Beijing cracking down on IP theft might increase funding in China, former US negotiator says


President Donald Trump, with (L-R) Vice President Mike Pence, Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, speaks during a press conference with Chinas Vice Premier Liu He(not shown), the countrys top trade negotiator, before they sign a trade agreement between the US and China during a ceremony in the East Room of the White House in Washington, DC on January 15, 2020.

Mandel Ngan | Getty Images

If Beijing cracks down hard on intellectual property thefts, it would not only boost the U.S. economy but it would also be good for China, according to a former top White House trade official.

Taking steps to protect trade secrets of foreign businesses operating in the world’s second-largest economy was part of the “phase one” trade deal that U.S. President Donald Trump signed with China on Wednesday.

“To me, the most significant part of this (deal) was what the U.S. was able to achieve on intellectual property,” Clete Willems, a partner at law firm Akin Gump, told CNBC’s “Squawk Box” on Thursday. “Trade secrets theft has been a long-time concern for U.S. businesses, and businesses around the world.”

Willems was previously the deputy director of the National Economic Council and served as the lead trade negotiator for the United States at multilateral summits like the G-7 and G-20.

He explained that the trade agreement’s provisions to protect intellectual property would make a difference for many of the companies doing business in China. “They’re going to have criminal penalties. They’re going to have due process for the judicial proceedings. They’re going to apply those penalties broader than they did in the past,” Willems said, adding there are provisions about pharmaceutical patents and counterfeit goods in the trade pact.

Wednesday’s agreement takes steps to root out several practices by Beijing that has irked the White House and members of Congress from both parties, including intellectual property theft and forced technology transfers from U.S. firms in exchange for Chinese market access.

It calls for China to submit an “Action Plan to strengthen intellectual property protection” within 30 days of the agreement taking effect. The proposal would include “measures that China will take to implement its obligations” and “the date by which each measure will go into effect.” (Read the full agreement here)

Part of the deal also details a $200 billion increase in Beijing’s purchases of U.S. goods over two years as well as commitment from Beijing to allow companies to operate without “any force or pressure” to hand over their technology — that, along with the trade secrets protection provisions, are likely to have ramifications for the U.S. tech sector, where firms want market access in China but are also suspicious over how government officials can access private data stored there.

“If you put it all together, it is going to be a big boost for the U.S. economy. I’ll also make the point, this is going for China,” Willems said. “This really empowers those in China that want to reform their system, want to make it more market-oriented and help them move down that path.”

Ultimately, “better intellectual property protection means more investment in China,” he added.

Still, some experts have expressed concerns about how the U.S. would ensure China keeps up with its commitments. Willems said the promise of further reduction in U.S. tariffs in the second phase of the trade agreement would likely be an incentive for Beijing to “faithfully implement this agreement.”

Another option for Washington would be to convince allies to work with the U.S. to enforce the agreement in a multilateral system to make it more sustainable and prevent Beijing from backsliding from its commitments, according to Willems.



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