US says China is still failing to crack down on copyright infringement and IP piracy

The US says China has failed to address the rampant trade of counterfeit goods, in Washington's latest review of "notorious markets" that comes amid heightened tensions between the world's two largest economies.

Like it did last year, the Office of the US Trade Representative (USTR) has designated six large Chinese online platforms as "notorious" sellers of counterfeit goods that violate US trademarks and copyright law, and said such piracy remains detrimental to American workers. It also added three new physical markets in China to the list, which identifies a total of 18 countries.

"This year's NML includes several previously identified markets because owners, operators and governments failed to address the stated concerns," the report said, referring to the Notorious Markets List that flags prominent foreign violators.

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Protecting intellectual property is a high priority for the American government, as 41 per cent of the country's total gross domestic product, or about US$7.8 trillion, came from IP-intensive industries in 2019, according to the US Patent and Trademark Office. IP-intensive industries also supported 44 per cent of the American workforce, or 63 million jobs, that year.

Property rights protection has long been a thorny point of contention in economic relations between China and the US, and it was one of former president Donald Trump's stated reasons for instigating the trade war with China that has continued under the presidency of Joe Biden.

"The widespread trade in counterfeit and pirated goods harms the economic security of American workers and undermines our work to craft equitable and inclusive trade policy," US Trade Representative Katherine Tai said in a statement accompanying the report's release on Tuesday.

Commercial-scale copyright piracy and trademark counterfeiting also undermine critical US comparative advantages in innovation and creativity while posing significant risks to consumer health and safety, the report said.

Although the annual NML is not an exhaustive list of markets where IP infringement takes place, the scale of harm that the online and physical markets on the list cause to American intellectual property owners, workers, consumers and the economy is significant, the report added.

The annual review comes at a time when Washington has ramped up its tech-containment efforts against China, and ahead of a planned visit to China by US Secretary of State Antony Blinken in February as the two sides seek to thaw bilateral relations.

The report also noted that, given China's reopening and an expected return of foot traffic to physical markets, there could be an increase in the volume of counterfeit goods traded at brick-and-mortar shops, and this should warrant more robust enforcement by the Chinese government.

The giant online platforms once again identified in Washington's annual NML are the WeChat e-commerce ecosystem, Taobao, AliExpress, Pinduoduo, DHGate and Baidu Wangpan.

AliExpress and Taobao are units of the Alibaba Group, which owns the South China Morning Post.

All six online platforms are some of the biggest names in China's cyberspace. Taobao is one of the largest e-commerce platforms in the world and serves Chinese consumers, whereas AliExpress serves international buyers who purchase from Chinese sellers.

Baidu Wangpan is a cloud-storage service operated by China's biggest search engine, Baidu, and the USTR said the online service is used to share unauthorised content such as movies, TV shows and books.

The report particularly noted that the WeChat e-commerce ecosystem is one of the largest platforms for counterfeit goods in China, and assessed the owner of WeChat, Tencent, in a particularly critical tone as it pointed to Tencent's "inadequate" effort to combat counterfeit goods trade via WeChat.

The USTR acknowledged that some Chinese platforms have been making efforts in combat the trade of counterfeit goods. For instance, DHGate - the largest business-to-business cross-border e-commerce platform, which is said to be a popular online market for purchasing bulk counterfeit goods that are then resold in other markets - has improved its AI technology to screen text and images for evidence of counterfeits.

Still, counterfeit sellers' techniques for evading platforms' monitoring are evolving along with the platforms' new strategies. Platforms should therefore keep improving their ways to protect rights holders, the report said.

While sales of counterfeit goods increasingly moved online during the pandemic, as foot traffic and tourism to China dissipated, major physical markets still served as product-testing centres where online orders are fulfilled.

The US says China continues to be the No 1 source of counterfeit products in the world, and out of the 39 global online markets and 33 physical markets that the office named on its NML, six online platforms and seven physical markets were from China.

Out of the seven physical markets in China that were listed, four were also on the list for 2021, while three in the cities of Shanghai, Shenyang and Yiwu were new for 2022.

This article originally appeared on the South China Morning Post (SCMP).

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