The US declares an intellectual property war on China

By Ashna Butani

China is big in counterfeit goods, pirated software and theft of trade secrets. When it comes to intellectual property theft, “there is the rest of the world, and then there is China“, says the Intellectual Property (IP) Commission Report of 2017. The document reveals that China has been obtaining IP from American companies operating in China, other entities, and from the US, through both conventional and cyber means. 

Determined to put an end to this theft, President Donald Trump asked Mr Lighthizer—a top US trade official—to review China’s activities. On 18th August, the US formally launched an investigation into China’s Intellectual Property policies; China is furious. The angered China is now voicing a serious concern over this issue, and may even sanction US trade.

What is China’s crime?

Over 70% of China’s software is pirated. Similarly, 70% of the goods in the market are counterfeits, says Scholz, director of a security consulting firm. His study reveals that counterfeit goods vary from shampoo that can burn consumers’ heads to gloves that can get one’s hands soaked. The labels are real, but the product is not. This has lead to a $20 million in losses for firms all over the world. These losses are the basis for the US’s concerns over intellectual property theft.

China has been accused of infiltrating American companies and stealing trade secrets over the last 30 years. Several officials have been arrested as a result of this. Project 863, started in 1986, was the precursor for the Chinese intellectual property theft that is now seen as a major threat to security all over the world. The project was the methodological acquisition of Western technology. Earlier this year, the Department of State, US, charged 7 people with the conspiracy to steal trade secrets, to make manufacturing easier for Chinese Companies. The intolerant United States has taken up the investigation and plans to delve deeper into the issue.

The high cost of stolen secrets

Pirated software, counterfeit goods and stolen trade secrets cost the US up to $600 billion a year. The Obama administration took this issue seriously, severely punishing offenders. The IP commission, however, states that several new tools created under Obama administration, remain unused. For instance, a law that gives the President the right to sanction foreign countries, individuals, and companies for IP theft, is yet to be invoked.

The commission not only urges the President to make IP theft a core issue but also proposes policy prescriptions such as increasing the number of green cards to science student and constraining the return of foreign students in the US back to their home countries. President Trump, who has given paramount importance to this advice, is likely to implement these strategies. This will significantly reduce the number of foreign students in the US.

China will not sit idle

It is clear that the Trump administration will find evidence against China. However, how it will react, is unpredictable. It could involve world organisations such as the World Trade Organisation, or act independently. China’s commerce ministry has also put its foot down. The ministry warns the US about the repercussions, saying that if the US side takes actions that impair the mutual trade relations, disregarding the facts and disrespecting multilateral trade rules, China will not sit idle. The situation will be followed up in a hearing in October, where US officials will discuss the findings. Regardless, the path that the Trump administration has taken is sure to impede relations with China.

Featured Image Source: Wikimedia Commons