Richard Bush of the Brookings Institution has raised the important question of whether the new tariffs would apply to goods covered under the WTO’s Information Technology Agreement (ITA), to which China, Taiwan, and the USA are all signatories. Parties to the agreement have agreed to phase out all tariffs on IT related goods over a three-year period from 2016. Unilateral action by any signatory to impose tariffs would therefore be a violation of WTO treaty obligations.
The US Trade Representative’s (USTR) measures do indeed extend to such goods: the previous round of tariff increases that took effect from July 6 applied to semiconductors and most printed circuit assemblies, while electronic integrated circuits are included in the latest round of increases, applied from August 23. The United States government has invoked Section 301 of the 1974 Trade Act in taking this action. This permits it to impose trade sanctions on foreign countries that either violate trade agreements, or engage in other unfair trade practices, and the administration justifies its action as a response to what it claims has been systematic theft by China of American intellectual property over many years.
The USTR could exclude Taiwanese components in Chinese finished products from the extra tariffs if it so wished, but this would require cumbersome rules of origin procedures and checking of shipments. As the primary motive of the tariffs is to put pressure on China, it also seems unlikely that the USTR would contemplate ways of easing their impact, even if this was to help Taiwan.
