The United States is facing challenges in its pursuit to rein in China's economic policies. On Sept. 20, the Financial Times reported that U.S. officials had approached their European and Japanese counterparts to convince them to join their broad push against China's intellectual property (IP) and technology transfer policies. Despite concerns about China's technology strategies and IP theft, the United States found the Japanese and EU officials unwilling to pursue any action against China.
The reluctance by Japanese and European officials to join the U.S. effort could be a response to the way U.S. President Donald Trump approached the trade investigation into China's policies — rather than a response to the investigation itself. Last month, the Trump administration opened an investigation examining Chinese technology transfer and IP policies, choosing as its investigative tool the controversial Section 301 of the Trade Act of 1974. Before the creation of the World Trade Organization (WTO), Section 301 investigations were the primary way the United States forced other countries to negotiate certain trade issues. But after the WTO's creation, the European Union filed a dispute at the WTO against the United States' use of unilateral Section 301 investigations without first appealing to the WTO — and won.
Europe and Japan worry that the investigation into China would only be a prelude to further use of the tool. Under Section 301, the United States still has to go through the WTO's dispute settling process. But if WTO rules do not cover the policies under question, the United States can move forward unilaterally.
The European Union and Japan also view the U.S. investigation as a potential first step toward discrediting the WTO. While much of the concern is due to Trump's protectionist policies at large, they also want no part in a trade war with China. Japan, in particular, ships 20 percent of its exports to China.
Meanwhile, China's strategy against the investigation is likely to continue toward isolating the United States on trade issues. China is also pushing back more broadly through the WTO. China brought two cases against the United States and the European Union for its treatment as a non-market economy. The proceedings have yet to take place. Another potential countermeasure by China would be limiting U.S. coalition building through investment and other favors to certain European countries.