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Annual U.S.-China Trade Meeting Yields Modest Results

The U.S. Department of Commerce reports that the U.S.-China Joint Commission on Commerce and Trade meeting in Washington, D.C., on 21-13 November yielded “key outcomes” in the areas of intellectual property rights protection, pharmaceuticals and medical devices, and information security policies. Commerce Secretary Penny Pritzker declared that while the two sides had productive discussions “significant challenges remain in our relationship, and we must redouble our commitment to addressing them.” The United States did not secure the commitments it had hoped for in the areas of biotechnology approvals and market access for beef but Pritzker is optimistic that additional progress could be made in these areas in the final weeks of the Obama administration. She also underscored the critical importance of pursuing “constructive engagement and sustained diplomacy” if the two sides are to make additional progress in the months and years to come.

Below is a summary of the major accomplishments of the meeting.

Implementation of Past Commitments
The United States and mainland China agreed on the importance of the full implementation of past JCCT outcomes to secure meaningful benefits for their workers and businesses. Beijing agreed to build upon the 2011 commitment of President Hu Jintao to President Obama to delink mainland Chinese indigenous innovation policies from government procurement preference as well as mainland China’s 2011 JCCT and S&ED commitments to eliminate catalogues or measures with such links.
 
Medical Devices and Pharmaceuticals
Mainland China committed to strengthen oversight of government procurement of medical devices to ensure foreign brands and foreign-manufactured products are treated in a transparent, fair and equitable manner and to not link procurement to policies promoting domestically-produced medical devices. Mainland China also affirmed that drug registration review and approval will not be linked to pricing commitments and will not require specific pricing information.

During the drafting of its unique device identification number regulations and implementing plans mainland China will fully consider the U.S. proposal to rely on international standards and harmonise with globally accredited UDI issuing agencies. It will also offer a phased-in and risk-based implementation approach, with an initial implementation period for phase I to be no less than two years from the issuance of the final rule and an exemption for all devices manufactured or labelled prior to the rule’s effective date.

IPR Protection and Enforcement
Mainland China agreed to a number of IPR-related commitments that will facilitate much-needed improvements for a wide range of industries that rely on the ability to protect and enforce their IPR in the mainland. Beijing confirmed that it is strengthening its trade secrets protections, including through planned amendments to the Anti-Unfair Competition Law and related judicial practice. It also plans to bolster other elements of its trade secrets regime, including with respect to the availability of evidence preservation orders and damages based on market value, consistent with other developments in intellectual property law in the mainland, as well as the issuance of a judicial interpretation on preliminary injunctions and other matters.  

Both sides confirmed that in those cases in which a judicial or administrative enforcement authority requests the submission of confidential information in conjunction with a trade secret enforcement matter such requests will be narrowly tailored to avoid putting sensitive business information at risk and will be subject to appropriate protective orders to control additional disclosure and ensure that information is not further misappropriated.

Mainland China is also actively conducting research on the Technology Import and Export Administration Regulations to address U.S. concerns and better address newly emerging areas of technology transfer. To that end mainland China will convene a joint seminar with the United States in the first quarter of 2017. Moreover, both sides will explore the use of big data and other new information technologies to enhance the capability for combating infringement and counterfeiting online.

In the coming year the two sides are to conduct numerous substantive exchanges and programmes on important IPR issues, including a technology licencing programme co-sponsored by the Ministry of Commerce, a programme to exchange information on mainland China’s legal protections for product and service designs and U.S. trade dress protections, programmes on criminal enforcement of trade secrets and counterfeit pharmaceuticals, and a joint conference to share experiences on recent trends in technologies, business models, and international legal developments and to discuss possible ways that criminal law, legislation and enforcement on IPR may be effectively utilised and adapted to address current and emerging IPR challenges.

Excess Capacity
Building on presidential commitments made earlier this year, the United States and mainland China agreed to jointly promote the expeditious establishment of the Global Forum on Steel Excess Capacity. In addition, the two sides recognised the commitment by G20 leaders to take effective steps to address the challenges of global excess capacity. Both sides also agreed to exchange information on soda ash and address global electrolytic aluminium excess capacity.

Innovation
This year’s JCCT provided an opportunity for the United States and mainland China to build upon commitments made by Presidents Obama and Xi in September 2016 that innovation policies should be consistent with the principle of non-discrimination. Mainland China confirmed that its “secure and controllable” policies will not limit sales opportunities for foreign companies or impose nationality-based restrictions and will be notified to the WTO Technical Barriers to Trade Committee. Recognising the importance of interconnected global digital infrastructures and the value of innovative technologies in effectively managing evolving new risks, the two sides also recognised that generally applicable information and communications technology security-related measures in their respective economies in commercial sectors do not discriminate unnecessarily or unnecessarily restrict trade or the flow of information in an orderly fashion.

Semiconductors
Mainland China and the United States jointly reaffirmed their commitment to a strong, vibrant global semiconductor industry that operates in fair, open and transparent legal and regulatory environments. Mainland China reaffirmed that operation of the integrated circuit investment funds will be based on market principles and that the government will not interfere with the normal operation of the funds. Beijing also clarified that the government has never asked the funds to require compulsory technology or IPR transfer as a condition for participation in the funds’ investment projects.

Competition
Mainland China clarified that its laws, regulations, rules and guidelines, as well as decisions on administrative penalties and merger reviews (published pursuant to AML Art. 30), are published on the websites of mainland China’s anti-monopoly enforcement agencies and will be updated in a timely manner.

Agriculture and Food Safety
Mainland China and the United States committed to exchange information and collaborate on the efforts that will lead to the recognition of zones free of high pathogenicity and low pathogenicity (subtypes H5 and H7) avian influenza, consistent with the recommendations of the OIE Terrestrial Animal Health Code, in order to minimise unnecessary disruptions of trade. The two sides also conducted technical discussions on their respective certificate requirements for imported foods and agreed to further co-operation and discussions regarding import requirements related to food safety.

Trade Statistics
At a 8-9 November meeting of the Statistics Working Group the two sides confirmed the new method for further reducing the statistical discrepancies of bi-lateral goods trade, analysed the causes for the statistical discrepancies of mainland China’s foreign direct investment in the United States and discussed the further analysis of statistical discrepancies of trade in services. They also agreed to launch research on statistical discrepancies of U.S. FDI in mainland China. A 2017 work plan will be drafted by the end of 2016 and research reports on statistical discrepancies of goods trade and mainland China’s FDI in the United States will be submitted to the next JCCT meeting.

Content provided by Picture: HKTDC Research
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