China has offered another concession to the United States, this time involving intellectual property (IP). On Sept. 18, China's Ministry of Commerce unveiled a four-month crackdown on IP theft. The ministry's stated goals include creating a fair, competitive market and encouraging foreign investment by limiting IP rights violations. The crackdown's targets will include outright theft of business secrets, brand-name knockoffs, and trade in goods that violate IP rights.
The move comes at a time of considerable U.S. backlash against China, particularly against the country's trade and investment policies. Last month, the Office of the U.S. Trade Representative opened an investigation examining Chinese technology transfer and IP policies. It was the proverbial sledgehammer in the U.S. trade toolbox. If the United States determines that Chinese practices restrict U.S. commerce, the White House will have a legal basis for leveling significant, wide-ranging trade measures against China.
Of course, the United States faces some restrictions in how it uses its sledgehammer. If China's practices run afoul of the country's commitments to the World Trade Organization (WTO) then the United States is required — by U.S. law and U.S. commitments to the WTO — to pursue action through the WTO first. The United States can only pursue independent action if China's IP rights violations don't break with the country's commitments to the WTO. The United States must also enter negotiations with China, even as it continues its investigation.
With the IP theft crackdown, however, China is making a clear effort to offer a concession to the United States and its businesses. It's not the first concession, either. In July, China reportedly offered U.S. President Donald Trump a deal to curb Chinese exports by gradually reducing the country's steel production capacity by 150 million metric tons by 2022. Trump rejected the deal, preferring tariffs on Chinese imports instead. China's offer, backed by U.S. Commerce Secretary Wilbur Ross, would provide long-term benefits, but tariffs would provide a more powerful boost to Trump's trade policy. It's still unclear whether the United States will accept China's conciliatory efforts.
Regardless, China's crackdown is an attempt to address U.S. concerns quickly, even if it's unlikely to deter the United States from completing its investigation next year. China's goal is also to drive a wedge between the Trump administration and U.S. businesses — just as the steel offer did. For while U.S. companies support changes to Chinese IP violations and some certainly back the U.S. Trade Representative investigation, there are concerns that U.S. action could trigger a reprisal against U.S. firms operating in China.