By Jacob Schlesinger
WASHINGTON -- The Trump administration announced plans Saturday
to pressure China over alleged intellectual property theft, adding
the threat of trade retaliation to an ongoing campaign seeking
greater cooperation from Beijing in the North Korean nuclear
crisis.
Aides said President Donald Trump will sign a directive Monday
ordering his trade representative to start a formal probe into
whether Chinese government agencies and companies were unfairly
acquiring valuable patents and licenses from U.S. firms, either
through outright theft, or by pressuring Americans to turn over
their inventions as the price of entry into China's market.
"Such theft not only damages American companies, but can
threaten our national security," a senior administration official
said in a Saturday morning briefing for reporters.
Officials at the briefing stressed that while they were casting
a spotlight on what they consider a major irritant in bilateral
commercial relations, they weren't rushing into action. They said
Monday's directive would launch a study into whether a formal trade
investigation was warranted, and that probe would take a year or
more. They declined to discuss what sorts of penalties the U.S.
might impose against China, saying that question was
"premature."
The administration made the announcement a day after Mr. Trump
held a phone call with Chinese President Xi Jinping to discuss
escalating tensions over North Korea's rapidly advancing nuclear
weapons program. Mr. Trump has repeatedly said he would cut Beijing
slack over trade issues if he felt the Chinese were being helpful
in reining in Pyongyang.
The Wall Street Journal reported earlier in the month that a new
trade investigation over China's alleged forced technology
transfers was in the works and had been planned for an early August
announcement. But that was delayed until after an Aug. 5 U.N.
Security Council vote imposing new financial penalties on North
Korea, which China supported.
Asked if Mr. Trump discussed the pending trade investigation
with Mr. Xi on Friday, an official pointed to the official White
House summary of the call, which didn't mention trade issues.
The White House aides said the new trade probe wasn't tied to
the administration's North Korea strategy, despite the president's
earlier linkage of the subjects. "These are totally unrelated
events," one official said. "Trade is trade. National security is
national security."
The new probe does signal a bit of a hardening shift in Trump
administration's China trade policy, as it is the first White House
trade directive aimed directly at Beijing. During the 2016
presidential campaign, Mr. Trump regularly blasted the U.S.'s $347
billion trade deficit with China, and vowed to take swift, drastic
retaliation if he were elected, from across-the-board tariffs to
branding Beijing a "currency manipulator."
But the early months of Mr. Trump's presidency have seen a
considerably softer tone toward China over trade. He quickly
dropped the campaign-trail threats, and during a genial April
summit with Mr. Xi at his Mar-a-Lago Florida resort, the two
countries launched a new "comprehensive economic dialogue" aimed at
resolving bilateral commercial disputes amicably. A month later,
China announced some modest market-opening moves, like ending a
14-year ban on U.S. beef imports, and Commerce Secretary Wilbur
Ross declared economic ties between the world's two largest
economies were "hitting a new high."
But the first round of economic dialogue talks in mid-July were
tense and ended up with no agreements. Officials said Saturday that
impasse was one factor behind the decision to launch the new trade
review.
In focusing on China's voracious appetite for American
intellectual property, the Trump administration responding to a
longstanding complaint by Western trade groups, who say the
country's industrial policies effectively force foreign companies
in sectors such as autos to transfer technology to stay in the
market.
Beijing has been emboldened by the growing strength of its own
companies to make more demands of foreign firms, industry
executives say, and the government is careful to keep regulations
vague. U.S. high-tech companies have struck a string of investments
and technology-sharing agreements in software, semiconductors and
other areas in the past couple of years, often under pressure from
officials in closed-door meetings.
China's government rejects assertions that it forces foreign
companies to transfer technology or permits infringement of
intellectual property. Premier Li Keqiang denied it was using
industrial policies to strong-arm foreign companies into turning
over technology, telling a World Economic Forum meeting in Dalian
in June that "such cooperation is voluntary and helps companies
expand in the Chinese market and even in third countries."
While many U.S. companies and policy makers agree Chinese forced
technology transfer is a problem, they also say it is difficult to
figure out a solution.
One challenge is that many U.S. firms are reluctant to lodge
formal complaints, making it difficult for trade officials to make
their case.
"An important question going forward will be whether U.S.
companies and trade associations who have highlighted the problem
will actually come forward and assist our government in the
investigation," said Michael Wessel, a member of the congressional
U.S.-China Economic and Security Review Commission. Or, he added,
"whether they will hide the facts fearful that our government won't
follow through, that the Chinese will retaliate against their
interests or that they'll have to admit what's happened to their
critical assets."
Another question is just what remedy the U.S. government might
pursue if it felt it had a case. Options might include imposing new
limits on technologies that U.S. firms could license to China, or
imposing new limits on Chinese investment in the U.S. But those
would likely draw complaints from U.S. firms, and may contradict
other policy goals. Mr. Trump personally touted China's Foxconn
Technology Group's announcement in July to build a new display
panel factory in Wisconsin.
The new China probe also marks a noticeable change in the
process for how the Trump administration is processing trade
policies, and suggests that a newly more organized and measured way
to proceed with those complaints may be emerging.
Earlier Trump trade threats were made seeking swift action, and
were done without broad consultation from stakeholders, drew
widespread concern from business groups and lawmakers. Among them,
an April promise to impose new steel and aluminum tariffs by June
-- a plan that remains stalled amid resistance. Mr. Trump also in
April threatened to pull out of the North American Free Trade
Agreement, but backed down after intense lobbying from allies,
business groups, lawmakers and his own aides. He instead agreed to
renegotiate the pact with Canada and Mexico, a process that begins
Wednesday.
In choosing the China trade probe, Mr. Trump is targeting an
area that business groups and Republican and Democratic lawmakers
have identified as a concern. His aides Saturday also stressed that
in contrast with the rushed earlier attempts at handling trade
matters, they were setting no deadline and that any investigation
would closely follow intricate procedures, including discussions
with Beijing.
Before making any decisions on an investigation, the trade
representative "would consult with the appropriate advisory
committees," one official said, and "if the investigation is
instituted, we would consult with China. We would give interested
parties the opportunity to comment. There would likely be a
hearing. And these investigations can take as much as a year before
we reach a conclusion."
Eva Dou in Beijing contributed to this article.
Write to Jacob Schlesinger at jacob.schlesinger@wsj.com
(END) Dow Jones Newswires
August 12, 2017 14:48 ET (18:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.