On August 18, 2017, the United States Trade Representative (USTR) initiated an investigation under Section 302(b) of the Trade Act of 1974 regarding “China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.”  The investigation will determine whether these practices are actionable under Section 301 of that statute, which authorizes USTR to retaliate unilaterally against certain unreasonable or unjustifiable foreign trade practices.

USTR’s initiation notice sets forth four categories of policies that will be subject to the investigation, though information on other relevant practices will also be considered:

  • Any administrative approval processes, joint venture requirements, foreign equity limitation, procurements, or other mechanisms that require or pressure the transfer of technology or intellectual property from U.S. companies to Chinese companies;
  • Acts, policies, or practices that limit U.S. companies’ ability to set market-based terms in licensing or other technology-related negotiations with Chinese companies;
  • State-directed or -supported investments in U.S. companies for the purpose of acquiring technology or intellectual property and facilitating technology transfer in industries of strategic importance to the Chinese government; and
  • State-supported theft of technology, intellectual property, or other commercial information through hacking or other cyber-related means to provide a competitive advantage to Chinese companies.

Many will see an investigation into these issues as long overdue.  The Chinese government’s technology transfer policies and strategic treatment of intellectual property rights are perennial issues in U.S.-China trade relations, and World Trade Organization Rules do not provide a clear solution to the practices listed above.  A 2010 report published by the U.S. Chamber of Commerce, for example, described China’s “indigenous innovation” policies as “a blueprint for technology theft on a scale the world has never seen before.”  In response to President Trump’s August 14, 2017 memorandum calling for the investigation, the Chinese Ministry of Commerce issued a statement that “[a]ny U.S. trade protectionism move will surely damage bilateral ties and the interests of companies from both countries.”

The statute gives USTR 12 months to carry out its investigation.  USTR is soliciting written comments, to be submitted by September 28, 2017, and will hold a public hearing on October 10, 2017 at 9:30 AM.