Public Comments Submitted in Response to USTR Initiation of Section 301 Investigations

Executive Summary

In its request for comment, the Office of the U.S. Trade Representative (USTR) solicits comments on and recommendations “regarding the acts, policies, and practices of certain economies relating to structural excess capacity and production in certain manufacturing sectors.”

In response to this request, these comments provide analysis specifically on China’s structural excess capacity and production and respectfully put forth recommendations for USTR’s consideration, including:

• The 301 investigation should recognize that structural excess capacity from China is categorically different in scale and scope than that from other countries.
• Remedies under this investigation should reflect this difference, focusing on tariffs to resolve concerns associated with Chinese structural excess capacity.
• Tariffs on China should be complemented by the negotiation of binding plurilateral sectoral agreements with U.S. partners to build sufficient scale to provide a commercially viable alternative market not dependent on China or distorted by unfair Chinese trade practices.

Using the example of mature node semiconductors, a sector in which China’s increasing share of global markets presents both economic and national security concerns, the comments outline the types of commitments that could be included in a binding plurilateral sectoral agreement, including:

• Commitments to support demand for derisked supply chains for mature chips
  • Government procurement commitments to restrict Chinese mature chips from government procurement markets while also ensuring such markets remain open to all countries participating in the sectoral agreement.
  • Supply chain integrity commitments to align policies related to the import of Chinese mature chips intended for deployment in critical infrastructure or other sensitive, non-governmental applications.
  • Common tariff policy to create a price mechanism that preferences mature chips produced in countries participating in the sectoral agreement.
• Commitments to coordinate supply-side policies on mature chip production
  • Notification and transparency requirements around incentives provided for mature chip production in chips club member jurisdictions.
  • Coordination of restrictions on outbound investment flows that contribute to China’s structural excess capacity in mature chips production.