(March 28): President Donald Trump is about to reopen a trade-war front with China left over from his first term: protecting American business from copycats.

Intellectual property theft likely costs the US economy hundreds of billions a year, and countering it was a key part of Trump’s 2020 trade deal with Beijing, which got derailed by the pandemic. As his new administration prepares to publish an action plan, due by April 1, firms say things have gotten even worse.

Up and down the manufacturing value chain — from makers of gardening kits to companies at the cutting edge in rare earths — entrepreneurs say they still see imitation products cropping up all over. They also complain about the slow and costly procedure for seeking redress, which is especially onerous for small business.

Robert Xiong set up Vego Garden, a market leader in raised beds for growing vegetables, in 2020. The Houston-based firm imports its patented products from China, and business was booming after the pandemic spurred many Americans to plant things. Then Xiong noticed a competitor was offering a product that looked strikingly like his own, at a cheaper price.

“It’s a very niche market and people were asking, ‘Is that your garden bed? It looks identical,’” he says. “So we bought a sample, and we took a look, and it was exactly the same.”

Xiong identified Chinese firms behind the rival products and filed a case against them at the US International Trade Commission. He eventually won a cease-and-desist order halting imports of the copycat beds — but only after two years of hearings and almost US$2 million (RM8.9 million) in legal fees.

In circumstances like that, there’s a risk that “you can win the case but lose the business,” Xiong says. He wants the Trump administration to streamline the process: “It’s too much work, working with lawyers, pulling together all the documents. That’s not really good for people like us.”

The USITC declined to comment on the timetable and cost of cases.

China has dismissed claims of wide-scale intellectual property theft, saying such charges are among the tactics used by Western rivals to hold back the country’s development.

The groundswell of business complaints over intellectual property was one driver of Trump’s first-term trade war. His trade office put the cost to the US economy as high as US$600 billion. Its then-chief, Robert Lighthizer, set up an investigation into China’s policies and practices in the area, to determine whether they were “unreasonable or discriminatory.”

The deal inked with China in January 2020 was sold as a protection for US manufacturers, with promises by Beijing to enforce legal oversight. An assessment by the Biden administration last year found some progress, but not enough. It cited persisting concerns about “technology transfer, trade secrets, counterfeiting, online piracy, copyright law, and patent and related policies.”

Putting a number on the economic impact of IP theft isn’t easy, but the official estimates likely aren’t entirely off-base, and the cost is clearly large and increasing, according to Charles Austin Jordan, an analyst with the China Projects team at research firm Rhodium Group.

“Stronger measures need to be implemented to stem the flow of illicit transfers and should be an integral part of any potential upcoming deal” with Beijing, he says.

Any new trade agreement between the world’s two biggest economies is likely to take a long time to hash out. In the meantime, costs are piling up for Bob Confer in New York state, whose company makes products including kayaks, snow sleds and ladders for hot tubs.

Confer says he’s seen copycat products from China mushrooming over the past two years – often featuring duplicate copies of his manuals, videos and marketing materials, too. He says he’s issued about a dozen cease-and-desist orders to e-commerce platforms, costing “tonnes of money.”

“They are turning into the single greatest threat to our business,” Confer says. “We have two in-house sales managers looking every single day to find products that look like ours.”

The battle over copyright is a key part of the background as Trump ramps up tariffs on China. In his first term, they largely targeted machinery and materials rather than consumer goods. That’s changed since his return to the White House, and there’s now an across-the-board duty of 20%, with more to come. Exemptions for low-value packages under the so-called de minimis rule – a particular concern for small businesses — are also in his crosshairs.

The result has been lower US imports from China compared with their 2016 levels. But some Chinese firms have also moved their US-bound production elsewhere, so the relief for American competitors has been limited. 

Ahead of the Trump administration’s IP report, some lawmakers are pushing for tough measures. Senator John Curtis, a Utah Republican, has drafted legislation titled the “Combatting China’s Pilfering of Intellectual Property (CCP IP) Act.” It would empower the US to block assets and impose sanctions on individuals and companies found to be in violation.

In the business world, concern about the issue reaches into industries that are on the frontline of geopolitical tensions, like the race to secure critical minerals.

Phoenix Tailings, based in Woburn, Massachusetts, operates a pilot rare-earth refinery and plans to open a commercial site later this year. It’s figured out a way to process metals such as dysprosium and terbium – used in a variety of products like speakers, headphones and missile guidance systems — with no direct toxic byproducts, and it sells to customers around the world.

Protecting this technology from Chinese IP theft takes up “a very sizable portion of our discussion at the board level,” chief executive Nick Myers says. “It’s a concern we deal with on a daily basis.”

His big ask from the Trump administration: Don’t wait around.

“Any startup company like ours, scaling innovative technology, has a 24-month lifespan at best,” Myers says. “The US government has to move very, very fast in a way they haven’t done before. China can move fast.”

Uploaded by Magessan Varatharaja