Made-in-China policy under fire

Move a market barrier, say US business giants which want govt action

By Bhagyashree Garekar, US Correspondent

WASHINGTON: In a development with shades of Google's clash with China, some of the biggest American companies have demanded that Washington intervene against Chinese policies which allegedly champion local businesses at the expense of US firms.

The call came from 19 US business groups, including influential bodies such as the US Chamber of Commerce and the Business Software Alliance, whose members include Microsoft, Apple and Cisco.

These groups have sought a firm US response to China's 'indigenous innovation' programmes which, they argued, will shut out the world's third-largest market to American firms unless they create Chinese brands and transfer the research and development of new products to China.

'For several years, the Chinese government has been implementing indigenous innovation policies aimed at carving out markets for national champions and increasing the locally owned and developed intellectual property of innovative products.

'We are increasingly alarmed by the means China is using to achieve these goals,' they said in a letter addressed to US Secretary of State Hillary Clinton, Treasury Secretary Timothy Geithner, US Trade Representative Ron Kirk and other top officials.

The development marks a new wrinkle in US-China ties, which were already under strain from a series of low-level trade disputes even before news of the Google incident broke earlier this month.

The Internet company had threatened to take down its Chinese portal, citing censorship and theft of intellectual property from hacking attacks which it claimed originated from China.

Much to Beijing's annoyance, the State Department raised the Google case in meetings with Chinese officials.

Mrs Clinton is likely to bring it up when she meets her Chinese counterpart in London today for a conference on Afghanistan, said reports.

In Tuesday's letter, the US businesses said they were particularly concerned about the new rules issued by the Chinese government in November to set up a national catalogue of products qualifying for significant preferences in government procurements. For listing in the catalogue, the products need to contain intellectual property that is developed and owned in China.

'This represents an unprecedented use of domestic intellectual property as a market-access condition,' they said.

Under the so-called Indigenous Innovation Product Accreditation system, sectors such as computers, software, telecommunications and green technology were the first to be affected.

When the rules were introduced, the US Chamber of Commerce, as well as business groups from Canada, Europe and Japan, laid out their concerns in a letter to the Chinese government.

But the latest salvo, coming after the Google episode, is likely to create a bigger stir.

In the petition, the US businesses warned that there were signs that Beijing might extend the restriction to more sectors and introduce elements such as subsidies for Chinese companies.

'Such policies, if left unchallenged, will be pursued by other important trading partners,' they argued.

Linking the issue to broader US-China ties, they called on the Obama administration to make it 'a strategic priority' in its economic engagement with Beijing.

Ending the letter on a strong note, they urged the government to consult businesses and like-minded foreign governments to come up with 'a strong, fully coordinated response to the Chinese government'.

Source: Straits Times, 28 Jan 2010.