We Don’t Need a Trade War to Address Chinese IP “Theft”

We Don’t Need a Trade War to Address Chinese IP “Theft”

A few weeks ago, Dean Baker wrote on how concerns that Chinese companies are “stealing” the intellectual property of U.S. firms seeking to do business there (a rare intersection of Trump’s beliefs with “elite opinion”) are misguided. He makes the case that this “so-called theft” functions as a great equalizer by giving economic growth in developing countries a boost.

For the sake of argument, let’s say we should take more aggressive steps to protect the IP rights of U.S. firms. Instead of using the counterproductive (and questionably legal) tariffs the Trump administration has rolled out, James Bacchus of the Cato Institute makes the case for using international trade law to address the problem.

For many of these U.S. allegations about China, however, [World Trade Organization] WTO obligations apply, and could provide more effective recourse.  The various options under the WTO treaty for challenging Chinese trade practices will be explored in more detail in a forthcoming paper. This blog post focuses on one particular WTO obligation, covering trade secrets.

The Trump administration has been raising concerns about China’s failure to protect trade secrets, but evidently ignored so far is Article 39 of the TRIPS Agreement in the WTO treaty, which establishes a WTO obligation for the “Protection of Undisclosed Information.” The United States was among the leaders in advocating the inclusion of Article 39 in the TRIPS Agreement as part of the WTO treaty, but the United States has, to date, not initiated an action in WTO dispute settlement claiming a violation by China of this WTO obligation.

Article 39 is a major innovation in intellectual property protection under international law. It is “the first multilateral acknowledgement of the essential role that trade secrets play in industry” and “the first multilateral agreement to explicitly require member countries to provide protection for… ‘trade secrets.’” One of the accomplishments of the Uruguay Round of multilateral trade negotiations that concluded the WTO treaty and established the WTO, “’[t]he inclusion of trade secrets under the TRIPS has been hailed as a major innovation.”

Thanks to the WTO, the administration has the tools necessary to achieve (or at least attempt) to resolve disputes related to intellectual property. Will it be an uphill legal battle? Definitely. But a trade war is a far worse solution that, unlike legal action under Article 39, doesn’t guarantee success.

Lastly, it will doubtless be insisted by those busy imposing unilateral tariffs that pursuing this claim and others in the WTO will take much time and much trouble and that, even if the United States prevails, a remedy is at best several years away. This likewise is true. But how much time and how much trouble are likely to result from the retaliatory legal actions and the retaliatory trade actions that are the certain consequence of tariffs imposed by the United States unilaterally and outside the legal framework of the WTO? Will US trade secrets be any better protected during the time it would take instead to seek and implement a WTO judgment under Article 39?

There’s a lot to hate about Trump’s trade war. But even if you think action must be taken to address IP “theft,” it’s far wiser to use tools already available to the U.S. than it is to take unilateral action that has already produced many economic casualties.

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By |2018-08-20T14:31:06-07:00August 20th, 2018|Blog, Intellectual Property|