Intellectual property rights in China: The changing political economy of Chinese-American interests

Relations between China and the United States have become increasingly complicated over the last decade, with a large number of political and economic issues in dispute. Prominent among these issues have been the recurring disputes between the United States and China over Chinese protection of foreign intellectual property. Since 1991 four bilateral agreements between China and the United States have addressed Chinese protection of intellectual property rights (IPRS). While the agreements were accompanied in the mid-1990s by US complaints over violations and subsequent bilateral tensions, the end of the millennium saw increased Chinese efforts to enforce foreign and domestic IPRS and less tension over the issue between the two governments. Our focus in this paper is on the economic and political foundations of the ongoing disputes between the two governments as well as the rapid convergence of Chinese IPR law and enforcement to OECD standards. International politics have clearly played an important role in the disputes. For example, the 1996 dispute over IPRs was, at least in part, a spillover from the wider sphere of US- China relations, in particular the contention over Taiwan policies and the 1996 visit of Taiwan's president to the United States. Domestic politics have played a role in the disputes, with the mid-1990s leadership transition in China (from Deng Xiaoping to Jiang Zemin) and the 1996 US presidential election increasing the need for politicians in both countries to become less flexible in their public stances, thereby further extending IPR negotiations and deepening tensions. Economic considerations have also played a fundamental role in these disputes. As a net exporter of intellectual property as well as IPR-intensive products, the United States has incentives to pressure China to upgrade IPR laws and enforcement, while China, a net importer of intellectual property and IPR- intensive goods, has incentives to resist. Relations between the two parties are tempered by the limited capacity of China's legal system and society to change rapidly in response to both domestic and foreign pressures. We argue that China's desire to join the World Trade Organisation (WTO) fundamentally changed the nature of the game due to the WTO's strong minimum standards for IPR laws and the veto held by the United States and the European Union over Chinese ascension to WTO membership.