Trump orders for review of China IP Practices

U.S. President Donald Trump, flanked by U.S. Representative Darrell Issa (R-CA) (L), Treasury Secretary Steven Mnuchin (3rd R), U.S. Trade Representative Robert Lighthizer (2nd R) and Commerce Secretary Wilbur Ross (R), finishes signing a memorandum directing the U.S. Trade Representative to complete a review of trade issues with China at the White House in Washington, U.S. August 14, 2017. REUTERS/Jonathan Ernst

President Donald Trump signed an executive order to give the green light to a potential investigation into unfair Chinese trade practices, including the theft of intellectual property, in a move that may eventually lead to tariffs on some imports.

The Ministry of Commerce responded with a statement Tuesday expressing serious concern and saying it “will resort to all proper measures” to firmly defend its lawful rights if the U.S. disregards multilateral rules and hurts bilateral trade ties. “The U.S. should cherish the current good trade ties and rapport with China and any protectionist move will certainly damage bilateral economic relations and hurt the business interests of companies in both countries,” the ministry said in its statement.

The memo Trump signed Monday adds to the list of trade irritants between the world’s two biggest economies as they work to contain North Korea. It directs U.S. Trade Representative Robert Lighthizer to consider investigating China’s intellectual property policies, especially the practice of forcing U.S. companies operating there to transfer technological know-how.

“This is just the beginning. I want to tell you that,” Trump said as he signed the order. He was joined by Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and Rep. Darrell Issa (R-Calif). “We will safeguard the copyrights, patents trademarks, trade secrets and other intellectual property that is so vital to our security and our prosperity,” Trump said.

“It’s my duty and responsibility to protect the American workers’ technology and industry from unfair and abusive actions,” Trump said at the White House. “We will stand up to any country that unlawfully forces American companies to transfer their valuable technology as a condition of market access. We will combat the counterfeiting and piracy that destroys American jobs.”

The outcome of the order is more likely to be benevolent and not yield punitive action rather than seriously escalate trade tensions and lead to trade war, according to Liu Li-gang, chief China economist at Citigroup Inc. in Hong Kong. It could satisfy demands of some U.S. interest groups and also fulfil Trump’s campaign pledges.

Chinese state media on Monday criticized Trump’s plans for an IP probe, saying the action will do more harm than good, whether it’s a new policy approach or negotiating tactic.

Earlier this year, a commission on U.S. intellectual property estimated that the annual cost to the U.S. economy in counterfeit goods, pirated software, and theft of trade secrets from all sources exceeds $225 billion and could be as high as $600 billion. China is the world’s principal IP infringer, the commission said.

USTR argues Beijing uses a range of practices to force U.S. companies to transfer IP, such as by granting regulatory approvals to drug makers that shift production to China or requiring that the designs of foreign products be replicable in China.

 

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