Trump authorises inquiry into IP violations in China

US President Donald Trump has put the heat on trade relations with China after signing an executive memorandum authorising an inquiry into the economy's alleged intellectual property violations and counterfeiting activities.

The move follows rumours reported by numerous media outlets a couple of weeks ago that the president had been discussing how to tackle the perceived IP violation issue in China, with suggestions that the possibility of an investigation by the US Trade Representative's office, under section 301 of the 1974 Trade Act, rated highly. This would have allowed Trump to impose tariffs and import quotas, as well as rescind licenses for Chinese firms, in response to discriminatory restrictions on American commerce.

The new memorandum, however, is a step shy of a full-blown investigation and instead directs US Trade Representative Robert Lighthizer to spend up to a year reviewing whether a formal investigation should be launched into China's trade policies on intellectual property. If an investigation is deemed warranted, it could take a year to complete.

Speaking at the White House on signing the memorandum, Trump said: "It's my duty and responsibility to protect the American workers' technology and industry from unfair and abusive actions. We will stand up to any country that unlawfully forces American companies to transfer their valuable technology as a condition of market access. We will combat the counterfeiting and piracy that destroys American jobs."

Calling the inquiry "a very big move", Trump also added: "This is just the beginning. I want to tell you that. We will safeguard the copyrights, patents, trademarks, trade secrets and other intellectual property that is so vital to our security and our prosperity."

According to data from the Commission on the Theft of American Intellectual Property, global counterfeiting, IP violations, theft of trade secrets and piracy costs the US economy as much as $600 billion a year.

Manufacturers have grown increasingly frustrated with what they see as China's unfair trade practices against US companies, which many argue are impacting jobs, growth and the US economy, as well as potentially threatening national security.

In its bid to become a world leader in technologies, such as electric cars, to compete with the US and Europe, China has introduced new rules where foreign firms are pressured to join joint ventures and share confidential company information with local partners, as well as having to store local data on Chinese servers. Opponents claim these rules could remove protections on US tech secrets and IP.

Last month, the USTR accused China of "widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe", and estimates that around 12 per cent of Chinese exports are fakes.

China has rejected the allegations of IP violations and has criticised the US move, saying it will do more harm than good.

In a statement, China's Ministry of Commerce said it "will resort to all proper measures" to defend its rights. "The US should cherish the current good trade ties and rapport with China, and any protectionist move will certainly damage bilateral economic relations and hurt business interests of companies in both countries."

The state-run newspaper, China Daily, called the US move a "rash" decision. "Instead of advancing the United States' interests, politicising trade will only acerbate the country's economic woes, and poison the overall China-US relationship," it said.

The inquiry has also been met with mixed responses on US soil. Variety magazine reported that Jessica Mackler, president of the progressive group American Bridge, said Trump's memorandum didn't go far enough. The "Chinese have undertaken job-killing attacks on American competitiveness and all Trump could muster-up in response was a vague request that wasn't worth the paper it was printed on. This weak, bureaucratic non-action is the latest proof from Donald Trump that his economic promises were empty lip-service about very real, urgent problems for our country."

However, there is also genuine concern that Trump may start a trade war where China will retaliate and the US consumer could lose out as prices rise.

Meanwhile, the memorandum comes a time when Trump is trying to increase pressure on China to rein in its neighbour North Korea over its missile testing and amid heightened tension over threats of nuclear war with America. The US has threatened trade measures with China to get the country onside, although US officials have downplayed the current memorandum in this context. China has opposed Trump's tactics to use trade as a negotiating tool.