View from the US

Wide support for Trump move despite worries of trade war

US President Donald Trump responds to a reporter's question after signing a memorandum directing the US Trade Representative to complete a review of trade issues with China, on Aug 14, 2017.
US President Donald Trump responds to a reporter's question after signing a memorandum directing the US Trade Representative to complete a review of trade issues with China, on Aug 14, 2017.PHOTO: REUTERS

The move by President Donald Trump to order an investigation into China's practices on intellectual property (IP) and technology transfer has been widely welcomed here - even on both sides of the political divide - notwithstanding the fears of a trade war.

The issue has long been a source of concern in the US, with an official commission estimating that in 2015, between US$58 billion (S$79 billion) and US$118 billion of counterfeit and pirated tangible goods may have entered the country. China's investment laws have also come under fire for requiring a significant amount of technology transfer in exchange for access to the Chinese market.

Reacting to the Trump move, Republican Representatives Kevin Brady and Dave Reichert, chairs of the House Ways and Means and Trade Sub-committees respectively, said in a statement that the ability of US businesses to compete had been "severely undermined" because China had robbed them of their most valuable assets to benefit its own technology sector.

Ways and Means Committee member Richard Neal, a Democrat, said Mr Trump's decision was "a first step in calling attention to this flagrantly unfair practice".

The White House also e-mailed journalists a series of statements from business leaders supporting the investigation.

Mr Thomas Kennedy, chairman and chief executive of Raytheon, said: "State-sponsored intellectual property theft is a problem for the US defence industry and our military capability. It poses both economic and national security concerns. We applaud President Trump for taking the necessary steps to protect our industry and our country."

  • US: China behind global norms in IP protection

  • WASHINGTON • Key aspects of China's intellectual property rights (IPR) protection regime fall short of international best practices, the United States government believes.

    And stringent requirements for storage of data and handover of codes bothers US tech firms that want to operate in the Chinese market.

    "Criminal penalties imposed by Chinese courts for IPR infringement are not applied on a frequent and consistent enough basis to significantly deter ongoing infringement," the US Department of Commerce said on its website export.gov

    "When administrative sanctions are issued, the basis for the sanctions is inconsistent and non-transparent, and penalties applied are insignificant, further weakening any deterrent effect," it added.

    "In addition, the award for IPR damages is very low, making civil litigation against IPR infringements an option with limited effect," it noted.

    Separately, under its Made in China 2025 (MIC2025) strategy, China has issued laws, regulations and standards that can disadvantage foreign companies.

    "Many of these measures involve 'secure and controllable' and other similar technology requirements, which limit foreign companies' access to China's market on questionable grounds related to national security," the US Chamber of Commerce said in a report this year.

    The measures apply to a range of industries, from banking and insurance to medical devices and aviation. And it means technology firms - such as Amazon.com and Apple - must store users' data in China and turn over source code and encryption software to the government.

    This bothers the US firms as it could give the Chinese government access to private data and proprietary technology.

    Nirmal Ghosh

 

Separately, Dr Robert Atkinson, president of the Information Technology and Innovation Foundation, an influential science and technology think-tank, said: "China... tries to gain advantage in strategically important industries by using dubious policies and practices such as coercing competitors into handing over proprietary technologies and intellectual property.

He said in a statement: "For too long, China has systematically flouted the spirit, if not always the letter, of its commitments under the World Trade Organisation and other agreements.

"The US response has been to engage in a seemingly endless cycle of ministerial dialogues that mostly have succeeded in eliciting empty promises that China will change its behaviour.

"We need to break that cycle by taking action that produces tangible results - not just to protect America's interests, but also to defend the integrity of the global trading system."

There are fears, however, that down the road, if Mr Trump does take punitive measures against China, it would trigger retaliation which would escalate into a full-blown trade war.

This scenario bodes ill for some sectors - like agriculture - and certain states that depend heavily on trade with China. Alaska, Oregon, South Carolina and Washington states, for example, export at least 20 per cent of their goods to China.

"Some see the potential for retaliation the Chinese could take against their commercial or market access issues wholly unrelated to IP," Ms Amy Celico, a former senior director for China at the US Trade Representative's Office and currently head of the China team at the consultancy Albright Stonebridge Group, told The Straits Times.

But at least one analyst remained sanguine about a trade war in the immediate future.

"This is a threat to investigate, so we are still far away from a trade war. The Chinese won't like it, but I don't think they will overreact to it either," Ms Yun Sun, a fellow at the Stimson Centre in Washington, told ST.

A version of this article appeared in the print edition of The Straits Times on August 16, 2017, with the headline 'Wide support for Trump move despite worries of trade war'. Print Edition | Subscribe