Three sources familiar with the findings of a month-long trade investigation have confirmed that the U.S. administration under President Joe Biden has concluded that China is using unfair policies and practices in order to dominate the global shipping, logistics, and shipbuilding industries.

U.S. Trade Representative Katherine Tai (USTR), at the request of United Steelworkers, and four other U.S. Unions in April 2024, launched the investigation under Section 301 of 1974's Trade Act. This section allows the U.S. government to penalize countries who engage in "unjustifiable", "unreasonable" acts or burden U.S. trade.

One of the sources, who was not authorized by the government to speak, stated that investigators concluded that China targeted shipbuilding and the maritime industry to dominate, using financial assistance, barriers for foreign companies, forced technology transfers and intellectual property theft, and procurement policies to give their shipbuilding industry an edge.

Beijing "severely lowered and artificially suppressed China’s labor costs" in the maritime, shipbuilding, and logistics sectors, this person said, citing an excerpt from the report.

USTR, White House and the Transition Team of Donald Trump have not yet commented.

The Chinese Embassy in Washington did not immediately comment.

Data cited in the investigation shows that China's share in the $150 billion global industry of shipbuilding has increased to more than 50% in 2023, from around 5% back in 2000. This was largely due to government subsidies. Meanwhile, once dominant U.S. Shipbuilders saw their share drop below 1%. South Korea and Japan rank as the second largest shipbuilders.

The unions' proposal to introduce tariffs on Chinese-built ships or charge port fees could be sparked by this report. They said that such a move is likely to come after a period of public comments.

Trump used Section 301 to impose tariffs against hundreds of billions dollars worth of Chinese imports in his first term, after a USTR probe found that China had misappropriated U.S. Intellectual Property and forced the transfer of U.S. Technology to Chinese firms.

Sources said that USTR would release its findings in the coming days, just a few days before Biden leaves office as a Democrat on January 20.

The U.S., along with other Western powers, have sharply criticised China's aggressive industrial policy and its overproduction of commodities such as steel. This reflects a rare bipartisan consensus about the necessity to fix U.S. Shipbuilding. China denies all wrongdoing.

The report comes after four years of Biden administration efforts to reduce China's dominant position by continuing Trump era tariffs, adding more, including new ones on electric vehicles, as well as imposing a variety of export controls.

Tai's Office announced last month a last minute trade investigation on older "legacy" Chinese semiconductors. This could lead to more U.S. Tariffs being imposed on Chinese chips that power everyday products from automobiles to washing machine to telecoms gear.

Experts agree it will take decades to rebuild the once vibrant maritime industry in the United States. They also say that billions of dollars of investment are needed. They said that tariffs will not be enough.

According to an excerpt of the report, "China's targeting the maritime, logistic and shipbuilding sectors to dominate is the greatest obstacle to the revitalization for U.S. industry in these sectors," concludes the report.

Scott Paul, President of the Alliance for American Manufacturing (a nonprofit partnership between labor and business), said that he was convinced by the findings.

He warned that "this is not a quick fix."

Trump, who said that he would increase tariffs against Chinese goods by 60%, criticized its efforts to dominate the commercial and military shipbuilding industry last week, telling Hugh Hewitt on radio that America had "suffered greatly" and needed a change of course.

He suggested that the U.S. may have to look to its allies for help in building the necessary naval vessels to support the U.S. Military.

Mike Waltz, Trump's new national security advisor, has been actively involved in the issue. He drafted a bipartisan legislation with Democratic Senator Mark Kelly before he left Congress to revive the U.S. Shipbuilding Industry.

We are way too reliant on China, in particular. We don't have a surge capacity. "We have a very small shipbuilding capability, which is completely unacceptable for a superpower," Paul said.

In the United States, there are only 20 public and privately owned shipyards. This is down from 300 shipyards in early 1980s. Experts report that demand for both civilian and military ships is growing. Reporting by Andrea Shalal, Editing by Heather Timmons and Richard Chang

(source: Reuters)