Biden Administration to Investigate China’s Unfair Shipbuilding Practices

Trade Representative Katherine Tai testifies before a Senate Finance Committee hearing on President Joe Biden's trade policy agenda on Capitol Hill on March 31, 2022. Jonathan Ernst/Reuters

The United States has opened an investigation against China’s unfair trade practices in shipbuilding and other sectors amid a growing trade dispute between the world’s two biggest economies.

The Office of the U.S. Trade Representative (USTR) announced on April 17 that it would probe the Chinese regime’s “unfair, non-market policies and practices” regarding maritime, logistics, and shipbuilding sectors that harm the U.S. shipping industry.

The investigation follows five major unions’ petition in March requesting USTR to investigate these Chinese sectors that allegedly “disrupt supply chains and undermine vital [U.S.] national security interests.”

“The allegations reflect what we have already seen across other sectors, where the PRC utilizes a wide range of non-market policies and practices to undermine fair competition and dominate the market, both in China and globally,” USTR Ambassador Katherine Tai said in a statement, using the official acronym for China under the Chinese Communist Party (CCP), and pledging to open a “full and thorough investigation into the unions’ concerns.”

The investigation will be conducted under Section 301 of the Trade Act of 1974, which allows the United States to impose sanctions against foreign countries violating U.S. trade agreements. The law grants “USTR to investigate and take action to enforce U.S. rights under trade agreements and respond to certain foreign trade practices.”

Data show that ocean shipping carries 90 percent of all globally traded goods and nearly 70 percent of U.S. international trade weight.

The Chinese regime has poured hundreds of billions of dollars into its shipbuilding industry. According to a report from the Center for Strategic and International Studies, Beijing funneled $132 billion to shipping and shipbuilding between 2010 and 2018. Other research shows that China gave nearly $91 billion to shipbuilders from 2006 to 2013.

In addition, Beijing has issued multiple supporting policies to its domestic shipbuilding sector, including tax favors, lavish financing, and grants from state-owned banks. The strategy is part of China’s ambition to become a major maritime power via the Maritime Silk Road program, part of the Belt and Road Initiative.

As a result, China has become the world’s top shipbuilder, with nearly 1,800 commercial ships under construction in 2022. In contrast, the United States had only five. China’s new ship output surpassed that of the next two leading countries, Korea and Japan, combined. When considering gross tons, a measure of a ship’s volume, China, Korea, and Japan account for over 90 percent of the world’s tonnage, while the United States contributes just 0.2 percent, according to Congressional Research Service data.

The unions said that the U.S. shipbuilding industry in 1975 claimed the world’s number one ranking with 70 commercial ships on order and employed 180,000 workers. However, after 50 years, the industry suffered heavily, with the number of commercial shipyards dropping over 70 percent and plummeting to 19th place.

“China’s policies targeting the shipbuilding, maritime, and logistics sector for dominance are unreasonable, unfair, inequitable, and discriminatory,” the petition wrote.

On April 17, President Joe Biden accused Bejing of “cheating” while speaking with steelworkers at United Steelworkers Headquarters in Pittsburgh.

“They’re not competing. They’re cheating,” he said. “And we’ve seen the damage here in America.”

The president stressed the importance of shipbuilding to U.S. national security. “That’s why my administration takes it very seriously that U.S. Steelworkers, along with four other unions, have asked us to investigate whether the Chinese government is using anticompetitive practices to artificially lower prices in the shipbuilding industry,” he said.

Sen. Sherrod Brown (D-Ohio) welcomed the move from USTR, praising his effort to push the Biden administration for the probe. “Now we need measures to level the playing field against China and boost U.S. shipbuilding to prevent dependence on foreign countries, prevent further loss of good-paying American jobs, and strengthen our national security.”

In response, the Chinese regime stated that it “firmly opposes” USTR’s decision, calling it a “mistake on top of a mistake.”