U.S. Plans to Retaliate Against China for Restrictions on Cloud-Computing Firms

The United States is looking at ways to retaliate against China’s restrictions on U.S. providers of cloud computing and other high-tech services, thus opening a new front in its trade fight with Beijing.

Individuals familiar with the matter said the U.S. trade representative’s office is putting together a new trade complaint arguing that China unfairly restricts U.S. trade in these high-tech services. The individual added that the trade representative has not decided yet whether to go ahead with the complaint, which would come in addition to recent moves to increase pressure on Beijing, including the imposition of tariffs on a total of $150 billion in Chinese imports.

However, according to The Wall Street Journal, USTR views China’s restrictions on cloud computing as providing a clear-cut example that might garner public support. It has said that China withholds licenses which would allow U.S. cloud-computing firms to operate independently in China and instead requires them to form joint operations with Chinese companies and license their technology to the Chinese partners.

Consequently, American companies can’t market their cloud-computing services in China or sign up customers directly. On the other hand, Chinese companies’ operations in the U.S. are not subject to restrictions.

“Some non-Chinese companies are reluctant to participate in China’s cloud market due to the number of restrictions,” said K.C. Swanson, director of global policy for the Telecommunications Industry Association. “Meanwhile the U.S. has no restrictions on foreign participation in our markets, it’s a clear-cut reciprocity issue.”

If the USTR decides to go ahead with the complaint, it could increase the risk of retaliation from Beijing.

The administration is also pursuing another proceeding focused on alleged Chinese infringement on U.S. intellectual property. In that action, the U.S. has threatened $50 billion of Chinese imports with 25% tariffs.

Chinese officials have argued that China’s trade and investment practices aren’t discriminatory and have made attempts to get the U.S. to start negotiations in order to avoid a full-scale trade war. However, no talks have taken place so far since the Trump administration maintains negotiations under prior administrations, haven’t produced much.

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