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Trade Secret Theft, Industrial Policies, Agriculture Among Key U.S. Concerns with China

Friday, January 13, 2017
Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Trade Representative’s annual report on China's compliance with its World Trade Organization obligations finds that, as in past years, the overall picture presented by China’s WTO membership remains complex despite some positive results.

The report finds that since China joined the WTO in December 2001 there has been a dramatic expansion in trade and investment among China and its trading partners, including the U.S. In 2015 U.S. exports of goods to China totaled $116 billion, up 505 percent since 2001, while U.S. services exports to China reached $48 billion, an increase of 802 percent. Services supplied through majority U.S.-invested companies in China also have been increasing dramatically, totaling an additional $43 billion in 2013, the latest year for which data is available.

Nevertheless, a wide range of Chinese policies and practices continued to generate significant concerns among U.S. stakeholders in 2016, many of which can be traced to the Chinese government’s interventionist policies and practices and the large role of state-owned enterprises and other national champions in China’s economy. The report states that in 2017 the U.S. will continue to work to resolve these concerns, which include the following.

- reports that actors affiliated with the Chinese government and the Chinese military have infiltrated the computer systems of U.S. companies and stolen terabytes of data for the purpose of providing commercial advantages to Chinese enterprises

- the continuing registration of trademarks in bad faith

- ineffective enforcement against infringement of pharmaceutical patents, a backlogged drug regulatory approval system, and insufficient regulation of the manufacture of active pharmaceutical ingredients

- measures with an apparent long-term goal of replacing foreign information and communication technology products and services

- export restraints, including export quotas, export licensing, minimum export prices, export duties and other restrictions, on a number of raw material inputs where China holds the leverage of being among the world’s leading producers

- substantial subsidies provided to Chinese industries, some of which appear to be prohibited under WTO rules

- massive excess capacity in manufacturing industries like steel and aluminum

- policies designed to assist Chinese automobile enterprises in developing electric vehicle technologies and building domestic brands that can succeed in global markets

- a ban on imports of remanufactured products and restrictions that prevent imports of remanufacturing process inputs

- a restrictive investment regime that includes lack of substantial liberalization, a case-by-case administrative approval system, and the potential for a new and overly broad national security review

- retaliatory antidumping and countervailing duties that lack legal and factual support

- discriminatory regulatory processes, informal bans on entry and expansion, overly burdensome licensing and operating requirements, and other means that frustrate the efforts of U.S. suppliers of services

- unwarranted restrictions on foreign companies that supply electronic payment services to banks and other businesses that issue or accept credit and debit cards

- overly burdensome regulatory approaches to awarding foreign companies business permits for access to the package segment of China’s domestic express delivery market

- uneven enforcement of regulations and selective intervention in agricultural markets by Chinese authorities

- incomplete publication of trade-related laws, regulations, and other measures in a single official journal

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