A Chinese company may take over the current owner of the biggest U.S. container port in Long Beach, despite President Donald Trump’s threat to slap a 25 percent tariff on $50 billion worth of China’s tech exports.
China’s state-owned COSCO conglomerate is within days of closing its $6.3 billion take-over of Hong Kong-based Orient Overseas Container Lines (OOCL), which owns America’s biggest container ship cargo processing operation in Long Beach, California.
The OOCL paid $4.6 billion to sign a 40-year lease with the Port of Long Beach to develop the Middle Harbor property, which tripled the size of the port’s container capability. The Long Beach container port handles one-fifth of all U.S. container activity. With over 2,000 vessel calls in 2017, OOCL processed 6.8 million 20-foot cargo container units containing $180 billion in goods.
The Wall Street Journal reported in April that COSCO’s takeover of OOCL was being reviewed by the U.S. Treasury Department Committee on Foreign Investment in the U.S. over national security concerns regarding China’s potential dominance of U.S. port trade.
It is not clear that the ongoing U.S.-China trade dispute will affect the national security review.
The Journal noted that COSCO Vice Chairman Huang Xiaowen told a news conference on April 3 that the OOCL deal would close by June: “Up to now we are quite confident to push forward this acquisition. … It’s progressing normally,” he was quoted as saying.
However, the Journal repted that COSCO has “proposed to divest or carve out the Long Beach terminal to satisfy U.S. concerns about the deal.”
Meanwhile, Reuters reported Monday, the U.S. has threatened to slap 25 percent tariffs on a substantial number of China tech exports by June 30, after World Trade Organization dispute settlement talks in Geneva broke down on May 28.
U.S. Ambassador to the WTO Dennis Shea demanded China end its unwritten rule requiring “forced technology transfer” for U.S. companies that want to do business with China state-owned enterprises.
Shea told the WTO dispute resolution committee, “This is not the rule of law. In fact, it is China’s laws themselves that enable this coercion.” He added that investment, licensing, and administrative rules amount to a “systematic, state-directed, and non-market pursuit of other (WTO) members’ cutting-edge technology in service of China’s industrial policy” — a lose-lose deal for Americans, he argued.
China’s Ambassador Zhang Xiangchen called the U.S. arguments a “presumption of guilt” and “pure speculation” based only on ,America’s $375 billion U.S. trade deficit with China. Zhang told Reuters that tech transfer is a commercial activity that benefits America, while Chinese innovation is driven by “the diligence and entrepreneurship of the Chinese people, investment in education and research.”
The U.S. originally launched its WTO complaint against China on March 23. Under the rules, both parties were required to engage in bilateral talks for 60 days. The clock is now ticking toward the WTO Dispute Resolution Committee meeting on June 22.