U.S. Officially Launches Investigation of China's IP Practices

(Bloomberg) -- U.S. Trade Representative Robert Lighthizer officially started a probe into China’s intellectual-property practices, less than a week after President Donald Trump asked him to consider the move.

The U.S. will investigate China’s policies and practices related to technology transfer, IP and innovation to determine if the behavior is “unreasonable or discriminatory” or restricts U.S. commerce, Lighthizer said Friday in a statement.

“After consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation,” Lighthizer said.

Trump on Monday signed an executive memo directing USTR to consider probing China’s IP practices under Section 301 of the 1974 Trade Act. The provision gives the president broad authority to impose tariffs on foreign goods, though such unilateral action has rarely been used since the creation of the World Trade Organization in 1995, according to trade experts.

The IP issue is the latest source of tension between the world’s two biggest economies, which have seen relations cool since Trump and Chinese President Xi Jinping bonded on a visit to the former’s Mar-a-Lago resort earlier this year. The probe threatens to further complicate the countries’ efforts to contain North Korea’s nuclear threat.

China’s Ministry of Commerce responded Tuesday to Trump’s memo with a statement saying it “will resort to all proper measures” to defend its rights if the U.S. disregards multilateral rules and hurts bilateral trade.

‘My Duty’

USTR said an inter-agency panel will hold a public hearing Oct. 10, and it invited those interested in the issue to submit comments by Sept. 28. USTR has argued in the past that Beijing uses a range of practices to force U.S. companies to transfer IP, such as by granting regulatory approvals to drug makers that shift production to China or requiring that the designs of foreign products be replicable in China.

“It’s my duty and responsibility to protect the American workers’ technology and industry from unfair and abusive actions,” Trump said at the White House on Monday. “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.”

To contact the reporter on this story: Andrew Mayeda in Washington at amayeda@bloomberg.net.

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Randall Woods, Robert Jameson