US Dept. of Justice Enlisted in Trade War With China — What’s the End Game?

China Technology  

   The U.S. Department of Justice (National Security Division) has now been enlisted by the Trump administration into its expanding trade war with China. This marks a significant escalation of legal and economic weapons used by the United States.

  US international economic legislation gives the president broad powers to conduct economic warfare. However, the use of such legal powers is always a policy issue. I’ve written before on Chinese economic espionage and technology. I agree it’s a problem—it has multiple dimensions. But what is the best remedy? What’s the end game?

On November 1st, Attorney General Sessions proclaimed a new China initiative that augmented the administration’s prior use of trade retaliation (Section 301) and aggressive trade actions under a national security rationale (Section 201).

Simultaneously with this new initiative, on November 1st, the Justice Department announced that a federal grand jury indicted a Chinese state-owned enterprise (SOE) with crimes related to theft of technology and trade secrets. In addition, the Justice Department filed a civil lawsuit on the same day, seeking to enjoin the SOE from future transfers of technology and from exportation of products to the United States relying upon such technology.

In addition to the above, Attorney General Sessions also stated on November 1st that this new anti-China initiative would include vigorous application of other pieces of U.S. international economic legislation, including the Foreign Agent Registration Act, rigorous implementation of the new foreign investment rules (CFIUS) as to Chinese investments and transactions in the US, more extensive application of the Foreign Corrupt Practices Act, and better utilization of mutual legal assistance agreements.

The enlisting of broad criminal prosecutions and the reliance on a wide range of international economic legislative enactments represent a significant escalation of the trade war with China. (This raises the larger issue of the role of domestic courts in foreign affairs, a topic for another posting). How this plays into bringing about a diplomatic resolution of a broader range of non-technology trade issues remains to be seen.

While criminal prosecutions have a significant and justifiable role to play in enforcement of intellectual property rights,  I would personally prefer to see more conciliation and international action than greater criminal prosecutions. (Prosecutorial discretion is extraordinarily important in state and federal criminal prosecutions.)  This would include greater use of the dispute resolution process of the WTO in coordination with other countries. (The United States has won over 2/3 of the cases it has brought in the WTO.)

   It is trade and economic negotiations, without duress and threats that will finally resolve US-China disputes and result in better management of trade relations as well as larger political relations. It is in the foreign policy and national security interests of the United States that criminal prosecutions and overly-broad unilateral reliance on domestic economic legislation (for example, sanctions and export controls) are not used as threats and political theater.

About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (Schar School of Public Policy).
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