US Trade Representative Robert Lighthizer has began a formal investigation into whether China’s intellectual property policies are “unreasonable or discriminatory” following an order from President Donald Trump that Beijing has warned will hurt bilateral trade ties.

“On Monday, President Trump instructed me to look into Chinese laws, policies, and practices which may be harming American intellectual property rights, innovation, or technology development,” Lighthizer said in an official announcement on Friday.

“After consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation. I notified the President that today I am beginning an investigation under Section 301 of the Trade Act of 1974.”

Trump launches US probe into ‘unlawful’ China trade practices, raising spectre of trade war

Trump directed Lighthizer to initiate the investigation earlier this week, following up on pledges to negotiate a bilateral trade and investment relationship with China that makes it easier for US companies to tap into the world’s second-largest economy.

Trump has often accused China of trade and investment practices that have led to the loss of American jobs, and is facing increasing pressure to show progress in the goals he set during his winning presidential campaign.

Six months into his presidency, Trump has so far failed to push through legislation meant to reform health care and the US tax code.

US companies from Zippo, a maker of pocket lighters, to General Motors and Lockheed Martin have faced challenges related to counterfeiting and unauthorised technology transfers in China, which has prompted some industry groups and Washington think tanks to support Trump’s investigation.

Little appetite for US-China trade war

“The coercive transfer and theft of intellectual property may be the single biggest economic harm China inflicts on the US,” Derek Scissors, a resident scholar at the American Enterprise Institute said in a report issued after Trump’s directive to the USTR.

“There is still a long way to go in improving the US-China trade relationship, but this is still a good initial response to predatory Chinese economic policies.”

Lighthizer’s investigation could take up to a year. Last week senior White House officials said possible outcomes included a negotiated agreement with China, unilateral US remedies or a dispute settlement process in the World Trade Organisation.

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Some have questioned the effectiveness of any trade sanctions outside of the WTO framework.

“Now that there is a functioning rules-based trading system – unlike in the 1980s, [when the US used the law to fight Japanese trade practices] – there is much more to lose,” according to a report this month by the Washington-based Peterson Institute for International Economics. “A Trump decision to operate outside of the rules will spur China to follow suit.”

“Beijing’s current approach has been to challenge its grievance with American trade policy at the WTO. At the WTO, China frequently loses,” the Peterson Institute report added. “If Trump acts unilaterally, what is to stop Chinese policymakers from enacting their own unilateral Section 301 process?”

Section 301 of the 1974 authorises the US President to retaliate against any action “that violates an international trade agreement or is unjustified, unreasonable, or discriminatory, and that burdens or restricts US commerce”.

Earlier this week, Beijing criticised Trump’s plan to launch the investigation. In an editorial, China’s state-run Xinhua news agency said Washington’s threat to investigate China’s trade practices would “harm mutually beneficial China-US trade ties and ultimately hurt American consumers”.

Meanwhile, the investigation was criticised by some US lawmakers this week for not doing enough. Democrats, including Senate Minority Leader Chuck Schumer, attacked the decision to hold a lengthy investigation.

“President Trump’s pattern continues: tough talk on China, but weaker action than anyone could ever imagine,” Schumer.

“To make an announcement that they’re going to decide whether to have an investigation on China’s well-documented theft of our intellectual property is another signal to China that it is OK to keep stealing,” Schumer said.

“Opening an investigation of China’s intellectual property practices is a necessary step, but far short of the comprehensive action American workers need,” House Minority Leader Nancy Pelosi said. “President Trump has done little on trade and nothing to create more good-paying jobs in America.”

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