Pro-China group says three-fourths of members are hurt by trade tensions

In a new survey just released by a pro-China council that includes Tyson Foods, Walmart and Microsoft as members, three-fourths of the members who do business with China say they will be impacted by the ongoing trade tensions between the two economic superpowers.

The 2018 survey by the U.S.-China Business Council (USCBC) was released earlier this week after President Donald Trump announced his intentions to impose tariffs on more than $200 billion worth of Chinese imports, subject to a 10% tariff beginning Sept. 24. Starting January 1, 2019, the level of the additional tariffs will increase to 25%. (Link here for a PDF of the report.)

In March, the U.S. Trade Representative’s Office (USTR) first released the findings of its Section 301 investigation, which found that found China’s actions, policies and practices related to technology transfer, intellectual property and innovation are unreasonable and discriminatory and burden or restrict U.S. commerce. The list includes 5,745 full or partial lines of the original 6,031 tariff lines that were on a proposed list of Chinese imports announced in July.

Changes to the proposed list were made after USTR and the Interagency Section 301 Committee sought and received comments over a six-week period and testimony during a six-day public hearing in August, officials said.

Included among the nearly 300 products removed from the proposed list are certain consumer electronics products such as smart watches and Bluetooth devices, certain chemical inputs for manufactured goods, textiles and agriculture, and some health and safety products such as bicycle helmets, car seats and playpens.

The USCBC’s survey of its 205 members was conducted in June and reflects rankings by respondents of the most significant issues they face as part of doing business there.

“The issues in the bilateral relationship are difficult ones, but they are solvable. Solutions will require detailed negotiations to address the problems – but it will be worth the time and effort for both economies, and for both American and Chinese companies,” said Erin Ennis, senior vice president of the USCBC.

In the 14-page survey report, regulatory issues presented a significant challenge for foreign companies in China, highlighted by the Trump administration’s Section 301 report. The report also highlighted support of U.S. trade officials’ efforts to try to address those issues are affecting business in ways that were expected and unexpected, officials said.

The three major themes dominate the US-China Business Council’s 2018 member survey outcomes included the following.
U.S.-China trade tensions affect American companies.
• 73% of companies report their business has been affected by current bilateral trade tensions.
• While companies report increased scrutiny from regulators in China and the U.S., and loss of sales due to U.S. and Chinese tariffs, they also report lost sales due to uncertainty about supply chains, reliability of American companies amid these tensions, and overall uncertainty about how and when these issues will be resolved.

Regulatory issues in China are a significant challenge for foreign companies.
• Since 2009, when USCBC began asking about signs of protectionism in China, companies have regularly reported that they see favoritism for Chinese companies in China’s licensing and regulatory processes. In 2018, almost 60% of respondents cite protectionism in licensing.
• U.S. companies remain optimistic, but China’s current policy and regulatory environment could affect American companies’ five-year business outlook for China.

China remains an important market for American companies despite the challenges.
• Most American companies invest in China to access and compete for Chinese customers, and China remains among the top priority markets for 90% of U.S. companies. Most plan to maintain or accelerate their resource commitment to China in the coming year.
• While companies report that their China operations are profitable, China no longer consistently outperforms other markers and, if trade tensions continue, American companies may begin to shift to other markets that present fewer challenges.

USCBC President Craig Allen also urged the Chinese government, which has announced plans to retaliated with $60 billion in new tariffs on U.S., goods, to address concerns raised by the Trump administration on theft and transfer of U.S. intellectual property and other unfair trade acts.

“We urge the Chinese government to implement a quick series of bold reforms that send a clear signal to its trading partners and members of the Chinese Party,” said Allen. “It is time for China to simultaneously address the legitimate concerns of foreign companies – not in a minimalist way – but in a manner befitting a global leader.”

According to the USCBC latest report, Arkansas businesses exported $910 million in goods to China in 2017, ranking only behind Canada at $1.2 billion. China was also the second-largest export market for businesses services such as travel, education and  industrial processes with $175 million worth of trade, which is a $369% spike from only $37 million a decade ago.

Altogether, Arkansas exports to China support 8,600 U.S. jobs, the council said. Some noted USCBC members with headquarters or significant Arkansas ties include Tyson Foods, Walmart, International Paper, Cargill and McLarty Associates.