Unilateral Tariffs vs. The Rule of Trade Law: The Case of Trade Secrets

A specific focus of any WTO complaint by the United States relating to the failure of China to enforce the protection of trade secrets will be the continuing legal shortcomings of the Anti-Unfair Competition Law of China, which, as the Office of the United States Trade Representative has pointed out in its Special 301 Report for 2018, include “the overly narrow scope of covered actions and actors, the failure to address obstacles to injunctive relief, and the need to allow for evidentiary burden shifting in appropriate circumstances, in addition to other concerns.” As USTR observes, in the 2017 update of the Anti-Unfair Competition Law, “despite long-term engagement from the United States and others – including from within China – China chose not to establish a stand-alone trade secrets law, and instead continued to seat important trade secrets provisions in the AUCL, an arrangement which contributes to definitional, conceptual, and practical shortcomings relating to trade secrets protection.”
Those who would rather apply the broad illegal brush of unilateral tariffs instead of the sharp legal stiletto of a precise claim in WTO dispute settlement will protest that Article 39 has never been tested in a WTO dispute. This is true. Yet similar protests were heard ten and fifteen years ago against bringing legal claims in WTO dispute settlement under the Agreement on Technical Barriers to Trade and the Agreement on the Application of Sanitary and Phytosanitary Measures, which have both since been proven to be reliable tools for upholding and enforcing WTO obligations. Not having been tested is not the same as having been tried and found wanting. Until proven otherwise, a legal claim of a failure to protect “undisclosed information” under the novel obligation in Article 39 of the TRIPS Agreement must be seen as a potentially positive means to the end of protecting trade secrets.

James Bacchus

The Cato Institute

May 11, 2018

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