U.S. trade barriers report slams China on overcapacity, tech transfer

[March 31, 2017]  By David Lawder

WASHINGTON (Reuters) - The Trump administration on Friday slammed China on a range of trade issues from its chronic industrial overcapacity to forced technology transfers and long-standing bans on U.S. beef and electronic payment services.

The annual trade barriers list from the U.S. Trade Representative's office sets up more areas of potential irritation for the first face-to-face meeting between President Donald Trump and Chinese President Xi Jinping next week in Florida.

USTR, controlled by the White House, said that Chinese government industrial policies and financial support for industries such as steel and aluminum have resulted in over-production and a flood of exports that have distorted global markets and undermined competitive companies.

"While China has begun to take steps to address steel excess capacity, these steps have been inadequate to date and even fewer efforts have been taken by China in aluminum and other sectors," USTR said in the report.

The USTR released the list of trade irritants in 63 countries just after senior Trump trade officials announced an executive order to study the causes of U.S. trade deficits.

The report said China also is using a series of cybersecurity restrictions as part of an apparent long-term goal to replace foreign information and communications technology products and services with locally produced versions.

USTR also accused China of using a range of measures to engineer the transfer of foreign technology to local firms. It said these include denying financial or regulatory approvals to companies using foreign-owned intellectual property or that do not conduct research or manufacture products in China.

"China also reportedly conditions foreign investment approvals on technology transfer to Chinese entities, mandates adverse licensing terms on foreign IP licensors, uses anti-monopoly laws to extract technology on unreasonable terms and subsidizes acquisition of foreign high technology firms to bring technology to the Chinese parent companies."

Chinese national flags are flying near a steel factory in Wu'an, Hebei province, China, February 23, 2017. REUTERS/Thomas Peter

Gaps in IP rights enforcement have allowed the misappropriation of foreign IP and trade secrets, both within and outside of China.

USTR's criticisms are consistent with increasingly vocal concerns raised by international business groups about what they see as a worsening business climate for foreign firms in China, as well as China's goal to boost domestic manufacturing content in 10 sectors from robotics to biopharmaceuticals.

Earlier this month, the European Union Chamber of Commerce said the "Made in China 2025" plan amounts to a "large-scale import substitution plan aimed at nationalizing key industries" or "severely curtailing the position of foreign business."

USTR also brought up longstanding complaints about online piracy of movies, books, music, video games and software in China as well as a ban on U.S. beef that has been in place since 2003.

It said delays in China's approval process for agricultural products derived from biotechnology also worsened in 2016, hurting U.S. corn exports.

(Reporting by David Lawder; Editing by Michael Perry)

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