On the Section 301 of 1988

Omnibus Act by Laura W. Young and George Fu

The 1988 Omnibus Trade Act was passed under industry pressure to allow the US to retaliate against trading partners engaged in unfair trade practices. The Act provides for retaliation through tariff and non-tariff measures. The Act requires that the United States Trade Representative (USTR) monitor all trading partners, and identify those jurisdictions engaged in unfair trade practices. Prior to implementing retaliation measures, the USTR must initiate an investigation of the accused nation’s practices. If the USTR’s investigation determines that unfair trade practices do in fact exist as a barrier to US goods and services, the USTR must take responsive actions against that nation.

Section 301 provides for three classes of investigations: “301," “Super 301" and “Special 301." In recent years, the US has aggressively wielded Section 301 against various countries and jurisdictions, including Japan, EU, China, South Korea, Taiwan, India, Greece, Brazil, Australia, Thailand, Turkey, etc.. As a result, it has obtained a substantially more open and freer international trade environment for US industries. Presently, the US is using “Special 301" against China for its failure to protect intellectual property rights. It is focusing on the need for China to take immediate, serious action against all forms of copyright piracy, especially at the production level, to stymie effectively the flow of pirated products across China’s border and to open China’s market to U.S. copyrighted works, in accordance with the terms of the 1995 US-Sino intellectual property rights agreement. Sanctions may be inevitable if China fails to honor its commitments, and thus comply with the Agreement.

As is commonly known, GATT’s Understanding on Rules and Procedures Governing the Settlement of Disputes (“Understanding”) has internationalized Section 301 with respect to nations engaging in unfair trade practices. However, the Understanding would probably limit the US’ unilateral retaliation under Section 301 itself. Certain US remedial actions under Section 301 may violate GATT and thus expose the U.S. to possible counter retaliation authorized by WTO. Nonetheless, it is unlikely that the US will abandon its Section 301. Particularly since it has proved such a useful tool in bringing about constructive reform, and a more level playing field for international trade so that they now meet GATT requirements. Furthermore, it appears quite likely that the US will continue applying Section 301 to open foreign markets for its industries, to achieve adequate and effective protection of US intellectual property, and to increase the transparency of many trading partners’ policies, notwithstanding possible GATT violation.