Pointer Blog / IPR and the US-China Trade War

IPR and the US-China Trade War

Protecting your brand in a changing global landscape

Unless you work in specific fields, such as mass agriculture or car manufacturing, you can be forgiven for not paying close attention to the details of the US-China trade dispute. As a primer for those who haven’t followed the story, since July 2018, tensions between President Trump and President Xi have ratcheted up as both countries have applied tariffs on products traded internationally. From soya crops to steel, both countries have increased the prices on a wide range of goods by taxing their cross-border movement. From the perspective of the US, this is to address what they claim is the Chinese government’s unfair manipulation of capitalist markets. For China, on the other hand, the American actions are part of a long-term policy of the economic intimidation of other nations.

If current trends continue, then ultimately this game of political chicken will only end when the economy of one of these nations slows down so much that it significantly compromises its own people. As of January 2019, signs point to the Chinese being more disproportionately inconvenienced by the trade war, their economy relying much more on exporting goods to the US than the other way around. However, US consumers do buy Chinese goods and the increase in prices on them has had an effect on consumer confidence which may well hurt the Americans too. A recent report by Bank of America Merrill Lynch even suggested that the Chinese economic slowdown may ease in the next few months while the American one is in danger of increasing. Coupled with the recent, high-profile profit miss against Apple’s usually untouchable forecasts, the American dominance of this issue doesn’t seem set quite yet.

How the US-China trade war affects intellectual property

In amongst these questions of supply and demand, however, there are also issues pertaining directly to IP rights and to China’s relationship with the rest of the world. There’s no doubt that some American politicians and business leaders see the trade war as an opportunity to take aim at what they see as China’s controversial lack of recognition for the IP rights of others.

In April 2018, a statement released by the White House pulled no punches on their view that China has been responsible for unscrupulous activity with regard to IP. “China has repeatedly engaged in practices to unfairly obtain America’s intellectual property,” and revealed that future trade talks had to be based on “achieving free, fair, and reciprocal trade and to protect the technology and intellectual property of American companies and American people.” Although much of this is concerned with patents, and with China’s controversial technology-transfer policy (wherein foreign companies with unique technology are required to partner with local firms and share their IP), questions around trademarks also persist.

Brand protection in the new China

There are two points arising from this situation, which are pertinent for brands interested in protecting their intellectual property. First, if the pressure on China to remedy their lack of recognition for western IP wins out then the resolution of the trade war may actually fall in favor of brands. In addition to easing economic tariffs, one of China’s main bargaining tools with the US will be the promise to work more proactively with western companies to redress the historical market manipulation. In some small but noticeable ways, this attempt to potentially improve relations has already been seen by China’s granting of trademarks for President Trump’s daughter, Ivanka, who recently secured marks within a year rather than the more usual period of 18 months to 2 years. Similarly, in December 2018 the Chinese government also announced new, stricter penalties on companies who don’t comply with IP law – all of which indicates a growing appetite for change. For brands who have counterfeiting issues in China then, the need to have relevant Chinese trademarks and to work with a partner who has expertise in maximizing them couldn’t be more timely.

Secondly, another aspect of brand protection which may be impacted by the trade war is the effect of price rises on consumer confidence. David Taylor, chief executive of Procter & Gamble, recently made a statement which outlined their fears that Chinese consumers will soon turn away from American brands. Understandably, with a billion customers in China, P&G are fearful of this occurring. One of the problems when consumers become more price-sensitive is that many of them will turn to counterfeiters, who subsequently experience their own growth to fill the gap.

At this point, the outcome of the US-China dispute is uncertain but the possibilities are very real that some mixture of the above could develop. A perfect storm of good fortune for brands would be that the Chinese begin to seriously tackle the problems of IP infringements on their online platforms but that the counterfeit problem also doesn’t grow in size. Whatever happens though, it pays to protect yourself adequately and to align with service providers who know how to make this work. If you need help with your IP rights in China why not give Pointer a call?

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