Portman, Bipartisan Group of Senators Urge President Biden to Keep Section 301 Tariffs in Place, Enforce Phase One Agreement with China

May 25, 2022 | Press Releases

WASHINGTON, DC – U.S. Senator Rob Portman (R-OH) today led a bipartisan group of senators in sending a letter to President Biden urging him not to lift the Section 301 tariffs, which currently target China and their illegal and unfair trade practices. The Biden administration has publicly signaled a desire to lift the tariffs, a policy position long advocated for by the Chinese Communist Party. The Biden administration has also noted that China has failed to comply with provisions in the Phase One Agreement, which the Trump administration reached with China in January 2020. Despite China’s non-compliance, the Biden administration has signaled a reluctance to utilize the Agreement’s enforcement mechanism to hold China accountable.

“We write to express our continued support for the trade action taken against China pursuant to Section 301 of the Trade Act of 1974. We share long-standing concerns about the ways in which China’s acts, policies, and practices have discriminated against U.S. exports and contributed to the offshoring of U.S. jobs, manufacturing, and innovation, all of which has undermined the competitiveness of our country. As you consider the future of the Section 301 action, we urge you to substantially maintain the tariffs in their current form. Rolling back the tariffs on China would undermine the U.S. position in negotiations, expose many U.S. companies and workers to a sudden flood of imports, and signal to China that waiting out the United States is preferable to changing their non-market behavior or complying with the Phase One Agreement,” said the senators.

They continued, “Rather than lifting the tariffs, the United States should use the enforcement tools guaranteed by that agreement to make clear that we are serious about rectifying its violations. We need to make clear to China that dialogue leads to commitments—and failure to adhere to these commitments are followed by robust enforcement. If we do not exercise the legal rights under the Phase One Agreement, it will only make it more difficult to make progress with China on the subsidies, state-owned enterprises, suppression of labor rights, and other unfair behaviors that are the core of the structural obstacles to a level playing field in bilateral trade.”

Along with Portman, senators who signed onto the letter include Senators Sherrod Brown (D-OH), Mitt Romney (R-UT), Mike Braun (R-IN), Kevin Cramer (R-ND), Rick Scott (R-FL), Bob Casey (D-PA), Jim Inhofe (R-OK), and Elizabeth Warren (D-MA).

Final text of the letter is available here and below.

Dear President Biden:

We write to express our continued support for the trade action taken against China pursuant to Section 301 of the Trade Act of 1974. We share long-standing concerns about the ways in which China’s acts, policies, and practices have discriminated against U.S. exports and contributed to the offshoring of U.S. jobs, manufacturing, and innovation, all of which has undermined the competitiveness of our country. As you consider the future of the Section 301 action, we urge you to substantially maintain the tariffs in their current form. Rolling back the tariffs on China would undermine the U.S. position in negotiations, expose many U.S. companies and workers to a sudden flood of imports, and signal to China that waiting out the United States is preferable to changing their non-market behavior or complying with the Phase One Agreement.

The United States imposed tariffs on $370 billion worth of goods from China in response to China’s discriminatory economic practices. For example, China imposes joint venture requirements on U.S. firms seeking to do business in China, thereby placing a thumb on the scale in favor of offshoring and technology transfer. China also requires foreign companies to license technology to Chinese firms at terms unfairly beneficial to China, and orchestrates intrusion into U.S. computer networks and theft of commercial intellectual property. These tariffs helped the United States conclude the Phase One Agreement with China to set new limits on these unfair practices. And yet, China continues to engage in non-market conduct which tilts the playing field away from American firms and workers, and towards Beijing’s Communist Party. The proliferation of industrial subsidies, reliance on State Owned Enterprises (SOEs), abuse of labor and human rights, and the expansion of Belt and Road Initiative all come to mind.

We also believe it would be naïve to disregard recent actions taken by China that raise significant geopolitical concerns. China is committing genocide against Uyghurs and other ethnic minorities in the Xinjiang Autonomous Region and other parts of the country. China has effectively ended Hong Kong’s separate political system and is forcing the people of Hong Kong to live under its dictatorial rules. And China has also emerged as Vladimir Putin’s strongest ally, even as Russia continues to attack Ukraine.  These facts raise grave concerns about the long-term future of U.S.-China relations.

Given these realities, we believe it counterproductive to lift or erode the Section 301 tariffs, especially in the hopes that China will somehow become more cooperative on other issues. At present, China remains wedded to a techno-nationalism at odds with American values—something hardly to be rewarded.

While an exclusion process is necessary in certain circumstances, such as when products cannot be currently sourced domestically, lifting, or even modifying, the tariffs from their current broad scope, would make it more difficult for the United States to exercise the leverage needed to address the acts, policies, and practices which necessitated the tariffs in the first place. Relatedly, it would signal to Beijing that, for all its rhetoric, the United States is not serious about addressing the inequities and imbalances in the bilateral relationship. In fact, Beijing has repeatedly asked for the tariffs to be removed—a sure sign that the Section 301 action is a significant concern for the Chinese Communist Party and its mercantilist economic approach.  Removal of the tariffs would be a unilateral give-away to a regime looking to undermine U.S. competitiveness. Furthermore, it would reward China’s non-compliance with provisions of the Phase One Agreement.

Rather than lifting the tariffs, the United States should use the enforcement tools guaranteed by that agreement to make clear that we are serious about rectifying its violations. We need to make clear to China that dialogue leads to commitments—and failure to adhere to these commitments are followed by robust enforcement. If we do not exercise the legal rights under the Phase One Agreement, it will only make it more difficult to make progress with China on the subsidies, state-owned enterprises, suppression of labor rights, and other unfair behaviors that are the core of the structural obstacles to a level playing field in bilateral trade.

In closing, we note that the tariffs are not a driver of today’s inflation. Not only do the tariffs predate the current inflation by over three years, but Chinese imports make up only 2 percent of goods included in the Consumer Price Index (CPI) and would not materially reduce inflation. Indeed, much of the inflation we are seeing relates to fuel and food—sectors that are unrelated to imports from China.  To avoid the tremendous strategic cost of lifting the tariffs, we urge you to retain the tariffs on China in their current form, and exercise all the tools at your disposal to assert U.S. rights in the face of China’s unfair economic practices.

Sincerely,

###