The three entities began discussing ways to curb China’s policies in January, and are preparing to file a case as early as March, the Yomiuri Shimbun reported on Feb. 15.
Foreign firms in China often feel compelled to set up joint-ventures with domestic firms in order to gain access to the country’s massive market.
The United StatesForced transfer and theft of intellectual property in China has concerned the administration enough that in August 2017, President Donald Trump signed a memorandum directing the U.S. trade representative to determine whether a formal investigation into China’s trade practices is needed.
China is the world’s top IP infringer, responsible for between 50 and 80 percent of all IP theft costs, the IP Commission estimated.
American businesses in China feel those challenges. In the 2018 business climate survey conducted by the American Chamber of Commerce in China, when asked about what barriers prevented them from increasing innovation, 27 percent of American businesses surveyed said lack of sufficient IP protection, while 15 percent said “IP localization requirements and/or technology transfer requirements.” Another 15 percent responded, “indigenous innovation policies that discriminate against foreign-invested enterprises.”
The United States, EU, and Japan are now formally filing a complaint with the WTO, claiming that China’s policies are discriminatory toward foreign companies, which violates WTO rules.
The EU and JapanThe EU Chamber of Commerce in China released a 2017 business confidence survey where 17 percent of businesses had to transfer technology in exchange for market access. In some industries, more than 20 percent of companies from the EU had to do so: 31 percent in aerospace and aviation, 23 percent in machinery, and 21 percent in environment-related and automotive/auto components.
European auto companies based in Tianjin and Shenyang cities—both auto manufacturing hubs—feel particularly pressured, according to the survey.
Japan also suffered big losses when Kawasaki Heavy Industries, the maker of Japan’s bullet trains, signed a licensing deal with Chinese firm CSR Qingdao Sifang in 2004.
Trade TensionsTensions have been building between the United States and China. In January, Trump vowed to enact a fine for China’s IP theft. Then the administration called the United States' support of China’s entry into the WTO a mistake, and finally, imposed tariffs on imported solar panels and washing machines. China dominates much of the world’s solar panel manufacturing.
Beijing seems to have finally conceded to the United States. Last week, China’s leading diplomat Yang Jiechi visited Washington for meetings with the administration to smooth out trade tensions.
Xi’s top economic advisor and member of China's ruling Politburo Committee, Liu He, has also requested a meeting with Branstad, FT reported.