Donald Trump is readying to respond to what he considers unfair trade practices being utilized by China, according to a senior Trump administration official. The U.S. President is considering encouraging U.S. Trade Representative Robert Lighthizer to initiate an official investigation of Chinese trade practices under the 1974 Trade Act's section 301, the official, speaking anonymously, said on Tuesday.
Section 301 of the Trade Act of 1974 allows the president to unilaterally impose tariffs or other trade restrictions to protect U.S. industries from "unfair trade practices" - such as trade agreement violations, or "discriminatory" actions that burden U.S. commerce - being undertaken by foreign countries.
The U.S. has "a long list of grievances about China on trade, including accusations of steel dumping and theft of U.S. intellectual property," according to Reuters, including domestically-held copyrights, trademarks, and patents.
Chinese officials, on the other hand have held that trade between their nation and the U.S. benefits both sides. They have also taken in recent months to slamming reports complied by the Office of the United States Trade Representative, as well as the European Union Intellectual Property Office and Europol, on the state of intellectual property infringements, saying that the reports are "lacking in objective standards and fairness" and "irresponsible."
Trump has long been a critic of Chinese trade practices but per Reuters, "his interest in penalizing Beijing has risen because of his concern at what he perceives to be Chinese inaction on reining in increasingly belligerent North Korea."
Chinese IP Infringements
In terms of IP, the news of an impending announcement comes on the heels of the release of the Office of the United States Trade Representative’s 2017 “Special 301” Report in May. A first for the Trump administration, the report detailed how intellectual property is being protected – or better yet, not protected – on a worldwide basis.
The yearly report is the result of a review of the state of intellectual property rights protection and enforcement of the U.S.'s trading partners around world, and it is especially relevant in fashion because it specifies which countries raise concerns due to their intellectual property practices.
Unsurprisingly, China – a routine "Priority Watch List" country – was highlighted in the report due to both “longstanding and new IP concerns [that] strongly merit attention.” As set forth in the report, “China is home to 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. China imposes requirements that U.S. firms develop their IP in China or transfer their IP to Chinese entities as a condition to accessing the Chinese market.”
Chinese counterfeiting now costs foreign firms an estimated $20 billion a year in lost profits. "In the case of one consumer goods manufacturer, as much as 70 percent of the goods on the market are counterfeits coming from China," said Charles Scholz, the Asia director for the security consulting firm, Kroll Associates, this spring.
The Organization for Economic Co-operation and Development echoed this notion is its 2016 report on global trade, noting: "Most [pirated and counterfeit goods] originate in middle income or emerging countries, with China being the top producer."