China-US relations

China warns it will respond if Trump investigation harms trading links

Beijing says it will defend its economic interests after president signals he will act over ‘theft’ of American companies’ intellectual property

PUBLISHED : Tuesday, 15 August, 2017, 11:27am
UPDATED : Tuesday, 15 August, 2017, 11:14pm

China will take action to defend its interests if the United States damages trade ties, the Ministry of Commerce said on Tuesday, after US President Donald Trump authorised an inquiry into China’s alleged theft of intellectual property.

Trump’s move, the first direct trade measure by his administration against China, comes at a time of heightened tension over North Korea’s nuclear ambitions, although it is unlikely to prompt near-term change in commercial ties.

US Trade Representative Robert Lighthizer will have a year to look into whether to launch a formal investigation of China’s policies on intellectual property, which the White House and US industry groups say are harming American businesses and jobs.

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The United States should respect objective facts, act prudently, abide by its World Trade Organisation pledges and not destroy principles of multilateralism, an unidentified spokesman at China’s Ministry of Commerce said in a statement.

“If the US side ignores the facts and disrespects multilateral trade principles in taking actions that harms both sides trade interests, China will absolutely not sit by and watch, will inevitably adopt all appropriate measures and resolutely safeguard China’s lawful rights.”

The ministry said the United States should treasure the cooperation and favourable state of China-US trade relations and warned that any action to damage ties would harm both sides trade relations and companies.

China was continuously strengthening its administrative and judicial protections for intellectual property, the ministry added.

China’s policy of forcing foreign companies to turn over technology to Chinese joint venture partners and failure to crack down on intellectual property theft have been longstanding problems for several US administrations.

Trump administration officials have estimated that theft of intellectual property by China could be worth as much as US$600 billion.

Experts on China trade policy said the long lead time could allow Beijing to discuss some of the issues raised by Washington without being seen to cave to pressure under the threat of reprisals.

China repeatedly rebuffed attempts by previous US administrations to take action on its policies and has insisted it rigorously protects intellectual property.

The state-run news agency Xinhua said the US investigation was a unilateralist “baring of fangs” that would hurt both sides.

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Jacob Parker, vice-president of China operations at the US-China Business Council said Trump’s memo was only the beginning of the process, but that he expected a decision on how to move forward from the administration in 60 to 90 days.

“I think it will be much faster than a year,” Parker said.

Coming to terms on an investment treaty would be a better way to get China to address the intellectual property issues, he added.

“This isn’t a surprise. Our companies have been honing their crisis communications and internal planning processes since the election. The rhetoric that came up during the campaign led them to take proactive action then. They are prepared, aware and ready for these types of actions going forward.”

The investigation is likely to cast a shadow over US relations with China, its largest trading partner, just as Trump is asking it to put more pressure on North Korea to give up its nuclear programme.

Trump has suggested he would be more amenable to going easy on China over trade if it were more aggressive in reining in North Korea.

China has said the issues of trade with the United States should not be linked to the North Korea problem.

Beijing rejects link between North Korea and China-US trade

Ken Jarrett, president of the American Chamber of Commerce in Shanghai, said in a statement on Tuesday that trade and North Korea should not be linked, but that the investigation was a “measured and necessary step”.

“The president’s executive order reflects building frustration with Chinese trade and market entry policies, particularly those that pressure American companies to part with technologies and intellectual property in exchange for market access,” he said.

“Chinese companies operating in the United States do not face this pressure.”