"Notorious" List Ignites New Tensions in U.S.-China Trade Relationship

Trade Representative’s ‘Notorious Marketplaces’ list includes Alibaba and eight other Chinese sites, prompting scathing criticism from Beijing amid intellectual property probe.

Mark Melnicoe
    Jan 26, 2018 5:39 PM  PT
"Notorious" List Ignites New Tensions in U.S.-China Trade Relationship
author: Mark Melnicoe   

A list of "Notorious Marketplaces" that engage in sales of pirated merchandise, released earlier this month by the Trump administration, has become the latest flashpoint in the U.S.-China trade relationship.

Chinese authorities have been bristling at often-bellicose messages coming from President Donald Trump since the 2016 campaign, in which he threatened policies that, if carried out, would mean an almost certain trade war. Included were his threats to impose 40 percent across-the-board tariffs on all Chinese imports and a finding on Day 1 of his presidency that China was a currency manipulator. Neither was implemented, though the U.S. imposition Monday of 30-percent tariffs on imported solar panels might be signalling a first step. In response, a Chinese official called it an "abuse of trade remedy measures."

Now, despite an occasional personal rapport between Trump and Chinese President Xi Jinping, trade tensions are on the rise between the world's two economic superpowers, which exchanged $648 billion in goods and services in 2016, according to the Office of U.S. Trade Representative.

China Disputes Findings

China's Ministry of Commerce reacted for the first time last week to the so-called "notorious" list, which contains nine marketplaces in China – both online and physical - blasting American authorities for what it called suspect sources.

"In the report, the U.S. frequently discusses the relevant Chinese businesses with the words like "reportedly,' 'according to authoritative sources' and the like," Commerce Ministry spokesman Gao Feng told a media briefing in Beijing. "It lacked conclusive evidence and had no relevant figures to back up its points," he said, expressing "our doubts about the objectivity and reliability" of the Office of U.S. Trade Representative (OTR), which issued the report.

China has taken numerous steps to crack down on the sale of fake products, a point Gao noted in his remarks. The most significant was an edict laid down last March 22 by the State Council, China's highest administrative body, that takes a multi-pronged approach to fighting piracy. The circular enlists law enforcement, the courts, the media, and even schools in a bid to "effectively curb" intellectual property (IP) infringement by 2020.

China has its own reasons for doing so, quite apart from American pressure. The world's largest seller and producer of fake products is moving to a much more innovation-driven economy, and that means it needs to protect IP rights for its own companies that are increasingly engaged in artificial intelligence, pharmaceutical development, virtual reality and other technologies.

Alibaba, the Hangzhou-based e-commerce giant, made an unwanted return to the notorious list this year despite well-publicized efforts to rid the platform of fake merchandise. In a statement last week, the company called itself a "scapegoat" and "just another instrument to achieve the U.S. government's geopolitical objectives."

That was a reference to Trump's vows to get tougher on China on trade after repeatedly accusing it of ripping off the United States, citing the large trade deficit.


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Shanghai's Yangshan Deep Water Port is the world's busiest port.

 

In another friction point, the OTR in August announced an investigation into Chinese policies regarding technology transfer, intellectual property, and innovation under Section 301 of 1974 Trade Act. American companies and trade associations, while welcoming help from the Commerce Department in prying open China's markets, have been weighing in with comments on the probe. As they express support, they also seem wary of the Trump administration going too far and jeopardizing the gains they've made and perhaps igniting a trade war.

The U.S.-China Business Council, which represents more than 200 American companies operating in the Chinese mainland, urged the trade office to "keep the overall bilateral commercial relation in perspective" when deciding on any possible retaliatory actions.

"U.S. trade and investment with China supports roughly 2.6 million American jobs, across many industries," it said, adding that China's enormous size and future growth will fuel "more market opportunities for U.S. businesses." Given the benefits, "the United States should seek to preserve the gains we have made for American companies in China while addressing the problems that remain."

In other words, don't start a trade war that would likely begin with tit-for-tat retaliatory steps by each side that could quickly ratchet up. The trade office has a year, until August, to complete its probe and announce remedies.

THE LIST

The nine Chinese entities cited in the report, primarily for selling counterfeit goods or copyright infringement, are:

Online markets:

  1. DHgate.com - A business-to-business e-commerce platform

  2. Taobao.com (owned by the Alibaba Group) - China's largest mobile commerce destination and the third-most popular website in China

  3. TVPLUS, TVBROSWER and KUAIKAN - Apps that allow streaming of television, live sports, and other copyrighted content

Physical markets:

  1. Silk Market (Beijing) 

  2. Hongqiao Market (Beijng) 

  3. Shenzhen Jindu Garment Wholesale Market (Shenzhen) 

  4. Jinxiang Foreign Trade Garment Market (Guangzhou) 

  5. Jinshun Garment Market (Guangzhou) 

  6. Zhanxi Area Markets (Guangzhou)



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