U.S. Plans Probe of China Over Intellectual Property

The Trump administration is gearing up to investigate China over what the U.S. perceives to be violations of intellectual property, according to a person familiar with the matter.

U.S. officials are discussing ways to raise the pressure on China over IP issues, said an administration official, who spoke on condition of anonymity Wednesday because the investigation hasn’t been announced.

Specifically, the administration is considering having the U.S. Trade Representative’s office start an investigation authorized by section 301 of the Trade Act of 1974, which allows the president to impose tariffs on foreign products in response to unreasonable or discriminatory restrictions on American commerce, the New York Times reported on Wednesday. A USTR official declined to comment to Bloomberg on the plans.

The probe could start in coming days and wrap up in a few months, the newspaper reported, citing three people familiar with the plans who asked not to be identified because the strategy isn’t public. The investigation would focus on allegations that China has violated U.S. intellectual property amid growing concern that it’s trying to become a world leader in technologies such as microchips and electric cars. The government could increase tariffs on products or rescind licenses for Chinese firms, the Times reported.

The move would mark a new strategy for the administration as it grows increasingly frustrated with China’s trade practices. Commerce Secretary Wilbur Ross in a Wall Street Journal opinion piece on Monday lambasted the country for imposing “formidable non-tariff trade barriers” against U.S. companies.

Democratic Senators are weighing in with a call for tough measures to stop trading cheating, citing China as one of the foreign targets. Policy proposals they released Wednesday in their so-called “A Better Deal for Trade and Jobs” agenda include creating an independent trade prosecutor to challenge “unfair trading practices by foreign countries, like China, that have been ignored far too long,” helping circumvent the World Trade Organization’s “years-long” process, according to an emailed statement.

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So far the administration has focused its efforts on seldom-used section 232 of the 1962 Trade Expansion Act, which allows the government to investigate whether imports threaten national security. At President Donald Trump’s request, the Commerce Department has been investigating whether steel and aluminum imports represent a security threat.

In a report to lawmakers last month, USTR accused China of engaging in “widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe.”

Since Trump’s inauguration in January, relations between the world’s two biggest economies have become tense, following a brief honeymoon when the leaders of both nations agreed to cooperate on some trade issues. The relationship showed strains when economic talks in Washington last month ended with the two sides unable to produce a joint statement.

While the Trump administration hasn’t followed through on repeated threats to get tough on China, this latest news suggests it’s preparing to challenge the country’s policy to develop technologies to compete with the U.S. and Europe.

“China is consciously and deliberating attempting to catch up with the tech frontier,” Tom Orlick, chief Asia economist with Bloomberg Intelligence, said.

source:https://www.bloomberg.com/news/articles/2017-08-02/white-house-said-to-prepare-probe-of-china-trade-nyt-reports