The United States today dragged China to the World Trade Organisation, accusing it of unfair technology practices that run counter to the WTO rules.
The US Trade Representative, Robert Lighthizer, filed a request for consultations with China at the WTO to address Beijing's discriminatory technology licensing requirements.
The request comes a day after US President Donald Trump announced that he was directing the USTR to pursue dispute settlement in the WTO to confront China over its policies that result in unfair treatment for US companies and innovators trying to do business in China.
China appears to be breaking WTO rules by denying foreign patent holders, including US companies, basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends, the USTR said.
In a statement, the USTR said 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, it said.
As per USTR, the American US consultation request identifies apparent breaches by China of WTO rules, harming the intellectual property rights of US companies and innovators.
The US 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 Trump Administration's third WTO consultation request.
Noting that consultations are the first step in the WTO dispute settlement process, the USTR said if the US and China are not able to reach a mutually agreed solution through consultations, the Trump Administration 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 US 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 US 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 China, USTR alleged.
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