CEO Innovation Summit | December 6, 2018 Learn More

Trade The History of Section 301 Tariffs


The history of Section 301 traces back to the 1970s, when Congress enacted it as a way for U.S. exporters to open foreign markets. Between 1974 and today, 122 investigations have been conducted by the U.S. government on trade policies. 

The 1980s saw a heightened use of Section 301, particularly under the Reagan administration, when 49 investigations took place. During this time, it was common for the administration to claim that trading partners were acting unfairly, even though no specific regulations existed. The General Agreement on Tariffs and Trade (GATT) only covered goods until 1995. There were no rules in place for trade in services, international investment, intellectual property rights, and anti-competitive practices. 

As the U.S. continued to use Section 301, trading partners became wary of the amount of control the U.S. was exerting in the cases. In 1994, following the GATT’s Uruguay Round of negotiations, the World Trade Organization (WTO) was established. This organization established an international trading system that protected American commercial interests in the pharmaceutical, entertainment, and information technology industries, especially with research and development. As a result of the new system of international trade regulations within the WTO, Section 301 was used much less. 

That is, until recently. In August 2017, the Trump administration decided to pursue an investigation and take subsequent measures under Section 301 against China. The investigation found that “the acts, policies, and practices of the Chinese government related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.” As a result, the Office of the U.S. Trade Representative announced that a 25% tariff will be imposed on products from China. The 25% tariffs are to act as compensation for the $50 billion in estimated annual harm caused by Chinese practices to the U.S. economy. The effects of the tariffs are likely to include retaliatory tariffs from China on U.S. exports. The tariff also reverts the decades of established commitment to international cooperation under the WTO. 

Business Roundtable agrees with the Administration that China must change a range of trade and investment practices that prevent a level playing field. “Many U.S. companies doing business with China have been harmed by foreign equity caps and joint venture requirements, intellectual property theft, forced technology transfers, unequal treatment under licensing and other regulatory processes, and in government procurement.” However, Business Roundtable supports the Administration’s efforts to engage in a constructive dialogue to help improve our strategically important relationship with China. Business Roundtable views this as the best approach, not implementing the proposed tariffs, since China is still demonstrating a willingness to change their practices. Business Roundtable also supports efforts by the U.S. to coordinate with their allies — within the context of the WTO and beyond — to convince China to introduce fair policies. This approach helps ensure international cooperation and reduces the threat of China imposing retaliatory tariffs, which will harm American businesses, workers, and consumers.