The report, entitled China’s drive for Indigenous Innovation – A Web of Industrial Policies, was written by James McGregor, a senior counselor for public affairs and communications firm APCO Worldwide.
It states that China’s polices are considered by many multinational companies to be "a blueprint for technology theft on a scale the world has never seen before".
The Chamber published the report on July 28. On the same day, Ron Kirk, United States Trade Representative, responded to reporters’ questions by saying that indigenous innovation "is going to be one of the top items that we continue to engage China on".
"We did address it and we were pleased that we got them to at least agree to be more transparent but we do not have final resolution of that," he added.
A week earlier, EU Trade Commissioner Karel de Gucht saidon a visit to Shanghai that European businesses were "increasingly worried" about the procurement policies of the Chinese government.
"Most of it has to do with the protection of intellectual property because the core of our economy is of course intellectual property," he said.
The US Chamber of Commerce report dates the origins of China’s latest drive to encourage domestic innovation, often referred to as its indigenous innovation policy, to 2006.
But the policy came under greater foreign scrutiny in December last year when the Chinese government published Instructions for National Indigenous Innovation Product Application Procedures. These appeared to limit what patents or trade marks that companies bidding on government contracts could hold outside China.
After strong objections from EU and US trade and industry groups, the Chinese government relaxed the requirements in April.
In particular, the section on trade marks now states that an applicant needs to have "exclusive rights to the product’s registered trade mark or the right to use the trade mark under PRC law".
But a separate section dealing with other IP rights was ambiguously worded, and IP owners are anxiously waiting for the publication of the first list of accredited companies that have fulfilled the indigenous innovation criteria.
The 40-page US Chamber of Commerce Report dates a shift in the technology policies of the Chinese government "from defence to offence" in July 2009 during the Communist Party’s 11th Ambassadorial Conference in Beijing in July 2009.
The report also refers to the Schneider Electric case, in which a French company ended up settling a long-running dispute with Chinese rival Chint over a utility model patent for $23 million, and China’s drive to create new technology standards such as TD-SCDMA for 3G mobile phones.
McGregor calls for the US government to switch its negotiating focus from China’s alleged currency manipulation to its IP policies and IP enforcement: "The currency debate gets lost in a cloud of economic theory. But IPR protection is governed by very clear international conventions and legal regimes that are enforceable in courts."
The Chinese government has vigorously rejected accusations of protectionism. In a comment piece for the Financial Times, Chen Deming, China’s Minster of Commerce, referred to a consultation held last year over the criteria used to accredit innovation products. "The results emphasised that all foreign enterprises are given equal treatment and that all their products are considered to be "made in China", while the same rules of origin are applied to them as to Chinese products," he wrote.
The WTO has a separate Agreement on Government Procurement, which China has not yet signed. China said in April that it would make a new effort to join the Agreement and reportedly submitted a new proposal to join in July.
