A more specific obligation related to intellectual property is that American companies have, in effect, been forced to turn over their technology to Chinese partners—in some cases by revealing their trade secrets—in exchange for being allowed to do business in China and have access to the booming Chinese market. Beyond intellectual property, there have been long-standing though somewhat vague allegations from U. As they describe it, transferring technology to Chinese companies is often a condition for the ability to make an investment there.
Specific details of these arrangements are difficult to uncover.
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The companies involved may be reluctant to complain because they fear having their investment permission revoked by the Chinese government. These subsidies are offered through a variety of programs, including the Made in China initiative and its specific implementing measures. WTO Members have brought several complaints against Chinese subsidies already, including an ongoing case related to agriculture subsidies see Appendix 1 , and there are additional complaints still to be brought.
While there are many justified complaints about China, it is important to examine each allegation objectively. There is a tendency these days to demonize China for everything it does, even when its practices are similar to those of other countries. Certainly there are some Chinese trade practices that merit criticism, but the case against China is weakened when unsupported claims are included. Specific violations included setting unfairly high patent royalties, charging for expired patents, tying Standard Essential Patents SEPs to non-SEPs, forcing cross-licensing without considering the value, and adding other unfair terms in licensing agreements.
When considering this question, keep in mind that Qualcomm has also been the subject of antitrust investigations in other countries for similar practices. In some instances, Chinese government or private-sector agents hack into U. Theft and purchasing are, in fact, very different. Theft is an unacceptable practice that governments should make every effort to curtail.
Company purchases by willing buyers and sellers, by contrast, are generally positive events, with both sides benefiting. There may be situations where a sale to a foreign company raises national security concerns, but there is nothing inherently wrong with the practice. Also, less advanced economies trying to learn from their more advanced counterparts is not exactly new and was advocated by Alexander Hamilton for the United States.
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The lesson here is that we should not jump to conclusions about the propriety of government behavior simply because China is the one doing it. Objectivity is crucial here, and baseless claims can undermine legitimate efforts to bring reform to China. Instead of a China trade policy consisting mostly of confrontation, the United States should rely more on negotiation. Unquestionably, the existing WTO rules are not adequate in all respects to deal with the unique challenges presented by China to the rules-based trading system.
The remedy for the inadequacy of rules, however, is not abandoning those rules, but the adoption of more and better rules.
Extension: What is Multilateral Trade?
Rather, it should cause us to redouble our efforts to reinvigorate the rules-based trading system by negotiating new rules to discipline protectionist actions and encourage China to adopt the market-based approaches that alone can secure long-term economic success for the Chinese people. Ideally, these negotiations should be multilateral and should include China.
As things stand now, China seems to see little benefit to any such negotiations: imposing unilateral and illegal tariffs on its products will not encourage it to sit down at the global negotiating table. Instead, China will retaliate with tit-for-tat tariffs and other trade restrictions of its own. But engaging China in WTO dispute settlement could—as has happened in other instances with other countries in the past—help inspire it to negotiate rather than litigate.
This, of course, would require a U. If China chooses not to participate in multilateral negotiations, then it should be given an incentive to do so by negotiations that proceed without China. These negotiations should be conducted within the legal framework of the WTO, in part so that China will have an automatic right to join in new rulemaking if it wishes to do so and if it agrees to abide by the new rules that are made. The idea of the TPP was in part to set up a common standard of enabling rules for free markets over and above those already in the WTO treaty and—through the proven success of such a standard—give the Chinese government reason to join.
Unfortunately, one of the first acts of the Trump administration was to pull out of the TPP, which has since been concluded successfully without the United States—but also without the combined economic presence the TPP would have had in the Pacific had President Trump not withdrawn. But there can be no negotiations if there is not first a willingness to negotiate. And, for all his talk of trade deals, President Trump has shown little interest in the give-and-take of actual international trade negotiations. But this approach will not work for long. It will not work with all countries.
And take-it-or-leave-it most certainly will not work with China, which has at least as much leverage over the fate of the American economy as the United States has over that of the Chinese economy. In truth, the fate of the two economies is in many ways one and the same, for the two are interdependent—a powerful reason for both the United States and China to choose to negotiate more and better rules on which they and all other WTO Members can agree. The Trump administration may be skeptical about the value of filing WTO complaints against China, preferring the immediacy and contentiousness of unilateral tariffs.
But if they are looking for effective approaches to addressing Chinese protectionism and other trade practices, WTO disputes are the better avenue. China has responded to U. By contrast, China has responded to previous WTO complaints with market opening.
World Trade Organization (WTO) | History & Facts | Britannica
The WTO dispute process is not perfect, but it is a tried-and-true approach to this problem. Its biggest flaw is that it is underutilized. The Trump administration should work with U. Source : Office of the U. Do respect intellectual property rights. Do enforce them. In particular, and despite widespread intellectual property violations in many other parts of the world in addition to China, no WTO Member has yet to challenge another Member with a systemic failure to enforce intellectual property rights. Article Members shall ensure that enforcement procedures as specified in this Part are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this Agreement, including expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements.
These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse. Is this obligation fulfilled by having sound laws on the books, as is generally the case with China? Or must those laws also be enforced effectively in practice, which is often not the case with China? Precisely how demanding is this obligation in requiring real enforcement of intellectual property rights? The Appellate Body has already been more than suggestive of the answer to this question.
That law must have real force in the real world of commerce. In the past, the United States has challenged successfully certain parts of the overall Chinese legal system for intellectual property protection in WTO dispute settlement. Instead of resorting to the illegality of unilateral tariffs and other arbitrary sanctions outside the legal framework of the WTO, the Trump administration should initiate a comprehensive legal challenge in the WTO, not merely to bits and pieces of particular Chinese IP enforcement, but rather to the entirety of the Chinese IP enforcement system as a whole.
Such a systemic challenge would put the WTO dispute settlement system to a test, to be sure. It would necessitate an outpouring of voluminous legal pleadings. Yet it could also provide the basis for fashioning a legal remedy that would in the end be acceptable to both countries and could therefore help reduce a significant obstacle to mutually beneficial U. China has denied the allegations by the United States of systemic Chinese violations of U. Yet widespread infringements continue and, in some of the innovative industrial sectors targeted by China strategically, seem to be increasing.
As it grows economically, China is growing as a force in world trade and thus in the WTO. China values its membership in the WTO, in part because China is aware of the considerable benefits it derives from membership. Article 39 is a major innovation in intellectual property protection under international law.
Objectives and operation
There is no WTO jurisprudence whatsoever on Article This is not because Article 39 does not provide protection. Information is protected under Article 39 if it is secret, has commercial value, and has been protected against disclosure. Under Article This, too, is language for the purpose of protecting contemporary trade secrets. It could be argued—and some developing countries did indeed argue during the Uruguay Round—that the protections afforded by Article 10bis are sufficient to protect trade secrets.
However, many countries at the time had neither sufficient laws nor efficient administrative procedures in place to protect trade secrets.
WORLD TRADE ORGANIZATION
Nor were trade secrets recognized as intellectual property in other international law. Those who would rather apply the broad illegal brush of unilateral tariffs instead of the sharp legal stiletto of a precise claim in WTO dispute settlement will protest that Article 39 has never been tested in a WTO dispute. This is true. Yet similar protests were heard 10 and 20 years ago against bringing legal claims in WTO dispute settlement under the Agreement on Technical Barriers to Trade and the Agreement on the Application of Sanitary and Phytosanitary Measures, which have both since been proven to be reliable tools for upholding and enforcing WTO obligations.
Not having been tested is not the same as having been tried and found wanting. It will certainly be said as well that proving a legal claim of illegal infringement of undisclosed information under Article 39 in WTO dispute settlement will not be easily accomplished.
This also is true. As the complainant, the United States will have the burden of proving this and all its legal claims against China in a WTO dispute. Moreover, the United States will have to prove each particular instance of the illegal infringement of specific trade secrets.
All of this will necessarily involve the accumulation and submission of a veritable mountain of evidence—not easy in any case and certainly not easy in a case against a WTO Member with such an opaque and elusive economic and administrative system. Without question, China presents a formidable climb in the fact gathering for winning a WTO case.