South China Morning Post | 1 May 2021
US says China has fallen short on ‘phase one’ intellectual property commitments
by Jodi Xu Klein
The US criticised China on Friday for failing to fulfil commitments it made in the “phase one” trade deal a year ago to improve protections for the intellectual property of American companies.
In its first report under the Biden administration, the office of the US Trade Representative (USTR) acknowledged the revisions China has made in its patent, copyright and criminal laws, as well as the publication of several draft measures concerning IP.
“However, these steps toward reform require effective implementation and fall short of the full range of fundamental changes needed to improve the IP landscape in China,” the report found.
The USTR report identifies countries it says are the most egregious intellectual property violators. In rare cases the agency could designate a nation as a “priority foreign country”, which would trigger an investigation that could lead to retaliatory tariffs or the filing of a dispute with the World Trade Organization.
China was not labelled a priority foreign country, but remained on the “priority watch list” this year, to be monitored closely for IP-related infringements. No immediate penalty is attached to the priority watch list designation.
Other countries on the priority watch list include Argentina, Chile, India, Indonesia, Russia, Saudi Arabia, Ukraine and Venezuela. No country has been labelled a priority foreign country since the Obama administration singled out Ukraine in 2013.
The phase-one trade deal signed on January 15, 2020, included commitments by China to start addressing long-standing concerns the US has had about trade secrets, patents, drug-related IP, trademarks, copyrights and geographical indications.
The pledges China made were part of the sweeping trade deal that helped alleviate the intensifying trade war former US president Donald Trump started that imposed tariffs on US$350 billion in Chinese goods exported to the US.
As part of the deal, China also agreed to purchase about US$200 billion American products by the beginning of 2022.
US Trade Representative Katherine Tai said at a congressional hearing on Wednesday that her office has yet to start a comprehensive review of the US trade policy toward China, but that she would closely monitor how China has followed through on the commitments it made in the deal.
“We are in the process of examining their performance and are scrutinising all of the aspects of what they have done,” Tai said.
In the review released on Friday, the agency said while “some improvements to IP enforcement” have been made, it remained unclear how effective the Chinese legal changes would be.
“Widespread counterfeiting in China’s e-commerce markets, the largest in the world, has also been exacerbated by the migration of infringing sales from physical to online markets, which accelerated during the Covid-19 pandemic,” the report stated.
The report also noted that Chinese officials have made statements to promote “indigenous” innovation and linked intellectual property rights to national security.
“Such statements and measures raise concerns about requiring and pressuring technology transfer and about whether IP protection and enforcement will apply fairly to foreign right holders in China,” the report found.