At the end of the day on Friday, there were a number of news reports about the Biden administration considering a new Section 301 investigation on China, this time focusing on subsidies. Here's Bloomberg:
The Biden administration is weighing a new [Section 301] investigation into Chinese subsidies and their damage to the U.S. economy as a way to pressure Beijing on trade, people familiar with the matter said.
Top Biden economic advisers, including U.S. Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo, are meeting Friday afternoon to discuss the potential probe, the people said.
Here's the FT:
A move to open a new investigation into unfair trade practices by China would follow the Biden administration’s growing frustration that Beijing has not fundamentally shifted away from its heavy use of industrial subsidies to prop up strategically important sectors in recent years.
And here's the WSJ:
Administration officials are considering launching an investigation into Chinese subsidies under Section 301 of the U.S. trade law, which could lead to new tariffs, according to people familiar with their plans. The White House is also looking to team up with the European Union, Japan and other allies in Asia, and rally support within the World Trade Organization to take on Chinese subsidies.
Upon hearing these reports, my first thought was that it would be crazy for the Biden administration to take the same approach to Chinese trade practices as the Trump administration did. If you want China to change its practices, a unilateral effort involving tariffs that violate WTO rules is extremely unlikely to accomplish this. Now, maybe you don't expect change, and just want to balance out the Chinese subsidies with U.S. tariffs. (Countervailing duties already take care of that to some extent.) But if you are hoping for change, more Section 301 tariffs seem like the wrong approach. It's difficult to disentangle all the various things that happened with Trump's trade policies, but I think it would be pretty hard to make the case that Trump's Section 301 tariffs led to meaningful liberalization of Chinese trade practices.
At the same time, figuring out what to do instead is complicated. It's easy enough to say, as I and other often do, that working with allies, and going through the WTO, is the better approach. But certainly neither one of those things will be simple. Nevertheless, I think it's the best option, and I was heartened to see the WSJ piece seem to mention this as a possibility being considered by the Biden administration. When the Trump administration started up the Section 301 process, I wasn't completely sure where they were going with it. It turned out they were going towards tariffs, of course. But the Biden administration might not be going in the same direction with a Section 301 investigation.
One thing a Section 301 investigation does is buy the administration a little time to figure out exactly how to proceed. And it could, in theory, be used as a basis for organizing a multilateral effort. If that's the idea, then I can see how a Section 301 investigation makes sense. I doubt USTR really needs to do much investigating at this point. I assume they have been gathering evidence for years. But they can write it all up nicely in a report, and in the meantime coordinate with allies on the best approach.
