Why the 2020 U.S.-China Trade Agreement Needs Anti-Corruption Provisions for the Protection of Intellectual Property

The United States has created the ultimate enforcement weapon for its intellectual property (IP) rights in Phase I of the 2020 U.S.-China Economic and Trade Agreement (USCTA). Under the USCTA, the United States has a unilateral right to declare China in breach of the treaty and to impose trade sanctions. The USCTA forbids China from retaliating. China’s only recourse is to withdraw from the USCTA. If China withdraws, however, the United States could reinstate the punitive tariffs that were suspended by the USCTA. As a result, China will be subject to tariffs no matter what it decides, either under the USCTA or due to withdrawal from the USCTA. China has been trapped into a no-win situation. As a matter of legal procedure, the USCTA is innovative and path-breaking; it is also clever and ruthless.As a matter of substantive law, however, the USCTA fails to address problems that have long plagued multinational companies (MNCs) in China. These are problems of pervasive corruption by government and business entities that create barriers to effective on the ground enforcement of IP rights, which is essential to day-to-day operations of MNCs. These problems are especially serious in three areas: demands for payments by PRC authorities in the enforcement of trade secrets, the use of ex parte contacts to influence the results of civil IP litigation, and the use of business bribes in e-commerce platforms that have contributed to an explosion in online sales of counterfeit products.Fortunately, the United States still has an opportunity to address these issues during the current negotiations on the second phase of the USCTA. This article will offer concrete suggestions on how to draft new provisions to address these major substantive problems that have long plagued MNCs in China