China Center for International Economic Exchanges

Wei Jianguo: The U.S. Section 301 Investigation Report Misleads the Political and Business Circles and the Public
Date:May 04,2018    Source:CCIEE

Today, the U.S. delegation led by Steven Mnuchin, the U.S. President’s special envoy and Treasury Secretary has started its visit to China, and Liu He, Member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, will exchange views with the U.S. delegation on U.S.-China trade, economic relation and other issues.

The trade friction between China and the United States in the past months began with the report of the section 301 Investigation. On March 22, the U.S. President Trump signed a presidential memorandum in Washington according to the report of the investigation, imposing large-scale tariffs on goods imported from China and restricting Chinese companies to invest in the United States.

Wei Jianguo, a special expert of the CGG think tank pointed out that the report complains about the mandatory technology transfer in China, which is a groundless allegation. There are more than 90,000 enterprises from various countries operating in China and none of them has ever accused China of forced technology transfer.

In order to provide the corporate managers and investors who are concerned about the China-U.S. economic and trade relations with a unique insight, we have exclusively published this paper of Wei Jianguo, Vice Chairman of CCIEE. We will continue to observe the development of the trade frictions between China and the United States, and provide more practical guidance and analysis.

The “Section 301 investigation report” made the U.S. government, Congress, and the political parties believe that there is a coercive technology transfer in China, violation of the provisions of intellectual property rights and unfair trade practices.

This report misleads the U.S. political and business circles, experts and the general public. It is completely wrong.

The three major viewpoints of this report are full of lies.

The following three points will explain in detail why is the report full of lies.

1. This report used more than 1200 footnotes and 5 copies to indicate that after China started its reform and opening up, all the U.S. companies must hand over their proprietary technologies and operating system blueprints in order to cooperate with their Chinese counterparts and do business in China. The report refers it to “mandatory technology transfers,” which is a groundless allegation.

When China cooperated with Japan, South Korea, Taiwan and Hong Kong at the beginning of the reform and opening up, it never requires mandatory technology transfer from foreign-funded companies. The U.S. Chamber of Commerce in China, the European Union Chamber of Commerce in China, the Korean Chamber of Commerce in China, the Japan Chamber of Commerce in China and other organizations have operated in China for 40 years and have more than 90,000 companies, none of them has ever filed a lawsuit against China. The cooperation between these multinational companies and Chinese companies was voluntary and based on negotiation. These multinational corporations have achieved rapid commercial growth in China and have never transferred their technology just because of the Chinese government’s presence or regulations. Many representatives of these chambers of commerce found the 301 investigation report ridiculous because the Chinese government has never practiced coercive technology transfer.

2. On the contrary, China highly respects the intellectual property rights and technology transfer of foreign companies. In 2017, China’s deficit in service trade was US$255.4 billion, a large part of which was paid by China for patent fees and technology transfer. For instance, Chinese people must pay about 5% of the technology transfer fee if they want to purchase a Samsung or Apple mobile phone. Furthermore, Chinese companies have agreed to pay quantity-based technology transfer fee when using video-recorder, cameras, and automotive technologies. In 2017, China paid US$37.6 billion for technology transfer. China has great respect for the WTO and strictly adhere to the regulations related to the intellectual property right. Before the U.S.-China trade war, the United States is the only country which believed that China violates the provisions of intellectual property rights.

3. Many people in China think that China has suffered a loss in the U.S.-China trade because it did not obtain any technology, but has given up the market. The recent penalties imposed by the U.S. on ZTE has fully demonstrated that the United States has not given us its core technologies. China needs to import more than US$100 billion worth of chips every year from the United States, this is the lesson we have learnt from the 40 years of reform and opening up.

These three points above indicate that the 301 Investigation Report was fabricated.

Historically, all the developed countries provided industrial subsidies.

The second accusation of the 301 Investigation Report is that the “Made in China 2025” strategy is a state-led and highly subsidized industrial policy for information technology, new materials, new techniques, smart manufacturing, biopharmaceuticals, precision instruments and new energy. As a result, the American companies have been treated unfairly. This is another lie.

Looking back in history, the governments of all the developed countries, including Germany and Japan, has designed core plans and objectives during their industrial development. For example, the state-subsidized loans and preferential tariffs offered by the Japanese government in the past century led to significant achievements in the industrial development.

The German government adopted a subsidy scheme for small and medium-sized enterprises (SMEs) and thus, the SMEs gained remarkable development.

The United States is no exception. Since the 1960s, the United States’ strong military system, including the semiconductor technology, Star Wars, the Internet, nuclear power, and pharmaceutical innovation have received special support from the U.S. federal defense budget and others budgets.

As can be seen, Japan, Germany, and even the United States have all come up with supporting policies for their industrial development. The United States spent more than US$1 trillion to support its Internet technology development and the so-called Star Wars technology, more than the combined budget of all countries in the world.

The U.S. trade representative Lighthizer inexplicably treats the “Made in China 2025” strategy as a target, accusing China of adopting industrial subsidy policies to achieve the strategic goal of promoting industrial development in the short-term, which has caused great panic in the U.S. industries. We can easily see that these accusations are senseless.

The purpose of the 301 investigation report is to replace multilateralism with unilateralism

The 301 investigation report discredited China’s foreign investment and the Belt and Road Initiative, saying that the purpose of the initiative is to further suppress the emerging companies of the U.S. and their technology, as well as the global market. This is a blatant fraud.

On the contrary, China has welcomed the United States to join the Belt and Road Initiative and the AIIB from the beginning but the U.S. government rejected China’s invitation.

What is more frightening is that this investigation report has led to a debate in the United States, which will cause misunderstanding of China’s development, in particular, it will mislead the people who hold a cooperative attitude of “winning with China.”

More importantly, the 301 Investigation Report is a notorious report, which is concluded according to the rules of the United States not the multilateral rules of the WTO.

Under normal circumstance, the trade contradictions between the two countries can be resolved through the dispute settlement mechanism of the WTO. However, the United States does not use this settlement mechanism but insisted on applying its own laws to make a lie, which is something that has never happened before.

This shows the panic and hypocrisy of the United States. More and more people have realized that the 301 investigation report will not work globally as it tries to replace multilateralism with unilateralism, chooses trade protectionism over globalization.

More people have started to learn more about this report. I believe that the U.S. entrepreneurs, multinational corporations, and experts and scholars will soon realize the hypocrisy and fraud of the so-called elites of the U.S. government.

I think that letting the American scholars and media themselves to expose the fraudulent 301 investigation report will have a greater impact on the cooperation between China and the United States.

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