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October, 2017

Industry groups representing U.S. tech giants criticize China's IP practices

Original article: The South China Morning Post

Industry groups representing U.S. tech giants including Apple and IBM spoke out against China's alleged abuses of intellectual property at a public hearing in Washington, D.C. The hearing was convened as the Trump administration launches a probe into China's controversial forced technology transfers and other suspected IP theft.


During the hearing, Erin Ennis, senior vice-president of the US-China Business Council, said that rules requiring U.S. firms to transfer technology to Chinese partners “as a condition to gain market access” could place “unreasonable and discriminatory burdens” on U.S. commercial interests.


Ennis said that the ultimate objective of the probe is to eliminate China's technology transfer requirements, which he described "an acute concern of American companies in key sectors." 

Analysis:

The Trump administration's probe into China's purported IP abuses is overdue. Beijing hasn't taken U.S. complaints about forced technology transfers seriously in the past because American firms grovel for access to the massive China market. 


From such a position of strength, the Chinese authorities don't have to make concessions. Instead, they telegraph a message that U.S. firms are exaggerating the problem. "Both U.S. and Chinese companies can enter into contracts or choose business partners freely and independently,” Wang Guiqing, vice president of a Chinese business group, told The Wall Street Journal in an October interview. 


The success of the probe is likely to hinge on whether U.S. companies cooperate fully. There are many American firms aggrieved about China's alleged IP abuses, but they are loath to speak about it publicly for fear of harsh reprisal by Beijing. That's why almost no individual U.S. firms submitted comment for the hearing. IP expert Richard Ellis told The Wall Street Journal that China would "absolutely sanction or punish a company instantly for saying they’re doing this.” 


Failing to cite specific cases weakens Washington's case against Beijing. After all, if IP theft by Chinese companies is as prolific as the Trump administration argues, then where's the evidence? It's easy for China to dismiss the allegations when there's no proof of its wrongdoing. 


Some observers have called for the Trump administration to issue subpoenas to ensure U.S. companies provide all the evidence in their possession. That would certainly put them in an awkward position. Still, there's strength in numbers. The more firms who speak out, the more seriously Beijing is likely to take the problem. 


Lucy Lu, a research analyst at the Peterson Institute for International Economics in Washington D.C., believes there is another way the U.S. could get China to improve its IP practices: return to negotiations on a stalled bilateral investment treaty. "The IPR section of the BIT could draw on relevant chapters in the US–Singapore FTA and the South Korea–US FTA, which set the gold standard for IPR terms," she wrote in an August post on IPR-Watch.org, adding that "enhanced Chinese respect for IPR has the potential to benefit China as much, or more, than the United States."

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