Hal Shapiro Quoted by Media on Possible Trump Admin. Trade Actions Against China

Akin Gump international trade partner Hal Shapiro has been quoted in several media outlets regarding a plan floated by the Trump administration to force China to crack down on intellectual property theft. It stems from what the White House sees as unfair trade practices, where U.S. companies that want to do business in China often have to turn over their IP in order to do so.

The Law360 article “Trump Eyeing Another Novel Approach To Muscle China On IP” reports that Washington is said to be considering invoking Section 301 of the Trade Act of 1974, a law that gives the Office of the U.S. Trade Representative (USTR) wide latitude to impose trade sanctions on countries hampering U.S. business interests. Once invoked, Section 301 triggers an investigative process, leading to either a complaint to the dispute settlement provision of a relevant trade agreement, or the imposition of unilateral sanctions. With no free trade agreement in place with Beijing, a Section 301 case here could fall under the domain of the World Trade Organization (WTO).

Shapiro said, even if the United States does not use Section 301, the matter will still likely go to the WTO if China feels the process has been breached. It could also opt to impose its own retaliatory measures outside of the WTO’s strictures.

“If the U.S. or any country imposes unilateral sanctions that otherwise should have been handled through the WTO, I think you can expect a very large international adverse reaction,” Shapiro said. “Many countries have strong support for the WTO and find that action, particularly by a leading economy, destabilizing.”

Another potential drawback for the administration in this instance, according to the article, is that it creates possibly undue pressure to act by drawing attention to the case and locking itself into a formal statutory process.

“There’s an old adage that it’s good to have a wall behind you in a gunfight so that you don’t get scared and run away. … The problem with the wall is that if you get scared, it’s hard to run away,” Shapiro said. “By invoking 301 as opposed to use an informal mechanism, you are putting pressure on yourself as a government to take action. They’re certainly free to do that, but it just raises the stakes.”

The POLITICO article “Trump’s expected trade order would turn up heat on China” reports that the United States, in the 1990s, pledged to settle disputes through the new WTO dispute settlement system rather than by taking unilateral action. Shapiro, however, noted that Section 301 remains on the books as a tool for trade officials to use, within certain conditions.

If the trade violation falls within the bounds of the numerous WTO agreements, the United States is obligated to pursue the case through the WTO dispute settlement system, he said. But if USTR is trying to curb an action not covered by a WTO pact, “then the U.S. is not bound to take the issue to the WTO because the WTO would be irrelevant to issue,” he added.

Finally, on the radio program “Marketplace,” which aired on National Public Radio, Shapiro said the problem with going to the WTO is that companies are sometimes reluctant to do so. “It’s like being hacked,” he said. “You don’t necessarily want the world to know you’ve been hacked and you may be angering a very important customer in the Chinese market.”