Ties That Bind - Bay Area Council Economic Institute

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Ties That Bind
protection should be followed by actions that bring such protection
into reality. And this is not a fantasy: there are constituencies
inside of China that seek stronger IP protection precisely
so that they can upgrade their own technology and skills base,
and appropriate an adequate return from those investments.
The U.S. government must also make adjustments in its approach
to the Chinese semiconductor industry. Its attempts to
limit access by Chinese firms to advanced semiconductor technology
have merely shifted the supply of those technologies
from the U.S. to Europe and Japan. China will develop a world
class semiconductor industry in time, and the U.S. lacks the
ability to alter that trajectory. In our view, the emergence of a
globally competitive Chinese semiconductor industry will take
substantial time, and is a development to be welcomed, not
feared. It will likely propel the two largest economies in the
world to become still more interdependent and, if managed well,
can increase prosperity in both countries and worldwide.
The Intellectual Property Hurdle
Whether a U.S. company is a manufacturer of clothing or consumer goods, or a producer of
semiconductor equipment or software, IP concerns in China sooner or later must be dealt with.
Protection of intellectual property topped the list of post-WTO concerns among foreign companies
exporting to and investing in China, in a U.S.-China Business Council 2005 survey. Although
the PRC has laws on its books protecting foreign patents, trademarks and copyrights—
and in 2001 strengthened those laws to conform with WTO standards for Trade-Related Intellectual
Property Rights (TRIPS)—enforcement has been uneven at best in areas ranging from
CDs and DVDs to software to pharmaceuticals to luxury consumer goods. IPR protection is
slowly improving, particularly in major business centers like Beijing and Shanghai, but falls off
sharply in more remote jurisdictions.