Donald Trump calls for review of China intellectual property practices as trade ties sour

US President Donald J. Trump signs a memorandum on addressing China’s laws, policies, practices, and actions related to intellectual property, innovation, and technology on August 14, 2017.
US President Donald J. Trump signs a memorandum on addressing China’s laws, policies, practices, and actions related to intellectual property, innovation, and technology on August 14, 2017. PHOTO: EPA

WASHINGTON (BLOOMBERG) - US President Donald Trump asked his top trade official to consider investigating China over how it handles intellectual property (IP), adding to the list of trade irritants between the world's two biggest economies as they work to contain North Korea.

Trump signed an executive memorandum on Monday (Aug 14) directing US Trade Representative Robert Lighthizer to consider investigating China over its IP policies, especially the practice of forcing US companies operating in China to transfer technological know-how.

"It's my duty and responsibility to protect the American workers' technology and industry from unfair and abusive actions," Trump said at the White House. "We will stand up to any country that unlawfully forces American companies to transfer their valuable technology as a condition of market access. We will combat the counterfeiting and piracy that destroys American jobs."

If China is found to be flouting the rules on US intellectual property, the administration has a range of options, including imposing import tariffs, according to administration officials, who spoke to reporters Saturday on the condition of anonymity. If USTR moves forward, the investigation could take as long as a year.

However, the top Democrat in the Senate said the president hasn’t yet matched his tough talk on China with action.

“To make an announcement that they’re going to decide whether to have an investigation on China’s well-documented theft of our intellectual property is another signal to China that it is OK to keep stealing,” Senate Minority Leader Chuck Schumer said in a statement.

Chinese state media on Monday criticised Trump's plans for an IP probe, saying the action will do more harm than good, whether it's a new policy approach or negotiating tactic.

The move comes amid growing tension over the threat of North Korea using nuclear weapons, and less than two weeks after the US received China's help in the United Nations Security Council to impose tougher economic sanctions on Pyongyang.


Chinese President Xi Jinping moved to calm nerves last week, telling the US president during a phone call that all sides should maintain restraint and avoid inflammatory comments. While the White House said the leaders reaffirmed their commitment to rid the Korean peninsula of nuclear weapons, Trump has previously criticised China for not reining in North Korea, and threatened trade measures if Xi fails to act.

Trump's announcement further complicates the already taut US-China relationship, which took a frosty turn last month when officials from both nations couldn't agree on a joint statement over economic issues after high-level talks in Washington.

Still, Trump's actions stop short of what some analysts had been expecting him to do on intellectual property. Rather than launching straight into a probe, USTR will first consider whether to begin an investigation under Section 301 of the 1974 Trade Act. Section 301 allows the president to impose tariffs on foreign products in response to unfair or discriminatory restrictions on American commerce. The provision has practically fallen into disuse since the mid-1990s after the creation of the World Trade Organization.

Administration officials on Saturday declined to say how long it will take before a decision is made whether to start a probe.

In a USTR report to lawmakers that was released in July, the administration accused China of engaging in "widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe".

Earlier this year, a commission on U.S. intellectual property estimated that the annual cost to the U.S. economy in counterfeit goods, pirated software, and theft of trade secrets from all sources exceeds US$225 billion ($307 billion) and could be as high as US$600 billion. China is the world's principal IP infringer, the commission said.

USTR argues Beijing uses a range of practices to force US companies to transfer IP, such as by granting regulatory approvals to drug makers that shift production to China or requiring that the designs of foreign products be replicable in China.