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The U.S. Should Take Any IP Disputes with China to the WTO

Aug 31 , 2017
  • Su Jingxiang

    Fellow, China Institutes for Contemporary International Relations

Before his departure, Steve Bannon, the former chief strategist of the Trump administration, bluntly admitted the US government was gearing up for an economic war against China. In August, President Donald Trump signed a presidential memorandum directing the US trade representative to investigate China under Section 301 of the Trade Act of 1974, a move that may be the opening shot in the war.

On the trade front, the Trump administration has consistently pursued a tough line. President Trump said that since China joined the WTO in 2001, the US lost many job opportunities and as many as 60,000 factories, though on what grounds he made such claims remain unclear. Prominent officials like Commerce Secretary Wilbur Ross, trade representative Robert Lighthizer, Chair of the White House National Trade Council Peter Navarro, are strong advocates for isolationist policies, championing an “an rese First” policy and a hard-line stance against China.

In fact, back in February this year, the Trump administration was already examining ways to circumvent the WTO to slap unilateral trade sanctions on China and other countries. Meanwhile, the US Commission on the Theft of American Intellectual Property released a report which ranked China as the world’s foremost IP infringing country, and claimed that technologies related to the F35 jet fighter, high-end glass manufacturing, and high-tech computer chips all fell victim to IP theft from China and recommended that the US government put IP protection at the core of its policy agenda. Writing in the Financial Times, Commerce Secretary Wilbur Ross also lashed out at China’s Made in China 2025 initiative and accused China of being engaged in a serious and strategic attack on  2025 initiativeort which rank plan targeting key industries including semiconductors, artificial intelligence, and autonomous vehicles. US media reported that the use of a Section 301 probe is one of a list of legal options being considered by the US trade representative.

Section 301 gives sweeping authority to the US trade representative to investigate trading partners deemed to be engaged in unfair trade. Depending on the findings of the investigation a settlement with the foreign country can be negotiated in the form of compensation or elimination of the trade barrier. Otherwise, the US can take retaliatory actions like imposing elevated tariffs or import restrictions. Section 301 investigations, bearing the hallmark of trade unilateralism, are initiated by the US, and in effect the US authority would act as the police, prosecutor, judge, and jury of such investigations. It begs the question whether such investigations can be fair and just.

Many Americans believe they have lost out from global economic tides, and some concerns are entirely valid and legitimate. American society confronts many problems, like high leverage, an aging population, and the adverse effects of tech advancement and globalization. Technological advancement and automation are responsible for 80% of manufacturing job losses in the US. Even if multinationals move back to the US, their operations would be largely automated, and will not generate jobs on the same scale as before. China is not to blame for this hard reality.

The global economy has embraced all countries that have integrated themselves into its fabric and subordinated themselves to its rules. Both China and the United States are integral parts of global economy, and the WTO oversees their behavior in this global economic community.  Since its establishment in 1995, the WTO has been functioning as the premier platform to address trade disputes between member nations. As the record shows, 86% of US-initiated cases at the WTO ended up in rulings favorable to America. During the Obama administration, the US filed 16 cases against China with the WTO, and won all 16 of them. As the WTO proves to be a valid channel for the US to raise and address trade disputes with China, the US can resort to the WTO trade dispute mechanism to address any grievances concerning IP protection in China. Unilateral actions will only jeopardize China-US ties and erode the current global economic architecture. Trade wars should have no place in our times.

Abraham Lincoln warned that “A house divided against itself cannot stand”. As two important members of the global community, China and the US share close economic ties and share important responsibilities for economic growth and stability of the global economic system. In addition, the US is also an Asia Pacific power, whose economic future is closely linked with the region, and it serves its interests to work with China, India, Russia and other emerging economies to seek common development. Trade war with China is rooted in an anachronistic worldview, and no one stands to benefit from it.

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