WTO Pact May Guard Trade Secrets

By Dougherty, Carter | The Washington Times (Washington, DC), March 28, 2000 | Go to article overview
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WTO Pact May Guard Trade Secrets

Dougherty, Carter, The Washington Times (Washington, DC)

Companies facing the prospect of having to part with valuable trade secrets to gain access to the Chinese market will have a new tool if China joins the World Trade Organization.

The Clinton administration hopes - but organized labor doubts - that companies will be able to resist a practice known as forced technology transfer if Congress approves a landmark agreement to bring China into the WTO.

"The WTO agreement gives companies that want to resist it a legal basis to do so," said Kevin Dempsey, a lawyer for the Semiconductor Industry Association, which has closely followed Chinese technology policies.

But organized labor fiercely opposes normalized trade relations with China, arguing that China's promises can't be believed and doubting that American companies will quit sharing their secrets.

"The companies are not exactly unwilling participants in these [technology transfer] deals," said Steve Beckman, a trade analyst for the United Auto Workers.

The WTO agreement is designed to curb these practices by getting at the dominant role of the state in China. It forbids the Chinese government from conditioning investments on technology transfer, a rule American officials insist also applies to state-owned companies.

The forced transfer of technology stems from official Chinese policies that foster the development of nascent industries.

Chinese companies typically demand that investors in an array of sectors - automotive, electronics, aerospace - bring new technology into China as part of joint venture agreements. Since it controls the vast majority of companies, the Chinese government can use its companies as surrogates to carry out official policy.

Eager to crack the 1.3 billion-strong Chinese market, many American companies have complied at least in part with Chinese requirements.

The automotive industry is a case in point.

According to a 1999 study by the Commerce Department, General Motors and Ford both jumped into the Chinese market despite requirements that they bring their new technology with them. By contrast, Chrysler Corp. stormed away from the bargaining table in the face of Chinese demands it considered excessive.

Stories like these have conjured up nightmare scenarios in which American companies help create their own Chinese competitors, who first learn from the American technology giants and then challenge their dominance in the world market.

The WTO agreement, as U.S. Trade Representative Charlene Barshefsky hastens to point out, has no effect on stringent American regulations that control trade in goods with military applications. These laws have been the subject of bitter battles between the administration and Congress because China also wants to beef up its military capabilities, but the WTO has nothing to do with them.

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