As WTO Reviews China, EU, US Criticise Its Policy On Innovation, IP Rights

In the past two years, China has acted to improve the protection of intellectual property rights with a need for continuing effort, a World Trade Organization report has found, but the country came under criticism this week from key trading partners such as the United States and the European Union for not providing adequate enforcement and for self-serving innovation practices.

On 31 May and 2 June the World Trade Organization undertook China’s third Trade Policy Review (TPR). The last China’s TPR took place in 2008. According to the WTO report, China “has become increasingly aware of the importance of intellectual property rights protection in facilitating innovation in the economy.” For example, China’s revised patent law “raised fines and legal compensation for cases of misleading assertion of patent rights,” and “the increase in innovation will undoubtedly contribute to increased awareness of the need to protect IP rights,” according to the report.

Trade policy reviews are cyclical assessments of WTO member countries’ trade and related policies. For each review, a policy statement is provided by the government of the member under review, and a detailed report written by the WTO secretariat.

In China’s opening statement, Yi Xiaozhun, Chinese vice minister of commerce, said that his country had received 1,508 questions from 27 members in preparation of its third review. According to the statement, each year from 2006 to 2009, China issued action plans on IP rights protection. In addition, in 2008, “China formulated the outline of the National Intellectual Property Strategy, specifying the objectives, priorities and measures of its national IPR strategy.”

China also supports multilateralism and “believes that a successful Doha Round [of negotiations] is of great significance” to achieve the rebound of the global economy and resist trade protectionism. The WTO Doha Development Agenda on trade liberalisation proposed in 2001 has met almost a decade of dissenting discussions between member countries and has not yet been completed.

In its TPR report, China said over the past two years “a number of laws and regulations convening IP rights were improved with new amendments, including for example the Patent Law and its implementation regulations, and the efforts of law enforcement to protect IP rights were also further strengthened.”

Nonetheless, the European Union although acknowledging China’s efforts to effectively protect IP rights, said they “remained concerned that enforcement remains insufficient, notably in regional and local levels, and deficiencies and obstacles in solving complaints persist,” according to the opening statement delivered by John Clarke, EU head of delegation.

According to the US statement, China, which acceded to the WTO in 2001, “became responsible for full adherence to WTO rules nearly 4 years ago, when all of the transition periods that China had been allowed as a new member of the WTO expired.”

The US urged China to participate in the Doha Round as a major emerging economy, and to “accept the responsibility that goes along with its power and influence.” One main area of concern, according to the statement delivered by Michael Punke, new US ambassador to the WTO, is what the US sees as China’s inadequate enforcement of IP rights.

Although the US acknowledges that China has taken numerous actions to improve the enforcement of IP rights, “these efforts have still not significantly reduced the unacceptably high infringement levels in China,” he said.

The US is working bilaterally with China, through bilateral talks and collaborations such as the US-China Joint Commission on Commerce and Trade, and the newly signed Memorandum of Understanding between the US Patent and Trademark Office and the China’s State Intellectual Property Office (SIPO) (IPW, WTO/TRIPS, 1 June 2010).

Of the 1,508 questions received by China – a staggering number according to WTO officials – about 230 came from the EU, 140 from the US, and 150 from Japan. Two-thirds of the questions have been answered by China, which according to the procedure has another month to answer the remaining questions, and some outstanding questions from its second review in 2008.

The EU and the US were the most critical of China, developing countries appeared more supportive, said the WTO officials.

According to a WTO press release, the TPR covered all aspects of China’s trade policies and practices. There was recognition that China had pursued the liberalisation of its trade and investment regimes, although some members said they had notice a slowdown in the process.

Some of the issues covered during the review meeting were the need for the Chinese government to “continue reducing regulatory and other barriers to trade,” by, for example, adopting more international standards in banking, insurance, telecommunications and postal services. Less than half of China’s national standards correspond to international standards, according to the WTO.

The Chinese government was asked by members to accelerate its accession to the WTO Agreement on Government Procurement. Members were also concerned about “China’s indigenous innovation initiative and ‘buy China’ policies in the government procurement framework.”

“Many expressed their willingness to work with China to facilitate its accession to the WTO Agreement on Government Procurement,” according to the TPR chairperson’s concluding remarks. China’s indigenous innovation initiative is seen as discriminatory to foreign products, foreign investments, foreign technology, and foreign intellectual property, according to the US statement on the China review.

Also during the review meeting, members encouraged China to speed its progress toward the country’s goal of “comparatively high standards” for IP rights by 2020.

The concluding remarks by the chair, the WTO and the government reports are available from the WTO here.