US Section 301 Update On China: Systematic Espionage, Plundering Of IP In US, EU, Australia, Japan

The Office of the United States Trade Representative’s (USTR) latest update of its “Section 301” investigation of China’s alleged theft and manipulation of US intellectual property rights, technology transfer, and trade secrets released today contains a litany of cases of China’s nefarious behaviour in the US as well as Europe, Japan, Australia and elsewhere.

In the face of sharp criticism, China has dug in further, the report says, and countries are teaming up at the multilateral level to try to put a stop to these practices. The report lists actions underway to try to control and stem the activity, for instance through “national security-related investment review processes.”

One serious concern raised is intensive investment in the latest technologies of the west:

“[D]espite an apparent aggregate decline in Chinese outbound investment in the United States in 2018, the Chinese government continues to direct and unfairly facilitate the systematic investment in, and acquisition of, U.S. companies and assets by Chinese entities, to obtain cutting-edge technologies and intellectual property
and generate large-scale technology transfer in industries deemed important by state industrial plans,” the 53-page report says. “Chinese outbound investment is increasingly focused on venture capital (VC) investment in U.S. technology centers such as Silicon Valley, with Chinese VC investment reaching record levels in 2018.”

Among the many other accusations, China is said to conduct licensing practices that are biased against foreign firms.

It is unclear whether the US or trading partners will take legislative or other firm action to change directions. The report ends only on the vague note that “USTR intends to continue its efforts to monitor any new developments and actions in this area.”

The USTR Section 301 update is available here [pdf].

Comments

Bashar H. Malkawi says

22/11/2018 at 8:29 am

While reviewing FDI generally involves a careful cost-benefit evaluation and a rational balancing of interests, additional dimensions of complexity arises in terms of outbound Chinese investment into the U.S. Most Chinese companies are controlled or dominated by arms of the Chinese state. By definition, all SOEs raise national security concerns because of their connection to their home states. Investments made by states trigger different regulatory sensitivities compared to considerations raised by private companies because of the possibility that in conducting business government owned or controlled entities may utilize non-profit motivations and substitute political ambitions instead of (or in addition to) profit-making.In evaluating FDI from United States companies, the presumption is the decision to invest is 100 percent profit motivated; but the same cannot innately be said of Chinese SOE investment.

In the U.S., CFIUS is the primary vetting mechanism and wields power to review a “covered transaction,” defined as any “merger, acquisition or takeover … by or with any foreign person which could result in foreign control of any person engaged in interstate commerce in the United States.” The term “national security” is not strictly defined and CFIUS focuses on certain strategic national security spheres such as energy, defense and technology. The U.S. President is specifically empowered to “suspend or prohibit any covered transaction that threatens to impair the national security of the United States.” Bashar H. Malkawi

US Section 301 Update On China: Systematic Espionage, Plundering Of IP In US, EU, Australia, Japan

Related

Other Languages

Archives

Staff Access

Sign up for free news alerts

Share this: