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On April 17, U.S. time, the Office of the U.S. Trade Representative (USTR) announced the launch of a Section 301 investigation against China's maritime, logistics and shipbuilding industries. The spokesperson of the Ministry of Commerce issued a statement on the US Section 301 investigation against China: China strongly deplores this and firmly opposes it.
China's Ministry of Commerce issued a document late at night on April 17 pointing out that the US application is full of a large number of false accusations, misinterpreting normal trade and investment activities as harming US national security and corporate interests, and blaming China for its own industrial problems, which is not only lacking in factual basis, but also contrary to economic common sense.
The Department of Commerce pointed out that a number of research reports in the United States show that the U.S. shipbuilding industry has lost its competitive advantage many years ago due to overprotection. The U.S. provides hundreds of billions of dollars in discriminatory subsidies to its own industries, but accuses China of adopting so-called "non-market practices." As a matter of fact, the development of China's industry is the result of technological innovation and active participation in market competition, and the accusations made by the US side are simply untenable.
01 The "China threat theory" is a problem
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The Section 301 investigation launched by the United States against China stems from a March 12 petition filed by five national labor unions with the Office of the United States Trade Representative (USTR) to open a trade investigation into China's alleged "unreasonable and discriminatory" practices in the maritime, logistics and shipbuilding industries.
The 137-page petition calls for restricting China's development in terms of imposing port calls for Chinese-made ships to be used as a revival fund for the U.S. shipbuilding industry, increasing market demand for the U.S. shipbuilding industry, isolating China's logistics system, and restricting the further deployment of China's "National Transportation and Logistics Public Information Platform."
David McCaul, president of the United Steelworkers' Union, re-read the new version of the "China threat theory" that has been hyped by the US media for some time in the past, saying that rebuilding the US shipbuilding industry is not only essential to improving maritime capacity, but also helping to consolidate the key supply chains shared by the military and commercial shipbuilding industries, making the United States "safer and more resilient."
But it turned out that the decline of the American shipbuilding industry was entirely self-inflicted. In the 80s of the last century, the United States eliminated most of the subsidies for shipbuilding. Today, due to the shrinking and outsourcing of the U.S. manufacturing base, most of the raw materials and components needed to produce new ships are no longer available in the U.S., which is a problem for other manufacturing sectors in the U.S. U.S. contractors are reluctant to expand production due to changes in production methods, and according to David McCaul, steel mills across the U.S. are currently using only about 70% of their capacity.
In recent years, the world's shipbuilding industry has undergone consolidation, and the rise of cheap ships produced in Japan, South Korea and, more recently, China has led to a decrease in U.S. investment in technology, plant equipment and worker training. The U.S. Bureau of Labor Statistics predicts that the number of marine engineers and architects in the U.S. will be "virtually unchanged" from 2022 to 2032, while the job market for such occupations is booming in countries like South Korea and China.
For the U.S., it takes time to rebuild workforces and factories from scratch, and years or decades of investment to achieve scale-up and high-velocity iterations that are critical for cost-effectiveness and productivity. To fill this gap, the United States has been turning to allies for help. In the same way, the transfer of the crisis to the outside world has become a "life-saving straw" for the US government to divert the attention of the public, and China has become a "backstabber" for the development of the United States.
02 Where is the problem of shipping logistics in the United States?
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The U.S. Section 301 investigation is aimed at the mainland's maritime, logistics and shipbuilding industries, what are they afraid of?
A joint petition of five U.S. labor unions states: "The U.S. commercial shipbuilding industry has changed beyond recognition. After World War II, the United States led the world in commercial shipbuilding. In 1975, the U.S. shipbuilding industry employed 180,000 workers, making it the largest shipbuilding capacity in the world.
Nearly 50 years later, the number of commercial shipyards in the United States has plummeted by more than 70 percent, tens of thousands of jobs have been lost, and tens of thousands of workers have lost their jobs. The United States now produces only one percent of the world's commercial vessels, dropping to 19th place in the rankings. According to the Financial Times, in 2023 the United States will produce only 10 ocean-going vessels, while China will produce more than 1,000.
According to the data released at the press conference of the North Bund International Shipping Forum, China's port cargo throughput and container throughput have ranked first in the world for many years, and China accounts for 8 and 7 of the top 10 ports in the world in terms of port throughput and container throughput respectively.
According to data from the China Shipbuilding Industry Association, from January to December 2023, China's shipbuilding completions, new orders, and hand-held orders accounted for 50.2%, 66.6%, and 55% of the global total in terms of deadweight tonnage, respectively, ranking first in the world for 14 consecutive years. China's shipbuilding products gradually cover all ship types in the market, with output accounting for more than 40% of the international market share, and the annual revenue of the industry exceeding 500 billion yuan.
On April 10, the WTO released global trade in goods data for 2023. According to the data, in 2023, China's international export market share will be 14.2% and the international import market share will be 10.6%, maintaining its position as the largest country in goods trade for seven consecutive years.
In the latest "2023 Global Logistics Performance Index Report" released by the World Bank, the overall ranking of China's logistics performance has risen from 26th in 2018 to 20th. Among them, logistics infrastructure and international freight capacity ranked in the top 10% of the world, reaching the international advanced level, and the infrastructure ranking surpassed the United States, France and other developed economies, up 6 places from 2018; The international freight capacity increased by 4 places compared with 2018, and the size of the mainland fleet reached 250 million tons, a year-on-year increase of about 10%.
According to data from Clarkson, a world-renowned shipping research company, in August 2023, the fleet size held by Chinese shipowners has reached 249.2 million gross tons, accounting for 15.9% of the global market share, surpassing Greece and becoming the world's largest shipowner. Greece's shipping capacity serves the trade of other countries, while the Chinese fleet goes to sea for its own trade, and sea freight is responsible for about 95% of China's foreign trade traffic.
Section 301 investigation is a habitual method of the US government, and its essence is a typical unilateral measure, which violates the basic principles of the WTO and flagrantly ignores and undermines multilateral rules. Back in 2007, the United Steelworkers filed a petition asking the Office of the United States Trade Representative (USTR) to launch a Section 301 investigation into China's subsidy policies and practices in the alternative and renewable energy sectors. Since then, Section 301 investigations have been frequently mentioned in the U.S.-China trade relationship. It is not the first time that China's state-owned shipbuilding and shipping industries have been on the U.S. sanctions list. Cracking down on China's shipbuilding industry has long been set up as a means and tool for the Biden administration to solicit votes.
03 Link: What is a 301 investigation?
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A Section 301 investigation is an investigation conducted by the United States under Section 301. Section 301 is the colloquial name for Section 301 of the U.S. Trade Act of 1974, which contains sections 1301-1310 of the Comprehensive Trade and Competition Act of 1988, and its main content is to protect the rights of the United States in international trade and retaliate against other countries that are deemed "unreasonable" and "unfair" in their trade practices.
Under this provision, the United States can investigate the trade practices of other countries that it considers to be "unfair", and may consult with the governments of the countries concerned, and finally the President decides to take retaliatory measures such as raising tariffs, restricting imports, and terminating the relevant agreements.
It was first found in the Trade Expansion Act 1962 and was later amended by the Trade Act 1974, the Trade Agreements Act 1979, the Trade and Tariff Act 1984 and, in particular, the General Trade and Competition Act 1988.
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