Focusing on large trade surpluses, overcapacity, or launching a Section 301 investigation targeting "digital barriers"

On the 11th, the Office of the U.S. Trade Representative (USTR) announced the initiation of a "Trade Act Section 301" investigation against 16 countries including South Korea, Japan, and China. The Trade Act Section 301, established in 1974, allows for the imposition of tariffs, restrictions on imports and services/investments, and other retaliatory measures if foreign governments engage in unfair practices against U.S. companies. Tariffs imposed can be continuously increased without an upper limit. On the same day, USTR Director James Greenwood held a phone press conference at the White House and stated, "This investigation focuses on countries with sustained large trade surpluses," and "it is expected to reveal unfair trade practices related to structural excess capacity and production in the manufacturing sector among major trading partners." He also hinted that additional investigations could be launched regarding discriminatory "digital barriers" targeting U.S. technology companies, such as the Coupang incident.

On that day, the countries included in Greenwood's investigation were South Korea, China, the European Union (EU), Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India, totaling 16 countries. He stated, "There are signs of overcapacity in various forms, such as current account surpluses, bilateral trade surpluses, and idle capacity." He added, "Our view is that these countries have been building capacity that is completely disconnected from domestic and international market demands." He further said, "Initiating the investigation and gaining a better understanding of the issues will help clarify the different causes among the countries." The same afternoon, the USTR published the content in the Federal Register, stating that it would form a "Section 301 Committee," accept comments from February 17 to March 15, and hold a public hearing on May 5. Greenwood stated, "We plan to negotiate with the investigated countries, our trade partners, during this period," and "after analyzing the investigation results, the USTR may take measures such as imposing tariffs and sanctions in the service sector."

Most of the investigated countries, including South Korea, have already reached trade agreements under the Trump administration. Greenwood stated, "Most countries have expressed concern about maintaining and complying with the agreements." In other words, the existing agreements remain independent and valid. He mentioned the case of the U.S.-China agreement following the previous Section 301 investigation against China, indicating the possibility of reaching bilateral agreements through negotiations. Additionally, the USTR has been highly sensitive to regulations targeting U.S. technology companies, such as the EU's digital services tax and South Korea's platform regulation legislation. This time, it also warned of the possibility of conducting additional Section 301 investigations into such "non-tariff barriers" in the digital field. In a statement released on February 20, the USTR mentioned digital services and pharmaceutical pricing, and Greenwood said, "Other matters could also be subject to Section 301 investigations," adding, "These issues are important matters that need to be resolved." Regarding specific industry sectors such as rice and seafood, he stated, "There are concerns about the situations of other countries, such as marine pollution."

Following a court ruling that deemed the reciprocal tariffs imposed by the U.S. government under the International Emergency Economic Powers Act (IEEPA) invalid, this investigation is essentially a measure announced with the intention of imposing tariffs. Regarding the investigation timeline, Greenwood stated, "It is known to be 150 days," aiming to reach conclusions before the expiration of the "global tariff" imposed by Trump under Section 122 of the Trade Act after the federal court's decision. On the same day, the USTR issued a statement in Greenwood's name, stating, "The U.S. will not sacrifice its industrial base for countries that export their overcapacity problems to the U.S.," and "the Trump administration's efforts to re-industrialize face significant challenges due to structural overcapacity across multiple fields." He also said, "Such overcapacity replaces existing U.S. domestic capacity or hinders manufacturing investments and expansions that should take place in the U.S.," and "in many areas, the U.S. has already lost its domestic production capabilities or lags behind foreign competitors at alarming levels."

On the 2nd, the USTR released the "2026 Trade Policy Agenda," stating, "Unfair and discriminatory measures will be addressed using the Trade Act Section 301." This was less than 10 days after the announcement of the investigation. Regarding South Korea, he stated, "Evidence of structural overcapacity is evident through large or sustained trade surpluses," and listed electronic equipment, automobiles and parts, machinery, steel, and ships as relevant sectors. As a result, it is expected that the Section 301 investigation issue will continue to appear on the agenda of U.S.-South Korea trade negotiations. On the 6th, the South Korean government sent Minister of Industry Kim Jeong-gwan and others to Washington D.C. to negotiate with counterparts, but failed to narrow the differences. In January, the institutional investor Greenoaks requested the USTR to initiate a Section 301 investigation over alleged discrimination by the South Korean government in the Coupang incident. Although the request was recently withdrawn, an USTR official told this newspaper, "We will continue to urge South Korea to ensure that American digital companies do not face unnecessary barriers in the South Korean market, and to conduct a fair investigation into the Coupang personal information leakage incident."

The federal court ruled on February 2 that Trump's reciprocal tariffs were illegal. Greenwood stated on the same day, "The president's trade policy to protect American jobs and ensure fair trade with trading partners will not change. Although the means may differ due to the court's change of heart or other circumstances, the policy remains consistent." A White House official also stated, "As the government has always maintained, the president has the authority to impose tariffs granted by Congress to protect national income and security." Additionally, the USTR will launch a Section 301 investigation on 12th against 66 countries concerning the "prohibition of importing goods produced through forced labor and the effective enforcement within the United States."

Source: Chosun Ilbo

Original: toutiao.com/article/7616201176408801832/

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