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Following President Trump’s Section 301 Decisions, USTR Launches New WTO Challenge Against China

03/23/2018

Washington, DC – The United States is taking action at the World Trade Organization (WTO) to address China’s unfair technology practices that run counter to WTO rules.

Today, the U.S. Trade Representative (USTR) – at the direction of President Trump – filed a request for consultations with China at the WTO to address China’s discriminatory technology licensing requirements.  The request comes a day after President Trump announced he was directing the USTR to pursue dispute settlement in the WTO to confront China over its policies that result in unfair treatment for U.S. companies and innovators trying to do business in China.

China appears to be breaking WTO rules by denying foreign patent holders, including U.S. companies, basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends.  China also appears to be breaking WTO rules by imposing mandatory adverse contract terms that discriminate against and are less favorable for imported foreign technology. 

These Chinese policies hurt innovators in the United States and worldwide by interfering with the ability of foreign technology holders to set market-based terms in licensing and other technology-related contracts. 

Background

The U.S. consultation request identifies apparent breaches by China of WTO rules, harming the intellectual property rights of U.S. companies and innovators.  The U.S. claims under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) relate to China’s discrimination against foreign intellectual property rights holders (Article 3) and failure to ensure patent rights for foreign patent holders (Article 28).  This is the Administration’s third WTO consultation request. 

Consultations are the first step in the WTO dispute settlement process.  If the United States and China are not able to reach a mutually agreed solution through consultations, the United States may request the establishment of a WTO dispute settlement panel to review the matter.

Following a Memorandum from President Trump, on August 18, 2017, the U.S. Trade Representative initiated an investigation under Section 301 of the Trade Act of 1974 into the government of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.  Following a thorough analysis of available evidence, USTR, with the assistance of the interagency Section 301 committee, prepared findings showing that, among other acts, policies, and practices, China uses discriminatory licensing requirements to transfer technologies from U.S. companies to Chinese companies.

China’s measures of concern include the Regulations of the People’s Republic of China on the Administration of the Import and Export of Technologies and the Regulations for the Implementation of the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures.  China’s measures provide less favorable treatment of foreign entities than the comparable treatment of domestic Chinese entities under the Contract Law of the People’s Republic of China.

The U.S. request for consultations is attached.

 

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