By: Mari Reyes
Prominent ranking Democrats Chuck Schumer, Ron Wyden, and Sherrod Brown released a letter sent to U.S. Department of Treasury Secretary Steven Mnuchin on February 1, 2019 regarding China’s “predatory trade practices.”[1] The letter encourages Secretary Mnuchin to remain steadfast and strong against China in case current negotiations with China fail.[2] This comes after some reports were released suspecting that Secretary Mnuchin could be urging the Trump administration to concede in trade negotiations with China.[3] In particular, the senators point out China’s history of technology transfers, espionage that has resulted in theft and extortion of intellectual property (“IP”), and the consistent threat on a free and open market that create American jobs.[4] The senators note that if China fails to make permanent reforms that fix these significant trade imbalances, any resulting trade agreement would be useless.[5] The letter follows a battle between the Trump administration and Chinese officials on tariffs.[6] The Trump Administration has set a March 1, 2019 deadline for China to make trade concessions before the U.S. raises its tariffs once again.[7] President Trump has threatened to increase tariffs from 10% to 25% on $200 billion worth of Chinese goods.[8]
Historically, Chinese theft of IP has occurred for decades and is so prominent that even the Justice Department declared it a national security issue in 2016.[9] According to a segment on 60 Minutes, it has not only cost billions of dollars, but two million American jobs.[10] While quantifying IP’s value can be difficult, it is utilized to create a competitive advantage when doing business.[11] This is especially true when competing with other countries.[12] As a result, bad actors are targeting up and coming companies with innovative and new ideas from their beginning.[13] This can include engineering plans, formulas, processes, designs, and much more.[14] Once these are stolen, companies often lose a large share of their profits because their idea is duplicated overseas.[15] For example, in January 2018, a Chinese wind turbine company was found guilty of secretly downloading source code from an American technology firm, which resulted in a net loss of $1 billion dollars and 700 American jobs.[16]
In November 2018, Trade Representative Robert Lighthizer released a report on China which focused on structural issues concerning U.S. technology transfer and intellectual property protection.[17] The report concluded that China has not altered its “unfair, unreasonable, and market-distorting practices.”[18] Many fear that the Trump Administration’s negotiations will fail because their recent comments have been lacking in particularity as to whether a solid agreement can be met.[19] Many business organizations have alluded that any structural, industrial, or policy changes will take a significant amount of time.[20] In contrast, the Trump Administration has guaranteed that any deal will have “strong enforcement language.”[21]
The potential outcome of these U.S. and China talks continue to draw speculation. Proponents believe the Administration’s strategy will work and use the fact that China has already agreed to increase their imports to eliminate its trade imbalance.[22] Many believe President Trump will take a much tougher stance on IP issues.[23] This is further exemplified by recent comments by both President Trump and some of his top officials citing IP and technology theft as China’s major offenses.[24] While the future remains unclear, the pressure on China continues.
[1]Press Release, In New Letter, Schumer, Wyden, and Brown urge Sec’y Mnuchin to Stay Aggressive During Trade Negotiations with China in Order to Obtain Enforceable, Verifiable, and Enduring Concessions to Combat China’s Predatory Trade Practices, Senate Democrats (Feb. 1, 2019), https://www.democrats.senate.gov/newsroom/press-releases/in-new-letter-schumer-wyden-and-brown-urge-secretary-mnuchin-to-stay-aggressive-during-trade-negotiations-with-china-in-order-to-obtain-enforceable-verifiable-and-enduring-concessions-to-combat-chinas-predatory-trade-practices.
[2]Id.
[3]SeeSaleha Mohsin, Mnuchin Signals Chance to End China Trade War Ahead of Talks, Bloomberg(Jan. 29, 2019, 11:04AM), https://www.bloomberg.com/news/articles/2019-01-29/mnuchin-signals-chance-to-end-china-tariff-war-ahead-of-talks.
[4]See Press Release, supranote 1.
[5]See id.
[6]SeeJohn Schoen, Timeline shows How the US-China Trade War led to the latest Round of Talks in Beijing,CNBC(Jan. 6, 2019, 4:00PM), https://www.cnbc.com/2019/01/04/timeline-of-us-china-trade-war-and-trump-tariffs-as-talks-in-beijing-start.html.
[7]SeeStephen Berg, Trump Floats China Deadline Extension as Retailers Brace, Law360(Feb. 12, 2019), https://www.law360.com/articles/1128319/trump-floats-china-deadline-extension-as-retailers-brace.
[8]SeeSean Higgins, Business, Democrats urge Trump to get deal with China on Intellectual Property Theft,Wash. Examiner(Feb. 1, 2019, 6:04PM), https://www.washingtonexaminer.com/policy/economy/business-democrats-urge-trump-to-get-deal-with-china-on-intellectual-property-theft.
[9]See Greg Funaro, WIPOUT: The Devastating Business Effects of Intellectual Property Theft, Digital Guardian(Oct. 14, 2016), https://digitalguardian.com/blog/wipout-devastating-business-effects-intellectual-property-theft.
[10]See Lesley Stahl, The Great Brain Robbery, CBS News(Jan. 17, 2016), https://www.cbsnews.com/news/60-minutes-great-brain-robbery-china-cyber-espionage/.
[11]See Funaro, supra note 9.
[12]Id.
[13]See id.
[14]See id.
[15]Id.
[16]SeeSherisse Pham, Chinese Wind Turbine Firm Found Guilty of Stealing U.S. Secrets, CNN Bus. (Jan. 25, 2018, 4:47AM), https://money.cnn.com/2018/01/25/technology/china-us-sinovel-theft-conviction/index.html?iid=EL.
[17]SeeHiggins, supranote 8.
[18]Id.
[19]Id.
[20]Id.
[21]SeeEnda Curran, The Trump-Xi Trade Truce Ends March 1. What Then?, Bloomberg(Feb.. 8, 2019, 12:30PM), https://www.bloomberg.com/news/articles/2019-02-08/the-trump-xi-trade-truce-ends-march-1-what-then-quicktake.
[22]See id.
[23]See id.
[24]See Higgins,supranote 8.
