders and other government agencies and “determined that these critical issues merit a thorough investigation”.
The Trump administration said it has a “strong commitment to protecting the IP of Americans and ending the illegal theft and transfer of IP to foreign nations”.
According to Chinese state media publication, China Daily, the country’s government has urged the US to “objectively evaluate China’s progress in protection of intellectual property rights [sic] and resolve the differences with China through dialogue and consultation”.
China’s ministry of commerce said: “The US 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.”
It said that, if the US 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”.
Chad Brown, senior fellow at Peterson Institute for International Economics, discussed the investigation on his Trade Talks podcast.
He said the Section 301 investigation was instituted under a trade law against unfair practices where “the US government accuses a trading partner of doing something wrong and unilaterally threatens to retaliate against them”.
Brown described the 1974 law as a “Cold War law” that was “originally well intentioned” to help US exporting companies that were shut out of foreign markets because trading partners were doing things that were unfair.
He said that while the law made sense back then, the World Trade Organization how handles such disputes.
“In the 1980s, a lot of what the US was complaining about wasn’t covered by any trading agreements in place at the time … we didn’t have any rules for intellectual property enforcement.”
“To my mind this Section 301 approach of the 1980s is extraordinarily outdated and is not the way to go.”