USTR Probes China Over ‘Unfair’ Shipbuilding Practices

Glenn Taylor
4 min read
6

The Office of the U.S. Trade Representative (USTR) opened a probe into China’s maritime, logistics and shipbuilding sectors Wednesday, alleging that the country is using “unfair, non-market policies” to burden or restrict U.S. commerce.

On March 12, five labor unions led by the United Steelworkers (USW) filed a 126-page petition requesting an investigation into China’s movements into these industries, which they called “far more aggressive and interventionist than any other country.”

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According to the unions, China has given its domestic shipbuilding industry unfair advantages by mandating the purchase and use of Chinese ships by Chinese state-owned shipping enterprises and state-owned oil companies.

The country has also intervened in its domestic industry, the unions claim, by directing mergers between “favored” state-owned companies, disapproving alliances by foreign competitors, denying berthing rights to foreign-owned ships, controlling freight rates and capacity allocations and tolerating intellectual property theft.

“This maritime and logistics infrastructure gives the Government of China access to large volumes of sensitive data regarding ship traffic, container contents, freight rates and more,” the petition said. “It also gives China leverage to provide preferential treatment to Chinese-built and -owned ships seeking to dock and unload at ports around the world, and to potentially deny such treatment to countries or companies that do not align with China’s industrial policy and geopolitical goals. With control over ports and logistics equipment and information, the Government of China could quickly disrupt critical supply chains, even where those supply chains do not rely directly on any goods manufactured in China.”

From 2000 to 2022, China’s share of new vessels built each year on a global basis rose from less than 10 percent to 47 percent, the petition said, citing data from Clarksons Research. In 2022, China built more new ships than the next two countries, Japan and South Korea, combined. While Chinese shipyards now produce over 1,000 ocean-going vessels a year, the United States produces fewer than ten.

The petition suggests that the USTR call for the implementation of a port fee on Chinese-built ships that dock at a U.S. port, the creation of a Shipbuilding Revitalization Fund to help foster competition from the domestic shipbuilding industry, as well as other measures to stimulate demand for, and the capacity to construct, commercial vessels built in the United States.

In the wake of the March petition, 38 members of Congress sent a letter to the Biden administration on April 10, urging them to investigate.

USTR Ambassador Katherine Tai said Wednesday that the petitions allegations were “serious and concerning,” leading to the Section 301 investigation into the potentially unfair trade practices.

“The allegations reflect what we have already seen across other sectors, where [China] utilizes a wide range of non-market policies and practices to undermine fair competition and dominate the market, both in China and globally,” said Tai in a statement. “I pledge to undertake a full and thorough investigation into the unions’ concerns.”

The USTR is currently engaged in its statutory four-year review of the Section 301 punitive tariffs on China-made goods, with the countries maintaining an uneasy trade relationship since former President Trump first imposed more than $250 billion in additional duties in 2018. Tai said Wednesday that she expects to conclude the review “very soon.”

The Ministry of Commerce of the People’s Republic of China (PRC) said it was “strongly dissatisfied” with the overture from the U.S., saying the investigation is “full of false accusations,” urging the U.S. not to repeat actions made by the Trump administration, which also launched probes into various Chinese products.

“We urge the United States to respect facts and multilateral rules, immediately stop its wrong practices and return to the rules-based multilateral trading system,” the commerce ministry said.

Nevertheless, President Biden is calling on the USTR to consider tripling the existing 301 tariff rate on Chinese steel and aluminum.

“Prices are unfairly low because China’s steel companies don’t need to worry about making a profit because the Chinese government subsidizes them so heavily,” Biden said at the USW headquarters in Pittsburgh on Wednesday. “They’re not competing, they’re cheating.”

U.S.-China trade policy is expected to be a hot topic for Biden and presumptive Republican nominee Trump entering the 2024 presidential election. Trump has already said he would expand on the Section 301 tariffs he first implemented during his presidency.

USTR has requested consultations with officials from the People’s Republic of China in connection with the maritime, logistics and shipbuilding investigation.

The office is seeking public comments on the matter and will hold a public hearing in connection with the investigation on May 29.

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