US may end up hurt in trade war with China

I agree that the United States should be wary of launching a Section 301 investigation of China's intellectual property (IP) abuses (Trade actions against China could turn US into 'villain'; Aug 17).

However, it must be conceded that the allegations against China are not entirely baseless.

The country's association with IP theft has been entrenched by anecdotes of counterfeit products as well as aborted lawsuits by disgruntled foreign manufacturers.

If China is to truly consolidate its reputation as an economic leviathan on the rise, it must demonstrate a more determined stance in defence of IP and in support of innovation.

That being said, any unilateral American investigation would be unprecedented, and would most certainly provoke a chain of tit-for-tat responses through adversarial tariffs.

This would do little to promote compliance with patent regulations or advance the interests of IP rights holders seeking recourse.

This is especially considering the high degree of interdependence between the two nations.

The value of American imports of Chinese goods outstrips that of American exports to China by over 300 per cent, raising the possibility that the Trump administration may end up undermining its own economic position.

Moreover, China is not unique in establishing ground rules for entry into its domestic market or in placing limits on foreign ownership of local businesses. The European Union, for instance, has similar regulations with similar objectives.

There is a crucial distinction to be made between unfair trading practices and fundamental comparative advantage.

China is a resource-rich nation with abundant skilled labour and increasingly well-developed infrastructure. The ability of Chinese firms to out-produce and undercut their global peers is almost a given.

In such a case, the response of corporate America should not be litigation, but direct commercial competition.

Conducting fair-trade dialogues with China on equal terms and with amicable intent, via the established multilateral mechanisms of the World Trade Organisation, is infinitely preferable to risking a full-blown trade war.

Paul Chan Poh Hoi

A version of this article appeared in the print edition of The Straits Times on August 30, 2017, with the headline 'US may end up hurt in trade war with China'. Print Edition | Subscribe