A short analysis of Chinese Intellectual property conflict with USA.

Taken from our wordpress blog.”Brinks of economic thoughts.”

 

A short analysis of Chinese Intellectual property conflict with USA.

 

 

 

An introduction

 

WTO Uruguay rounds meet of 1986-94 did make an introduction of Intellectual Property Rights within the multipolar trading system in the world due increasingly interconnected trade system. New innovations form a significant part of the human evolution. Ideas, inventions, scientific discoveries not only pave way for betterment of humans but also do bring along with them a financial worth for the creators. Innovators are assigned with a legitimate right to not only own their creation, but also prevent others from using their inventions.

There is a considerable variation in which these rights have been created and enforced in nations. With the passage of time these differences have led to bilateral and multilateral tensions in economic relations. These rules were actually supposed to settle the disputes in a systematic manner.

 

USA-China Relations-A very short insight.

 

The relationship between USA and China has been regarded by many as the most important bilateral relationship in this century.USA has the world’s largest economy while the People ’s Republic of China has the second largest economy. These 2 nations have come a long way since June, 1844 when formal diplomatic relations were established between the Chinese empire and the USA government. Post WW2,USA recognized Republic of China based in Taiwan, as the Chinese government.USA formally recognized People’s republic of China in 1979.Since that time relations between both nations have seen conflicts to mutual support on varied range of issues.

 

USA-China Intellectual property rights conflict

 

USA government now has formally launched an investigation into the Chinese conduct with regards to the Intellectual property rights under section 301 of Trade Act of 1974.

The investigation will be looking after the cases to conclude whether acts and practices of the Government of China with regards to technological use, IPRs and innovation are discriminatory and restrict U.S. interests. US President’s Donald Trump’s memorandum clearly notified that US is one among the forerunners of free and fair trade practices in field of research and development globally. And he will be more than willing to take any sufficient measure to ensure that US innovators, researchers are properly rewarded. On a broader scale it is clearly evident that US has concluded that practises adopted by China with regard to Intellectual property matters is violation of set rules of WTO laid Intellectual property Right rules. The section 301 authorises the US trade representative with the power to take steps where they feel US interest have been hampered by unfair trade practises.

Although one irony can be seen in the opposition of protectionist steps taken by the Chinese administration.USA has been opposing heavy subsidies which are given to the domestic industries in China. It hampers any prospect for the foreign player to operate in the market. These subsidies are already prohibited under the WTO rules. At same time we see USA on a conflict with the developing world on huge agricultural subsidies given to its agricultural sector and farmers.

US trade representatives have been long concerned about deficit which exists in the bilateral trade with China, which currently stands at around 325 Bn $.Total trade between these 2 neighbours stand at around 650 Bn $.USA has been arguing that some reason of this deficit have been that China has been copying US products and services and then selling them back to USA.There have been serious issues with counterfeit goods and even online piracy.

US firms were especially upset about certain partial rules which required local association or disclosure of intellectual property to enter into the Chinese market, which they insisted facilitates transfer and copying of their original ideas.

Commission on the Theft of American Intellectual Property has come up with indicative figures that the annual cost to the US economy from pirated software and theft of trade secrets is ranging anywhere between $225bn and $600bn.China is blamed for nearly 90 % of US items coming back into the US markets.

USTR report clearly made conclusions that few Chinese practises have been a cause of concern for USA’s interest. The report has also made a series of disclosure of steps which USA can take to WTO with regards to Chinese compliance with the Intellectual Property Rights.

After its accession to the WTO, China undertook a revision of framework of laws and regulations with regards to IPR of domestic and foreign stake holders. Protection of trade secrets in China has become a serious problem. Registration of trade marks in bad faith has been one among the major concerns raised.

China has been aggressively insisting on the import restrictive policies, thus setting a limited market scope for the foreign goods, manufacturers and service suppliers. China has also been pointed out for deploying export restraints, on number of goods where it holds leverage as it is one among the biggest producers of such goods globally.

China has also been one among the largest producers of steel. The Chinese government actions have led to consistent overproduction of steel thus resulting in distortion in global markets. China has imposed ban on import of remanufactured products.

The biggest cause of concern has been about sharing of innovation and technology of a product. In notable number of cases Chinese officials have forced foreign operators to licence their technology and Intellectual property on unfavourable terms. China has investment restriction into many service sectors companies.

 

In increasingly interconnected world financial services have emerged as major front. Financial economy has a significant impact on geo-economics. But China has still not opened its banking and financial industry to outside players. Same can be said about insurance, telecommunications, and internet, legal and other services.

Overall report indicated that many steps have to be taken by China in order to fulfil its commitment to WTO compliances.WTO membership has introduced China to best global practises ,but still much needs to be done on the forefront of transparency.

Report has been very much critical of land laws, licensing laws and administrative laws which in a way prohibit possibilities of foreign players to participate, or rising of barriers to make entry of outside playersdifficult.

Report has commended the Chinese intent to allow US service provider to operate into maritime sectors.

 

Chinese reaction

 

Chinese commerce ministry has issued a statement showing its concern and the potential of the matter to affect the bilateral relations. The remark clearly made that if any kind of disrespect is made towards the trade rules, Chinese administration will not be sitting idle. Official media has been also critical of the possible steps taken by USA.

 

 

Conclusion

 

Trade matters are nowadays deciding the bilateral and multilateral relations. Given the way global community is exhaustively interconnected it leaves no chance to not gain by mutual interactions. World order has moved for its betterment to multipolar realities, much better than earlier existing bilateral blocks. Owing to this fact trade and commerce has also gained momentum among the major powers. Any kind of discrimination done intentionally to harm this spirit must be dealt strictly. People do gain by innovation, not only financially at an individual level, but also impact the society on a larger scale in a positive manner.

One true opinion also exists; there had been many cases of investigation under section 301 of US Trade Act. But as USA worked ,a more proper dispute settling system evolved  up with WTO, where best global practises could have been adopted ensuring mutual benefit among participating parties. In case if USA tries to leave aside the system for whose formation it played a prominent role, it might set an example to other nations to take similar steps unilaterally. This may then become a bigger problem.

 

 

Harsh Vardhan Pathak

 

References

 

(http://www.wipo.int/treaties/en/ip/paris)

 

(http://www.wipo.int/treaties/en/ip/berne/)

 

https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm

 

https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/august/ustr-announces-initiation-section

 

https://ustr.gov/sites/default/files/2016-China-Report-to-Congress.pdf

 

 

 

 

 

 

 

 

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