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ITIF Proposes Barring Imports When China Subverts Trade Rules

WASHINGTON—China is threatening U.S. market share in various industries by engaging in unfair trade practices, and U.S. policy responses so far have been ineffective or insufficient to mitigate the economic damage. But Congress can turn the tables by reforming a century-old law to make subverting trade rules less profitable, according to a new report from the Information Technology and Innovation Foundation (ITIF), the world’s leading think tank for science and technology policy.

ITIF’s report proposes updating Section 337 of the 1930 Tariff Act to give the U.S. International Trade Commission (USITC) greater powers to bar imports from companies that receive unfair competitive advantages from governments in non-market, non-rule-of-law economies such as China.

“The last decade has shown that U.S. policy won’t deter China from undermining the rules and norms of global trade. But barring imports from companies that benefit from unfair trade practices can mitigate the damage to firms in the United States,” said ITIF President Robert D. Atkinson, who authored the report. “Making unfair trade practices less profitable would send a clear message to China that if it systematically subverts trade rules or norms to benefit particular firms, then those firms will be denied access to the U.S. marketplace. And the administration should encourage allies to take the same stand.”

Section 337 of the 1930 Tariff Act currently allows for the U.S. International Trade Commission (USITC) to bar imports when there is evidence that unfair competition is causing economic harm. But the law has numerous shortcomings, according to ITIF’s analysis. In the last decade, it has primarily served as a forum for patent disputes, often among competing U.S. firms.

ITIF’s report recommends updating the statute to, among other things, make it easier to impose exclusion orders against imports from companies systematically supported by unfair trade practices in non-market, non-rule-of-law economies such as China. ITIF recommends allowing the Commerce Department to bring cases to the USITC while providing more resources to thoroughly document and adjudicate unfair Chinese practices. In addition, the report recommends repealing the standard of having suffered harm before bringing a case.

Reforming Section 337 would send a clear message of support for free, rules-based trade and serve as a framework for U.S. allies to emulate in upholding those values and norms. With a united front, firms from rule-of-law nations would be able to compete on more level terms, while government-backed champions from non-rule-of-law nations would have fewer markets to operate in, so their growth would slow down.

“Absent a significant change in Chinese government leadership, Chinese policies cannot be changed,” said Atkinson. “And while policies to improve U.S. competitiveness are necessary, they aren’t sufficient. The United States must simultaneously protect its own market from unfair competition and slow down China’s advance by cutting off some of its profits.”

Read the report.

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The Information Technology and Innovation Foundation (ITIF) is an independent, nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized by its peers in the think tank community as the global center of excellence for science and technology policy, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.

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