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Commentary By Diana Furchtgott-Roth

Standing Up to China

Economics, Governance Civil Justice

President Trump is helping American companies fight intellectual property theft.

President Donald Trump has asked the U.S trade representative to explore whether China has stolen American intellectual property. It's about time that China was taken to task, not just for intellectual property violations, but for making it difficult for American companies to operate within China.

America has a competitive advantage and consistently outperforms the world in intellectual property. People seek to imitate America in many ways, including music, software, pharmaceuticals and technology.

“American businesses expect theft in countries around the world, and take it for granted that our government does nothing in response.”

But in many countries American intellectual property is routinely stolen. Each year, the trade representative publishes a report on global intellectual property theft.

In last April's report, Algeria, Argentina, Chile, China, India, Indonesia, Kuwait, Russia, Thailand, Ukraine and Venezuela were listed as egregious violators and placed on the "Priority Watch List." These same countries were listed in the 2016 report. Another 23 countries are on a "watch list."

American intellectual property is stolen in many ways. As well as software piracy, American corporate employees are thrown in prison or harassed in a government shake-down. Companies are hauled into foreign courts and accused of stealing their own patents. Pharmaceuticals are copied without license.

Millions of Americans earn their livelihood from creating, protecting and promoting intellectual property. When American intellectual property is stolen, Americans lose.

American businesses expect theft in countries around the world, and take it for granted that our government does nothing in response. This emboldens those who steal our property, leading them to increase their piracy. Trump's actions should be a warning to China and other offending nations to obey the rules.

In addition to intellectual property theft, China makes business difficult for foreigners in other ways. It blocks the development of American business in China at the same time that it seeks to expand in America. In 2016, Chinese investment in the United States was over $55 billion, according to the China Global Investment Tracker.

Major Chinese tech companies such as Alibaba have centers in California and benefit from U.S. capital markets, even as their American counterparts are blocked in China.

Fuyao, a Chinese auto glass company, opened a plant in Ohio. But when American companies want to open plants in China, they face obstacles.

American automobile companies are required to partner with state-owned Chinese automobile firms in joint ventures in order to produce vehicles in China. Joint ventures in China are further restricted by limiting the maximum percent of ownership to foreign companies to 50, known as the 50:50 rule, as well as requiring foreign companies to share their technology, resulting in intellectual property theft.

U.S. credit card companies, such as Visa and American Express, have been trying to enter the Chinese marketplace for approximately 10 years. In 2012, the World Trade Organization ruled in favor of U.S. credit card companies, but China failed to open the credit card market until 2015. Five years after the WTO ruling, U.S. companies have guidelines to receive licenses, but the process will likely take at least two years to complete.

New Balance has been tangled up in lawsuits because it translated "New Balance" into a similar word in Chinese, Xin Bai Lun, which was awarded to someone else in the 1990s. Despite having the name New Balance in America since the 1960s, it continues to lose court battles for having used the term "Xin Bai Lun" in a few advertisements. Apple, Michael Jordan and Tesla, have also run into trademark battles in China.

American companies are afraid to stand up for themselves because they fear being blocked completely from the lucrative Chinese market. Finally, with Trump's announcement, our government is starting to fight back.

This piece originally appeared in U.S. News & World Report


Diana Furchtgott-Roth is a senior fellow and director of Economics21. She also served on the transition team for President Donald Trump. Follow her on Twitter here.

This piece originally appeared in U.S. News and World Report