Bhavik Menon
Edited by Rayleigh Nam, Mac Kang, and Jia Lin
Introduction
For the greater part of the last three decades, tensions between the United States and the People’s Republic of China (PRC) have slowly escalated. Recently, the relationship has deteriorated due to geopolitical brinkmanship in the Asia-Pacific region. Particularly during the Trump administration, economic affronts by both sides have soured the relationship between the two powers. Many of these policies were aimed at stopping China’s ‘economic espionage’ – “the unlawful or clandestine targeting or acquisition of sensitive financial, trade or economic policy information; proprietary economic information; or technological information” [1]. Due to Beijing’s aggressive and often exploitative economic tactics, many in the West have blasted such tactics as deeply unethical. The Trump Administration attempted to combat their actions through the China Initiative, a Justice Department initiative started in 2018 to prosecute Chinese agents who perpetrate such acts. To Washington’s chagrin, it proved virtually ineffective, as the initiative was unable to prosecute any suspected agents, while Beijing’s exploitation continued. The Biden Administration ended the program in 2022, citing prosecutorial stumbles as well as its contribution towards increased stigmatization of Asian Americans.
Rebuking the China Initiative for its shortcomings as well as alleged discrimination of Asian-Americans, the Biden administration has opted to stifle China’s economic espionage without a formal program by prosecuting a number of individuals suspected of engaging in such activities. While Beijing’s economic espionage extends to all industries of the American economy, Washington has been markedly aggressive in shoring up security in the energy arena, an industry imperative to maintaining domestic economic growth and relevance in foreign markets. The administration’s success thus far has come from their use of a specific section of a law created half a century ago: Section 301 of the Trade Act of 1974. Per a Trump-era brief on Section 301, the executive’s powers are empowered by Clause III of the Act, which rules that “acts, policies or practices that are unreasonable or discriminatory and that burden or restrict U.S. Commerce” allow Washington to act to remove such obstacles to American economic growth [2]. Both the Trump and Biden Administrations have applied this clause to target exploitative practices, with the Trump Administration going as far as to directly link the clause as an offensive tool against Beijing. In recent history, Section 301 of the Trade Act of 1974 has become an agent of executive empowerment, allowing the federal government to take action to protect American energy interests from China’s intellectual property theft.
Executive Action Regarding Section 301
While Section 301 has been invoked far more during the current administration, espionage efforts during the preceding term laid the foundation for its usage. Though reports of attempted or successful economic espionage in the energy industry date back before the Trump administration, such attempts significantly increased during his term. During the latter years of his presidency, the Justice Department prosecuted alleged Chinese agents for attempting to steal General Electric’s turbine technology [3] and Jason Energy Technology’s coiled tubing technology [4] in 2018 and 2020, respectively. While the Biden Justice Department continued prosecution and eventually won a conviction in the General Electric case in 2023, prosecution for economic espionage has remained an inefficient solution for Chinese IP offensives in the energy arena. With such cases taking years before justice is fully achieved, Beijing’s agents are free to continue to engage in espionage without any formal reproach.
The United States executive has quietly acknowledged this issue and pivoted away from using prosecution as the foremost defense against Beijing’s deceitful practices, instead invoking Section 301 to empower executive rulemaking and protective economic doctrine. Section 301 covers five actions the executive may take. Section 301 (ii), particularly relevant to the Biden administration’s decisions, states that the United States may impose “duties, fees, or other import restrictions on the goods or services of the foreign country for such time as deemed appropriate” [5]. Major trade tariffs levied by the Trump administration which resulted in a bilateral trade war were implicitly grounded in this clause, which was seen as necessary at the time to remove Beijing’s disruption of U.S. Commerce. Now, through the Office of the U.S. Trade Representative, an executive empowered by Section 301 may move to defend American economic interests and has done so in various energy sub-industries, from energy generation to electric vehicle (EV) technologies,
In May 2024, the Office of the U.S Trade Representative announced a 100% tariff on electric vehicles from China to protect American EV interests. Such a decision came after:
a multiyear review, in which the Office of the US Trade Representative (USTR) concluded that specific actions of the Chinese government are unreasonable or discriminatory and burden or restrict United States commerce under Section 301 of the Trade Act of 1974…The latest action builds on an investigation begun in 2017, and USTR’s statutorily mandated four-year review catalogs a variety of old and new US concerns with China’s policies, ranging from intellectual property rights violations to excessive control of supply chains [6].
In this landmark executive decision, the Biden administration not only pursued a protectionist mandate on electric vehicles, but also “announced expansions to the United States’ Section 301 tariffs… on solar panels… batteries, [and] green energy supply chain inputs” [7]. Similar to the EV tariffs, this decision was the “culmination of the statutory four-year review of the Section 301 Investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, which USTR commenced two years ago in May 2022” [8]. These two actions, bundled into one set of executive orders by the Biden Administration, substantively build on the aggressive Section 301 doctrine in energy first introduced by the Trump Administration.
Conclusion
While it is unclear to what extent the executive of the next administration will be empowered by Section 301, it is likely that they will continue to utilize its powers to shield American energy industries from Beijing’s deceitful intellectual property offensives. Current executive action has shown that Section 301 has been a greatly effective tool of executive empowerment against Beijing, who Washington sees as the greatest threat to its economic hegemony.
[1] economic espionage, LII / Legal Information Institute, https://www.law.cornell.edu/wex/economic_espionage (last visited Oct 2, 2024).
[2] Office of the United States Trade Representative, Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation under Section 301 of the Trade Act of 1974, (2018), https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF.
[3] Office of Public Affairs | Former GE Engineer and Chinese Businessman Charged with Economic Espionage and Theft of GE’s Trade Secrets | United States Department of Justice, (2019),https://www.justice.gov/opa/pr/former-ge-engineer-and-chinese-businessman-charged-economic-espionage-and-theft-ge-s-trade (last visited Oct 2, 2024).
[4]Office of Public Affairs | Chinese Energy Company, U.S. Oil & Gas Affiliate and Chinese National Indicted for Theft of Trade Secrets | United States Department of Justice, (2020), https://www.justice.gov/opa/pr/chinese-energy-company-us-oil-gas-affiliate-and-chinese-national-indicted-theft-trade-secrets (last visited Oct 2, 2024).
[5] Office of the United States Trade Representative, Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation under Section 301 of the Trade Act of 1974, (2018), https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF.
[6] ecarew, Why This Matters: Section 301 Tariffs on Electric Vehicles, Roosevelt Institute (2024), https://rooseveltinstitute.org/2024/05/14/section-301-tariffs-on-electric-vehicles/ (last visited Oct 2, 2024).
[7] ecarew, Why This Matters: Section 301 Tariffs on Electric Vehicles, Roosevelt Institute (2024), https://rooseveltinstitute.org/2024/05/14/section-301-tariffs-on-electric-vehicles/ (last visited Oct 2, 2024).
[8] Biden Administration Expands Section 301 Tariffs on Imports from China, Targeting Green Energy, Metals, Minerals, Port Cranes, Medical Supplies, and Semiconductors | White & Case LLP, (2024), https://www.whitecase.com/insight-alert/biden-administration-expands-section-301-tariffs-imports-china-targeting-green-energy (last visited Oct 2, 2024).
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