Possible New Section 301 Investigation and China's Response

Last Friday, a number of media reports suggested that the Biden administration was considering opening a Section 301 investigation into China's industrial subsidies (see Bloomberg, Financial Times, Wall Street Journal). It remains to be seen whether the Biden administration will pursue a Section 301 investigation here, and, if it does, what it will do with the results. The Chinese Foreign Ministry's response when asked about this issue was relatively measured.

The Trump administration used Section 301 to investigate China's practices related to "Technology Transfer, Intellectual Property, and Innovation," which led to the imposition of tariffs by the United States, retaliatory tariffs by China, and ultimately the Phase One trade deal and a tariff truce, under which most of the original tariffs remain in place today.

If the Biden administration carries out its own Section 301 investigation, additional tariffs, or a revised set of tariffs, are possibilities, although Section 301 does not have to result in tariffs. It could also be used as the basis for coordinated action by the United States and other countries at the WTO or other fora.

Chinese Foreign Ministry Spokesperson Zhao Lijian was asked about this issue at a September 13 press conference. He said that "we hope the relevant departments of the US and China can follow the spirit of the phone call between the two heads of state, properly manage differences, strengthen cooperation and bring the bilateral relations back to the right track of stability and development as soon as possible." The full exchange was as follows:

Bloomberg: The Biden administration is said to be weighing a new investigation into Chinese subsidies and their damage on the US economy as a way to pressure China on the issue of trade. My first question is, does the foreign ministry have a comment on these media reports? Secondly, the last time there was an investigation like this, it led to tariffs worth billions of dollars on Chinese exports. What does the foreign ministry think the US should do in terms of the tariffs that are still in place on Chinese goods?

Zhao Lijian: The presidents of China and the US spoke over the phone the other day. President Xi Jinping pointed that for some time, due to the U.S. policy on China, the China-U.S. relationship has run into serious difficulty. This serves neither the fundamental interests of the people of the two countries, nor the common interests of countries around the world.

President Biden noted that the world is changing fast. The US-China relationship is the most consequential relationship in the world, and the future of the bulk of the world will depend on how the United States and China get on with each other. The two countries have no interest in letting competition veer into conflict. The US is prepared to have more candid exchanges and constructive discussions with China to identify key and priority areas where cooperation is possible, avoid miscommunication, miscalculation and unintended conflict, and get US-China relations back on track.

As for your specific question, we hope the relevant departments of the US and China can follow the spirit of the phone call between the two heads of state, properly manage differences, strengthen cooperation and bring the bilateral relations back to the right track of stability and development as soon as possible.

I want to emphasize that developing trade relations and cooperation between China and the US should follow the spirit of mutual benefits. We have all seen that the relevant trade policies adopted by the Trump administration only ended up hurting its own interests.