Better for the U.S. to File the New China IPR Case in the WTO … More Legitimacy?

The USTR fired a direct shot at Beijing last week as it formally started a §301 investigation into China’s intellectual property practices and entry of US firms into China, particularly in joint ventures.

The formal decision to open an investigation followed Trump’s executive memorandum earlier last week. The USTR will hold a public hearing on the subject in October at the International Trade Commission, when members of the public may testify.

The USTR will examine whether Beijing’s practices – specifically requirements that U.S. companies transfer technology in order to do business in the country. It will need to determine if this violates the statutory standards of unreasonable, discriminatory or restriction of U.S. commerce.

If the USTR determines if any one of these standards has been violated the U.S. could eventually take unilateral action. But the rules indicate that a case shall be filed first in the World Trade Organization.

The problem is much of the global trading community consider that §301 in and of itself violates the WTO rules. That states joined the WTO as a means of restraining such unilateral actions, particularly by the U.S., the principal supporter of the WTO and the primary architect of the dispute resolution system.

As far as U.S. – China trade relations this may be viewed as only a very mild trade action — the filing of an administrative action within the U.S. Yet, even though Bannon is gone from the White House staff the USTR Lighthizer still represents his nationalistic – protectionist- China hawk sentiments. U.S.-China trade relations are still precarious.

The best practice for the U.S. is it should just go ahead and file an action with the WTO directly. That’s the proper forum. We have litigated many cases with China as both a complaining party and a responding party. That’s the normal and customary way of doing things in global commerce.

Why choose this unilateral and domestic action. A somewhat discredited  and nationalistic approach. This is not clear. But the answer in part is probably because the Obama administration did not. We’ll see …………….

  • ….. “USTR Initiates Section 301 Investigation of China.” USTR News Release (August 18, 2017).
  • ….. “Lighthizer’s Economic Deficit.” Wall Street Journal (August 22, 2017).
  • …..”Bannon Exit Highlights China’s Success in ‘Containing Trump’.” Financial Times (August 22, 2017).

About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (Schar School of Public Policy).
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