US trade report keeps China on priority watch list as Blinken visit begins

China remains on Washington’s “priority watch list” for intellectual property protection infringement amid a “slowdown” in Beijing’s pace of reform, the US government said on Wednesday.

The latest Special 301 Report – issued each year by the Office of the United States Trade Representative (USTR) to assess the adequacy and effectiveness of the country’s trading partners’ IP rights protection – landed as US Secretary of State Antony Blinken started his three-day trip to China.

“In 2023, the pace of reforms in China remained slow,” said a senior USTR official. “Stakeholders acknowledge some positive developments but continue to raise concerns about implementation of the amended criminal law, copyright law and patent law.”

Other long-standing concerns raised by rights holders include technology transfer, trade secrets, bad faith trademarks, counterfeiting, online piracy and geographical indications, the official said.

The 93-page report, of which the China section comprises 10 pages, said the USTR has been taking actions to address “unfair and harmful Chinese acts, policies, and practices”.

The priority watch list remained unchanged from last year, with Argentina, Chile, India, Indonesia, Russia and Venezuela also continuing to appear.

In addition, 20 other countries were placed on the USTR’s “watch list”, reducing the number by two from last year, after it removed the Dominican Republic and Uzbekistan.

China has been either listed on the priority watch list or identified as a “priority foreign country” for most of the years since the report was first issued in 1989.

This year’s report noted that “statements by Chinese officials that tie IP rights to Chinese market dominance continue to raise strong concerns”, as did the 2022 report.

These included statements from President Xi Jinping on the need for China to allow no delays in breaking through the “chokehold” of critical core technologies, the latest report said.

“Such statements recall long-standing concerns about requiring or pressuring technology transfer from foreign individuals or companies to Chinese companies, as well as about whether IP protection and enforcement will apply fairly to foreign right holders in China,” it said.

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Critical concerns also include “the decrease in transparency and the potential for political intervention” with the Chinese judicial system, according to the report.

China’s Supreme People’s Court admitted in December that Chinese courts were uploading fewer verdicts to China Judgments Online – an online public database serves as an important resource for lawyers, academics and the public.

The court cited security and privacy concerns and said 19.2 million court rulings were uploaded to the website in 2020, but dropped to 10.4 million in 2022, and just 5.1 million in 2023.

The move is “further hampering transparency and making it more difficult for right holders to determine how China protects and enforces foreign IP”, the USTR report said.

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Although a new database of verdicts was launched in February, the report said there are still concerns over a deterioration in transparency, as the Supreme People’s Court has not clarified the extent to which case decisions will be accessible to the general public or foreign firms.

The report noted that China continues to be the world’s leading source of counterfeit and pirated goods, based on US customs seizures in fiscal year 2023.

Counterfeit and pirated goods from the mainland and Hong Kong accounted for more than 83 per cent of the value, measured by manufacturers’ suggested retail prices, during the period, according to US Customs and Border Protection.

The USTR said China’s e-commerce markets – the largest in the world – remain a source of widespread counterfeiting as sales of infringing products have migrated from physical to online marketplaces.

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Last week, the USTR announced the launch of another Section 301 investigation into China’s maritime, logistics and shipbuilding sectors.

This is on top of the 2017 investigation that led to the imposition of tariffs on a variety of imported goods from China over the following two years. In retaliation, China attached additional tariffs to certain US goods.

In 2020, the two countries reached the first phase of an economic and trade agreement that included a progressive rollback of tariffs as well as a chapter on strengthening protection and enforcement of IP in China.

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