China's MOC issues statement on U.S. Section 301 investigation

China's Ministry of Commerce (MOC) released a statement Thursday regarding the Statement by the U.S. Trade Representative on Section 301 Action released on July 10.

China's Ministry of Commerce in Beijing [File photo: IC]

The following is the full text of the statement.

I. The slander of the United States against China about gaining extra advantage through unfair trade practice is a distortion of facts and hence is groundless.

For the purpose of meeting its political need at home and containing China, the U.S. side produced a whole set of policy logics that distorted the truth of China-U.S. economic and trade relations. As a matter of fact, underlying problems in the American economy and society are purely caused by domestic, structural reasons in the United States. The success of the Chinese economy has never been a success of practicing mercantilism outside China or the success of practicing the so-called state capitalism. Rather it is a success of the commitment to market-oriented reform and continuous opening-up. First, China-U.S. trade imbalance. The U.S. side claims that it has massive trade deficit with China, but its number is over estimated, and the main reason for the deficit does not lie on the Chinese side. Rather it is because saving rate in the United States remains low, the U.S. dollar serves as international reserve currency, and the two countries differ in industrial competitiveness and international division of labor. Besides, the United States, due to its cold-war mentality, imposes restrictions on the export of hi-tech products which has comparative advantage. Second, the so-called theft of intellectual property. The Chinese government already put in place a full-fledged legal system to protect intellectual property rights, allowed judicial system to play a leading role in IPR protection, and promoted the establishment of IPR courts and dedicated IPR tribunals. In 2017, China paid 28.6 billion U.S. dollars worth of IPR royalty, a 15-fold increase from 2001 when China joined the World Trade Organization. Third, the so-call "forced technology transfer". The Chinese government did not make this kind of request to foreign companies, and cooperation between Chinese and foreign companies in technology and other economic and trade field is contract behavior purely based on voluntary principle. Both sides have reaped huge benefit from the cooperation over the years. Fourth, "Made in China 2025" and other industrial policies. Under market economy conditions, these policies implemented by the Chinese government are guiding documents in nature, and are open to all foreign-funded companies. The irony is that the country providing massive trade subsidy in agriculture and manufacturing happens to be the United States itself.

II. The United States' accusations that China neglects differences in trade and has not taken active measures are not true.

The United States claims that it has "patiently urged China" and that China ignored the U.S. request, but the truth is that trade differences have always been an important issue to China, who has been promoting the resolution of differences through dialogue and consultations with maximum sincerity and patience, with the hope to protect China-U.S. trade and economic cooperation, satisfy the growing needs for a better life of the Chinese people, and promote quality growth of the Chinese economy. From February to June this year alone, China engaged in four rounds of high-level economic talks with the United States, and has announced the China-U.S. Joint Statement with important consensus reached on strengthening trade and economic cooperation and avoiding a trade war. But due to domestic politics, the United States has gone back on its words, brazenly abandoned the bilateral consensus, and insisted on fighting a trade war with China. China has done its utmost to prevent the escalation of trade frictions. The United States is fully responsible for the current situation.

III. The United States accused China's countermeasures have no international legal basis, but in fact it is the U.S. unilateral initiation of a trade war that has no international legal basis at all.

In August 2017, the United States unilaterally launched the Section 301 investigation against China despite opposition from China and the international community. The United States released a Section 301 investigation report in March 2018 and imposed 25 percent tariff on 34 billion U.S. dollars of Chinese exports to the United States on July 6 in disregard of 91-percent opposition in the comments it received. On July 11, the United States further escalated the situation by announcing a tariff list of Chinese products worth 200 billion U.S. dollars. Domestically, the 301 investigation runs counter to the U.S. President's Statement of Administrative Action approved by Congress; internationally, it has violated its commitment made in the resolution of the GATT trade dispute with the European Community in 1988. The tariffs are typical unilateralism, protectionism and trade bullying. They are a clear violation of the basic WTO principle of most-favored-nation treatment as well as the basic spirit and principles of international law.

IV. That China was forced to take counteractions is an inevitable choice to defend national interests and global interests, and is perfectly rightful, reasonable and lawful.

In facing repeated threats of a trade war by the United States, the Chinese government repeatedly stated its principled position of "not wanting a trade war, not being afraid of one, and having to fight one when necessary". The Chinese side insisted on not firing the first shot, and was forced into taking reciprocal countermeasures after the United States first started the trade war. China did this entirely for defending its national dignity and people's interests, defending the principles of free trade and the multilateral trading system, and defending the common interests of the countries across the world. The Chinese government has already taken the unilateralist actions of the United States to the Dispute Settlement Mechanism of the WTO. The Chinese government's measures, both bilateral and multilateral, to respond to the emergent situations resulting from the U.S. unilateral actions are in full compliance with the fundamental spirit and principles of international law.

V. The United States is not only launching a trade war with China, but also with the whole world, dragging the world economy into danger.

When the United States willfully exits from groups based on its own interests under the pretext of "American First", it becomes an enemy to all. It not only initiates the 301 investigation against China based on IPR, but also launches the 232 investigation against key global economies in the name of national security and creates trade frictions in steel, aluminum, automobile and other key industries. At present, many WTO members have already taken countermeasures against the United States and requested consultations with the United States under the WTO dispute settlement mechanism. It is fair to say that this largest trade war in the economic history launched by the United States is not a trade war between the United States and China, but a global trade war. Such U.S. practices will drag the world economy into the "cold war trap", "recession trap", "anti-contract trap" and "the trap of uncertainty", seriously worsen global economic and trade environment, destroy global industrial chain and value chain, hinder global economy recovery, trigger global market fluctuations and hurt the interests of numerous multinationals and average customers in the world.

VI. China will continue to firmly push ahead with reform and opening according to the plans and pace that are set, and work with the rest of the world to firmly uphold free trade and the multilateral trading system. 

This year marks the 40th anniversary of China's reform and opening-up. Its high-speed economic growth in the past four decades hinged upon reform and opening-up, so will high-quality growth in the future. No matter how things change outside, the government of China will stay determined to let the market play a decisive role in resource allocation, protect property rights and intellectual property rights, give play to the major role of entrepreneurs, encourage competition and oppose monopoly, continue with opening-up, create an attractive business climate, provide solid support for economic globalization, safeguard international trade and economic system, and grow and prosper with all countries in the world that seek progress.