“China, China, China.”
We heard a lot about China during President Trump’s campaign for presidency, and China has been a hot topic since President Trump started serving as the 45th president of the United States.
In August 2017, President Trump said, “Washington will turn a blind eye no longer. Today, I am directing the United States trade representative to examine China’s policies, practices and actions (regarding U.S. intellectual property).” China’s popularity in the media and news outlets is due to President Trump’s sanctions against China and his willingness to take world power China on, thus inciting an alleged “trade war.”
The China-U.S. trade war commenced after years of alleged stealing of American intellectual property by the people of the Republic of China. The U.S. Administration relied, in part, on Section 301 of the Trade Act of 1974 to file a request for consultation to the World Trade Organization to “prevent the unfair trade practices and theft of intellectual property.”
The United States alleged that China has been forcing American companies to divulge proprietary technology as a pre-requisite for doing business in China – thus enabling China to steal U.S. trade secrets. A public hearing took place in Washington D.C., where Americans told stories of intellectual property theft. The head of the US Commission on the Theft of American Intellectual Property, Richard Ellings, stated that the theft, “Totaled $1.6 trillion over the past four years.”
Section 301 of the U.S. Trade Act of 1974 authorizes President Trump to take appropriate action to “rectify an act, policy or practice of a foreign government” that violates an international trade agreement and/or restricts U.S. commerce. On March 22, 2018, President Trump announced that the United States Trade Representative would publish a list of products with intended tariff increases, addressing the practices of China that are restrictive to U.S. Commerce.
In response to action by President Trump, China imposed 15-25% tariffs (varying depending on the product) – of which, 128 included products are products it imports to the United States. In June 2018, the office of the United States Trade Representative put out a press release advising on a list of products imported from China that were subject to additional tariffs as part of the U.S. response to China’s transfer and theft of American technology and intellectual property.
The United States Trade Representative found through its investigation that the appropriate actions to take were to place a 25% ad valorem tariff on approximately $50 billion of products from China and to pursue a case with the World Trade Organization in pursuing a dispute settlement with China in addressing its discriminatory licensing practices. Tariffs have consistently been added by the United States and China has also retaliated and added additional tariffs to products. U.S. Ambassador Robert Lighthizer has said, “We must take strong defensive actions to protect America’s leadership in technology and innovation against the unprecedented threat posed by China’s theft of our intellectual property, the forced transfer of American technology, and its cyber-attacks on our computer networks.”
More recently, the Chinese wind turbine company Sinovel was fined $1.5 million after it stopped paying to use American Superconductor software. Two of Sinovel’s employees were found to have bribed an American Superconductor worker for a stolen source code. Due to the stolen source code, the American company reportedly lost $1.4 billion in market value, which eventually led to a 70% cut of its workforce. Still, China’s Ambassador to the World Trade Organization, Zhang Xiangchen, stated, “It is difficult to hold China accountable since these technology transfers are based on mutually agreed terms.”
On November 1st, the U.S. Department of Justice – in collaboration with Taiwan’s Ministry of Justice – charged a Chinese company with economic espionage. United Microtechnologies was charged with “conspiracy to steal, convey, and possess stolen trade secrets” from an Iowa based manufactured named Micron Technology. Employees of Chinese company Microtechnologies stole proprietary information about dynamic random-access memory then passed it on to another company named United Technologies whom was partnered with the Chinese company.
While President Trump declined to label the current relations with China as a trade war, both parties and the world are arguably feeling the effects of two super power countries unable to come to a resolution. Despite repeated efforts, to date, neither the U.S. head of state nor China’s head of state have backed down.