U.S. Tools to Address Chinese Market Distortions: Trump Administration Tariffs, Response to Chinese State Capitalism Industrial Policy Subsidies, Investment Restrictions, IP Theft, WTO Disputes

This important report compilation contains the testimony of eight renowned experts at a hearing in 2018 exploring U.S. policy options available to address Chinese market distortions. The first panel, "A Coordinated Policy Response to Chinese State Capitalism," addressed industrial policy challenges like subsidies, price distortions, and investment restrictions. The second panel, "A Coordinated Policy Response to China's Techno-nationalism," focused on challenges from China's push to develop domestic-led intellectual property, including technology transfer, IP or data theft, and restrictions on cross-border data flows.

Panel I: A Coordinated Policy Response to Chinese State Capitalism * 1. Chad Bown, Ph.D. Reginald Jones Senior Fellow, Peterson Institute for International Economics; former Senior Economist for International Trade and Investment, White House Council of Economic Advisors * 2. Linda Dempsey VP, International Affairs and Economic Policy, National Association of Manufacturers * 3. Celeste Drake, Trade and Globalization Policy Specialist, AFL-CIO * 4. Jennifer A. Hillman, Professor from Practice, Georgetown Law School; former Member, WTO Appellate Body * Panel II: A Coordinated Policy Response to China's Techno-nationalism * 5. Lee Branstetter, Ph.D. Professor of Economics and Public Policy, Carnegie Mellon University; former Senior Economist for International Trade and Investment, President's Council of Economic Advisors * 6. Mark Cohen, Head of the Asia IP Project, University of California at Berkeley; former Senior Counsel, U.S. Patent and Trademark Office * 7. Willy Shih, Ph.D., Robert and Jane Cizik Professor of Management Practice in Business Administration, Harvard Business School * 8. Graham Webster, China Digital Economy Fellow at New America; Senior Fellow, Paul Tsai China Center at Yale Law School

The circumstances certainly surrounding China's accession to the WTO were distinctive if not unique. China acceded on the grounds it wouldn't immediately comply with all requirements but would increasingly be able to do so over time. Prior to its accession, China had enacted sweeping and painful reforms to state-owned enterprises. And its leadership used the WTO to expand China's integration with global markets and devolve government control in many industries.
But those positive circumstances have changed. China's President Xi Jinping has called for renewed centralization of economic and political authority under the government and the Party, writing that "East, West, North, or South, the Party leads everything." Though the global economy has been driven in part by China as a growth engine, the Chinese government continues to use tariff and non-tariff barriers, like investment restrictions and government subsidies, to block access to China's domestic market and tilt the playing field in favor of Chinese companies. These barriers are actually compounded by two imperatives for Chinese leadership. First, they seek to promote China's economic transition to higher value-added industries, requiring technological innovation to boost wages and productivity. Now, in theory, this would entail firm investments in R&D and government support for scientific research, education, and human capital. In practice, it's often incorporated theft of foreign intellectual property, cyber espionage, and requests to transfer technology at the expense of American and other foreign companies. Second, the Chinese government has published targets encouraging domestic companies to be internationally competitive, not only in low-cost manufacturers but in more sophisticated products and services. And Chinese government subsidies that have led to steel overcapacity may lead to high export volumes of electric cars, of lithium-ion batteries, and semiconductors.