US Trade Report 2018: Tariffs, sanctions or, engagement?

The United States Trade Representative (USTR) conducts ‘Special 301 Report’ annually to assess and evaluate the level of intellectual property (IP) protection and enforcement among US trading partners worldwide. The Special 301 Report is legally regulated through the Section 182 of the Trade Act 1974, amended by the Omnibus Trade and Competitiveness Act of 1988, the Uruguay Round Agreements Act, and the Trade Facilitation and Trade Enforcement Act of 2015 (19 U.S.C. § 2242). The report spots countries where IP protection for US goods and services is insufficient or stagnating thus placing them either on a ‘priority watch list’ or ‘watch list’ depending on the level of importance placed upon them. The annual report of the year 2018 saw two new additions to the watchlist as compared last year’s report, namely, Saudi Arabia and the UAE, making the overall number of countries rise up to 36. One of key highlights of the report is the US policy towards China, especially in light of recently imposed $50 billion trade tariffs on Chinese goods, by the Trump Administration.

On China

The Trump Administration stated that because of its theft of US IP, tariffs would be imposed upon China. The US President Donald Trump’s political rhetoric states that the US would become much “stronger and richer” with its planned Chinese import tariffs. Donald Trump issued a Memorandum on 14 August 2017 ordering the Trade Representative to determine whether policies, laws, practices or actions of the Chinese government that may be unreasonable or biased and harm American IP rights under section 301 of the Trade Act of 1974 (19 U.S.C. § 2411). It comes as no surprise, therefore, that China continues to be on the “priority watch list” for months after this statement, dating back to the first time the report was published in 1989. A year before the publication of this 2018 report, USTR launched an investigation into certain Chinese acts, policies, and practices related to technology transfer, IP, and innovation following consultation with the relevant advisory panel and the Section 301 Committee. The 2018 report highlights the challenges and concerns of the US in enforcing and protecting the US market and its IP concerns by the China.

By exerting pressure on China on a variety of pharmaceutical-related issues, including, adequate protection from unfair commercial use, and unauthorized disclosure of tests or other data generated, this US policy of implementing tariffs hopes to attain marketing authorization for pharmaceutical products. Thus, by speeding up the implementation of an effective patent dispute resolution system, between the two countries, the US uses a multifaceted policy with a strategic depth to engage with China, as well as exerting pressuring where it deems necessary. China also continues to be monitored in accordance with Section 306, which deals with enlisted countries that have bilateral agreements with the US to discuss specific concerns expressed in the previous reports.

This multidimensional policy towards China reflects the urgent need to address IP-related concerns, ranging from “trade secret theft to internet piracy, counterfeiting, high level of manufacturing, and export of fake goods”. The requirements for technology transfer imposed as a condition of access to the Chinese market means that foreign IP licensors are required to implement adverse conditions and criteria for IP ownership and research and development localization. As well as obstacles to pharmaceutical advancement, structural barriers to administrative, civil and criminal IP enforcement are extremely problematic for the US in its engagement with China. Therefore, through a standardization approach, many of the early reports highlight efforts to engage China, by bringing them as a party to various International conventions and treaties.

One of every US Administration’s main trading objectives is to capitalize on all possible ways to encourage other nations to allow US goods and services in their markets. Another trading priority of the government is to protect and enforce US IP rights in an appropriate and effective manner. One of the key goals of US government with relation to its trade policy is to ensure that the US IP owners enjoy the full scope of their IP rights, thus having an equitable opportunity to profit and use their IP globally.

On Pakistan

Likewise, Pakistan is one of the countries that have remained in the Special 301 Report watchlist ever since the first report was published in 1989. Pakistan was in the “priority watch list” for a full eight years starting from 2008 till 2015. Pakistan has been removed from the “priority” listing since 2016, while it has maintained a “positive dialog” on IP with the US according to this 2018 report. These talks focused on spreading noticeable public awareness, building capacity and training programs in Pakistan to promote IP protection and enforcement. Accordingly, in cooperation with the US Embassy in Islamabad, United States Patent and Trademark Office (USPTO) organized two workshops in Alexandria, Virginia for Pakistani customs officials and parliamentarians.

Pakistan remained on the ‘priority watch list’ until the publication of the 2006 report, which took it out to the “watch list”. This was a clear landmark in the progress made by the country on IP rights issues, as it was able to establish the Intellectual Property Organization of Pakistan (IPOP) for a more centralized and coordinated enforcement. Whilst the 2018 report indicates that the IPOP is continuing its efforts to coordinate the involvement of the different government bodies with relation to IPR. The 2018 report goes on to highlights specific concerns, including; “prevalent sales of pirated and counterfeit products, pharmaceuticals, printed works, optical media, digital content, and software”. In comparison, the 90’s (from 1993 until 1998), the reports in relation to Pakistan specifically referred to concerns over the lack of protection for textile designs and goods.

Much of the early 2000’s indicated widespread concerns regarding counterfeiting and piracy, especially of books and optical media. In 2007, the US conducted an out-of-cycle review to monitor progress in legislation enactment for providing effective protection against unfair commercial use of undisclosed test and other data generated to obtain marketing approval for pharmaceutical products, as well as system of coordination between its health and patent authorities to prevent the issuance of marketing approvals for unauthorized copies of patented pharmaceutical products.

The 2018 report shows optimism about the establishment of IP Tribunals in the major cities of Islamabad, Lahore, and Karachi, although it questions the courts’ potency. It is important to note that in the absence of sufficient human and financial resources to strengthen IP enforcement, the US presses Pakistan to continue to work bilaterally, including through the Commercial Law Development Program (CLDP), and to carry out further reforms to achieve international standards. Though as a country grappled with multi-dimensional political and financial crisis, it is unlikely that much that focus is prioritized towards IP, as the general rule of law and basic fundamental rights situation remains fragile, in itself.

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Usman Ghaffar

Usman Ghaffar is an aspiring IP law expert & a sports/tea enthusiast, who obtained his Bachelor of Laws from the Oxford Brookes University. He is currently undergoing his Master studies in Intellectual Property Law at the University of Szeged & Technische Universität Dresden.

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