Industry Says It Hopes USTR Probe Into China Trade Actions Spurs Improvement
President Donald Trump's order to review whether China's trade practices discriminate against American companies' IP (see 1708140060) is generally viewed optimistically by industry, and experts told us they hope this at least improves trade relations incrementally. “This is a measured step that raises fair questions [and] it provides ample opportunity to avoid unnecessary escalating trade tension by improving the treatment of American IP in China," said Sentinel Worldwide CEO Steve Tepp. "It's a smart move.”
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"The tech industry is optimistic that this will lead to positive outcomes" on compulsory tech transfers, concerns about joint ventures and obligations on U.S. and other international tech companies to enter the Chinese market, said Computer and Communications Industry Association Vice President-Law and Policy Matthew Schruers. The Trans-Pacific Partnership Agreement, which Trump withdrew from in January (see 1701240047), was intended to address those issues among others, he said: "That ship has sailed. Other solutions need to be pursued and this is a measured way."
Information Technology and Innovation Foundation Vice President-Global Innovation Policy Stephen Ezell said past approaches of using dialogue and engagement failed to deliver substantial changes from China in modulating restrictive policies. He said Trump's move signals a "much tougher stance" in holding China to its commitments when it joined the World Trade Organization. Ezell said the U.S. government's "measured but strong investigation" will signal to China that the U.S. this time is serious. He said China won't be justified if it retaliates since the U.S. may develop a comprehensive inventory of problematic trade policies and practices. With documented cases, he said the U.S. can coordinate with other affected allies and press China to change its ways.
Other industry groups supported Trump signing the memo, which launched a U.S. Trade Representative Office examination of China's policies and practices. It could later lead to a formal Trade Act Section 301 investigation. President Gary Shapiro said in a statement that CTA supports the president's action: "While Section 301 is a powerful tool, it is also a lengthy process, and we urge the White House to move forward in a way that preserves global supply chains and does not inadvertently expose U.S. companies to uncertainty, burdensome tariffs or retaliation." Software & Information Industry Association CEO Ken Wasch said U.S. companies "frequently" encounter counterfeiting and piracy, unfair competition rules and other problems in China. The U.S. Chamber of Commerce said China restricted access to its market and broadly tried to undermine American companies' IP. Through this examination, USTR can "consider a prudent path forward," it said.
Industry allies don't expect any major overhaul in how China does business, but they hope it might cause an incremental improvement to the trade relationship. They said Trump's action could complement behind-the-scenes discussions between the countries, which occur on many levels and in different international engagements. One expert didn't think U.S. companies would see any backlash from China. The Chinese Embassy in Washington didn't comment.
There have been "serious and consistent allegations" about China and IP theft, but Trump "is not prejudging" the inquiry, the White House said. It alleged China hacked into networks of U.S. companies to steal commercial data. It cited Department of Homeland Security information that China and Hong Kong account for 88 percent of seized counterfeit goods coming into the U.S. The administration said IP theft could cost the U.S. economy as much as $600 billion annually.