Vandegrift Blog: The Calm Before the Storm by Janet Labuda

On July 12, I attended an all-day Washington DC meeting of the U.S. Fashion Industry Association. First to address the audience was Congresswoman Jackie Walorski (R-Indiana) a ranking member of the House Ways and MeansCommittee. Also, Angela Ellard, Chief International Trade Counsel for House Ways and Means Committee and Shane Warren, Chief International Trade Counsel for the Senate Finance Committee addressed the attendees. The hot topic, for the day, was the imposition of tariffs by the Trump Administration to counteract unfair trade practices by China and various other trading partners.

The take away was that it “may get worse before getting any better.” Over the years, the Congress has given ever increasing authority to the President to take unilateral action regarding harmful trade practices. These take the form of 232 cases and 301.

Section 232 of the Trade Expansion Act of 1962, as amended, gives the executive branch the ability to conduct investigations to “determine the effects on the national security of imports.” Within 270 days of initiating any investigation, the Commerce Department issues a report to the President with the investigation’s findings, including whether certain imports threaten to impair America’s national security. The President has 90 days to determine whether he concurs with the findings and, if so, to use his statutory authority under Section 232 “to adjust the imports” as necessary, including through tariffs or quotas.

Under Section 301 of the Trade Act of 1974, the U.S. Trade Representative (USTR) initiated an investigation to determine whether China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation are unreasonable, unjustifiable, or discriminatory and burden or restrict U.S. commerce.

Following a thorough analysis of available evidence, USTR, with the assistance of the interagency Section 301 committee, prepared findings showing that the acts, policies, and practices of the Chinese government related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.

  • China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to force or pressure technology transfers from American companies.
  • China uses discriminatory licensing processes to transfer technologies from U.S. companies to Chinese companies.
  • China directs and facilitates investments and acquisitions which generate large-scale technology transfer.
  • China conducts and supports cyber intrusions into U.S. computer networks to gain access to valuable business information.
  • An interagency team of subject matter experts and economists estimates that China’s policies result in harm to the U.S. economy of at least $50 billion per year.

After these conclusions, the administration announced tariffs affecting $200 billion in imports. While it appears that both the Executive and Legislative branches, bilaterally, agree that China engages in unfair trade practices there is disagreement on the imposition of the tariffs. The presenters were hard pressed to predict when and if new tariffs will be imposed and continue to monitor the effects of the current round on individual U.S. businesses and industrial sectors.

The take away recommendation is to reach out to representatives from both houses of Congress if you are adversely affected by the tariff imposition. This outreach should include any data that shows impacts to your economic viability, competitiveness, or employment strength.

The Congressional representative and staffers assured everyone that all actions taken or contemplated by the President are being monitored and assessed and that regular communication is occurring to ensure that corrective measures are helping and not harming the economy.