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WTO case eyed over China’s forced technology transfers

WTO case eyed over China’s forced technology transfers

TOKYO (The Japan News/ANN) - Japan, the United States and the European Union are considering jointly filing a case against China at the World Trade Organization over Chinese rules that effectively force foreign companies to transfer technologies to domestic firms, Japan's The Yomiuri Shimbun has learned.

The move is aimed at protecting the technologies and other intellectual property of companies that enter the Chinese market.

Japan, the United States and the European Union are working together to curb Chinese policies designed to aid its own companies in the massive domestic market.

The Japan-US-EU side started full-fledged discussions on this issue in January and are preparing to jointly file the case as early as March. In 2012, Japan, the United States and the European Union jointly lodged a formal complaint against China over its restrictions on exports of rare earth metals and other materials, but this latest case would be the first to involve the technology transfer issue.

The Chinese government has established strict capital controls for foreign companies in the automobile and other important industries. Foreign firms seeking to enter the Chinese market cannot avoid setting up joint ventures with domestic companies. Under a regulation that took effect in 2002, after a foreign firm transfers technology to a Chinese company or a joint venture and that technology is then improved inside China, the Chinese firm is allowed to freely use that technology.

This has made it very difficult for Japanese, US and EU companies to keep their unique technologies and confidential information within their own walls. The Japan-US-EU side believes the Chinese regulations, for all intents and purposes, force foreign companies to transfer their technologies, which violates WTO principles that prohibit discriminatory treatment of foreign companies.

As China’s economy has grown, transfers of technology from overseas have also quickly expanded. In 2011, it was revealed that China was preparing to apply for patents overseas for some technologies incorporated into a high-speed train that Chinese companies had developed based on technologies supplied by manufacturers from Japan, Germany and elsewhere.

After the complaint is filed, all nations involved in the case — including China — will hold discussions on the issue. If the problem cannot be resolved at this stage, the process then moves to a WTO dispute settlement panel that examines the case. If the panel decides trade rules have been violated, the WTO will urge China to take corrective steps.

This review could drag on for an extended time, but Japan, the United States and the European Union have decided this issue should not be left unaddressed.

In its “Made in China 2025” initiative announced in 2015, Beijing stated its plan to become a world-class manufacturing superpower. The strategy centers on fields such as electric vehicles, robots and social infrastructure, including electrical power facilities and transport systems. Many Japanese companies are at the forefront of these fields thanks to their technologies, so this has generated a growing sense of urgency over possible technology leaks.

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