The property rights of China and America economics - Research Paper Example

The Property Rights of China and America Economics Introduction In the current highly competitive business environment, business entities are going to great lengths to establish and protect particular niches in the market. The main aim for this is to enhance optimal performance and maintain a desirable and economically rewarding competitive edge. On a larger scale, countries are taking initiatives to ensure that their economic development and growth maintains an upward growth. Relative measures towards the attainment of this goal are all encompassing and reflective of the social and economic trends across the globe. They range from formulation of policies and regulations that enhance economic growth to establishment of trade relations with countries whose economic performance is stable. Besides optimizing profits, the main aim of such relations includes safeguarding the overall wellbeing of the populations. From an ethical view point, the efforts of such countries are morally acceptable. This is especially because of their need to enhance the standards of living of the majority of their populations. Nonetheless, it is worth appreciating that certain initiatives have adverse impacts on the wellbeing of the global economy. This is because the negative implications undermine the economic performance of other countries. In this regard, it is worth appreciating that countries do not exist in a vacuum. Globalization trends have triggered the establishment and maintenance of relations between countries. All these are geared towards enhancing the flow of goods, people, products and information. The activities of a single country greatly impact on the performance and general wellbeing of another country. It is against this background that this paper provides an in depth review of the property rights of China and America economics. Understanding the Historical Underpinning The fact that the USA and China have had close economic ties over time cannot be overstated. The two nations have varying potentials with respect to economic production. They venture in different fields and aim at producing ideal products that would enable them to perform competitively in the global market. For this reason, America and China established viable trade as well as diplomatic relations (The United States International Trade Commission, 32). Examples of these include total US-China Trade that was signed in 1979 and Mutual-most-favored-nation treatment of 1980. Undoubtedly, these institutions enhanced economic and specifically trade operations between the two countries. With the relative viable environment, they were able to import and export products with ease. Historical evidence indicates that China has always focused on reducing the production costs and thus enhancing the purchasing power of its citizens. The US importers benefited significantly from this because they were able to get Chinese products at a lower price. Likewise, this enabled America to improve the living standards of its population as well as general wellbeing. This is because it was able to cut the costs that were associated with production. As a result, it provided its population with consumer products at cheaper prices. However, this had adverse impacts on the performance of local industries. In essence, it compromised local production and instead boosted the economic performance of Chinese industries form which the relative products were sourced. In addition, this practice greatly undermined the quality of products offered in the market for American consumption. This is because the raw materials employed in their production were relatively low. China has also invested significantly in the US economy. In particular, it has explored foreign direct investment and a host of other non bond investments. Thus the economic relationship between the two countries is considered to be mutually benefiting. An evaluation of the economic wellbeing of China however indicates that it has benefited the most from the relations that it has with the US as well as with other countries. This is attributed to its policies as well as rules and regulations that govern its economy. Analysis of its manufacturing and exporting capacities indicates that the country benefits immensely from its neighbors. Since it is comparatively more economically endowed than its counterparts, it collects products from its neighbors and Asia and then exports these to the US. This gives it a competitive edge because other superpowers prefer to get products directly from it as opposed to getting these from various countries. Regardless of the trade relations with the US being mutually benefiting, it has been compounded by a significant degree of tension. Reportedly, the US has accused China of adopting economic policies that are economically distortive and overly protective of its population. This according to the critics has greatly hurt the US economy by undermining its economic interests (Morrison 23). Some of the demeaning Chinese policies include its resistance to adopt a currency that is market based failure to fully implement the provisions and obligations of the World Trade Organization, employment of discriminatory and damaging government procurement policies and its promotion of unfair industrial policies amongst others. Perhaps the most hurting practice has been China’s failure to protect America’s Intellectual property Rights. Notably, this has spurred conflicts between the two nations over time. To a great extent, China’s reluctance on this aspect has strained the trade relations between the two countries. The property rights related conflicts between China and America date back to 1979. In this year, the United States raised its concerns about the issue of protecting property rights to China. In response, China promised the US to review these concerns and later, it committed itself to protect the trade and commercial secrets, patents as well as the copyrights of the United States. This commitment was legalized and the provisions laid down in the US-China Bilateral Trade Agreement that was signed by the two parties in 1979. The two countries worked together throughout the 1980s in a bid to enhance their economic capacity and be able to maintain a competitive advantage on the global economy. During this period, they employed the Joint Commission on Commerce platform to review and evaluate various emergent issues related to compliance. They maintained a cordial relationship that even culminated to China joining the Paris Convention for Protection of Intellectual Property. Nonetheless, this desirable relationship did not last long and frictions reemerged in the early 1990s. During this point in time, the US found out that the China was infringing upon certain property laws. For this, it instigated an investigation to find out the extent of violations of the Intellectual Property Rights by the Chinese. China was indeed found to be reluctant about enforcing the relative rights fully. Although it had taken measures previously, these had not been effective in countering the practice in the country. The two countries engaged in a series of negotiations that were aimed at addressing the retaliatory tariffs concern. This bore beneficial outcomes as in 1992, the two countries successfully signed a legal memorandum of understanding. In this, China agreed that it would take practical measures aimed at strengthening its Intellectual Property Rights laws. In particular, it made a pledge to accord computer software the literary equal importance as literary works and subject it to copyright protection for a period of fifty years. In addition to this, it made a pledge to expand its definition of pharmaceutical patents and protect them accordingly. Notably, this had been a bone of contention in the negotiations between the two countries. To assert its position on the preceding concerns, China later joined the Universal Copyright Convention and The Berne Copyright Convention (Oi and Walder 66). Further in 1993, the country assumed additional relative responsibilities that were provided for by the Geneva Phonogram Convention. Undoubtedly, the efforts that were being undertaken by China in this regard indicated that it was ready to implement the relative laws fully. Through this, it succeeded in convincing the entire world that it was committed to making relevant amendments to safeguard the wellbeing of other countries. Notably, it agreed that indeed, the previous activities and operations were contrary to the legal as well as moral concerns. It then demonstrated to the world and to its major trade partners that it was ready to change and assume practices that were legally acceptable. However, regardless of taking the mentioned legal and institutional measures, the country’s malpractice did not cease. Statistical evidence according to Karabell indicates that specifically, incidences of piracy continued to rise significantly (Karabell 51). China’s laxity in enforcing the relevant rules and regulations prompted the US to initiate another investigation into the matter in 1994. Reports on this ascertained that practically, China was doing very little to address the issue at hand. This reluctance was attributable to a host of factors. The main reason was to safeguard the economic wellbeing of the country and enable it to compete positively with its counterparts. It is for this reason that the US decided to impose 100% tariff on the Chinese imports. Before this decision could be effected in 1995, China, through various negotiations and consultations, agreed to implement the Intellectual Property Laws accordingly. Seemingly, there were distinct enforcement measures that China agreed on. This step convinced the US to withdraw its threats with regards to imposing a significant 100% tariff on China’s imports. In particular, China agreed to develop and institute practical measures that were aimed at conducting a crackdown on all the organizations and companies infringing on the Intellectual property Rights; carry out important bilateral consultations frequently, establish task forces whose role was to raid and destroy illegal manufactures, and make significant improvements in its border control. Additionally, China made a promise to increase the market access of vital US products. This at that particular time was to be attained by allowing the US based companies to establish new joint ventures as well as banning quotas on a host of goods. This was considered to be particularly useful to the US because of its ability to remove trade barriers between the two countries. The relative trade barriers had been caused by China’s tendency to sell and promote the pirated US products in its markets. However, the pirating malpractice was deeply rooted in China’s economic and trade culture especially at the domestic level. For this reason, it was not easy to address the concern right away. Relative efforts were further compounded by the country’s previous reluctance and laxity in fighting the practice. At this point in time, China made efforts to address the concern by focusing on curbing the sale of pirated products by retailers. This was unfruitful especially considering the fact that exports and distributions factions were allowed to continue with the practice. In this respect, it is worth acknowledging that the damage that was being done to the US economy was significant. Apart from selling the pirated products in the domestic market, China proceeded to exporting the respective products to other markets in Eastern Europe, Southeast Asia, Latin America and Hong Kong (Fishman 61). This was disadvantageous to the US exporters and it made them to incur immense losses. Seemingly, it also made it difficult for the US to explore these markets as well as markets in other third world countries effectively. It is widely agreed that the most affected industry was the technological faction whose pirated products were sold in large scale to the markets in the third world. Increasingly, it became difficult for the United States to curb the practice. Its complexity and deep rooted nature compromised the ability of the US to address it accordingly. China in this respect argued that from an economic point of view, the producers of the respective products still benefited significantly from their products. In other words, piracy according to this country did not harm the producers of the products because the returns that accrued from these were insignificant. Certainly, it cannot be disputed that there are inherent gaps between the perceptions towards intellectual property rights between China and the United States. The Current Scenario As aforementioned, the issue of Intellectual property Rights has been the bone of contention between China and the United States. While China is comfortable about exploring piracy in a bid to enhance and sustain its economy, the US believes that its rights are being violated. It feels that China is benefiting unfairly from its electronic and technological products. This has culminated in a series of disputes between the two countries. The disputes have had detrimental implications on the economic relations between the two countries. From the outlook, China believes that the practice is illegal and needs to be addressed accordingly. However, it has taken minimal efforts to address this. Its failure to keep its promises in the past has further raised suspicion with the US believing that it is unlikely to address the concern even in the future. Piracy in China is a practice that seems to be well integrated in the economic structure of the country. It is further augmented by the political environment that supports relative operations. This is further compounded by the recognition that the practice takes place at every stage of production. All these indicate that it cannot be easily dealt with without sufficient machinery and willpower. Seemingly, the stakeholders in the practice are innumerable and seeking as well as getting their permission to curb the practice can be not only tiring but also frustrating. This is because they benefit immensely from it and are therefore unlikely to let go of it without getting other alternatives. In an economy that is increasingly providing minimal opportunities for exploration, fighting piracy in China is far from being achieved. The United States continues to threaten China with imposition of stringent economic sanctions in a bid to make it honor its previous pledges and promises. The Chinese on the other hand have reportedly retaliated sharply to the aforementioned threat and even promised to impose tariffs of a greater value than those of the United States. These would be imposed on important US products such as Agricultural produce, motor vehicle parts and relative spare parts and telecommunication equipment amongst others. In addition, China threatens to suspend any new US tourism investments in the country. Furthermore, current reports indicate that China is willing to suspend any new applications that are made by the United States to protect pharmaceutical as well as chemical products if it proceeds with its initial threats. Comparatively, the United States would equally suffer negatively from the preceding threats. At this point in time, it is worth acknowledging that the two countries benefit mutually from the trade relations and relative threats can adversely affect each of them. Current research indicates that China is unwilling to make any agreements with the United States regarding the issue. It believes that the agreements that it has made in the past are enough to resolve the problem. However, its noncompliance tendency is worrying. It implies that the country is not ready or willing to address the issues accordingly. This is regardless of having agreed to the conditions that were set by the United States in the previous agreements. Since both countries benefit in different ways from the relationship, it is certain that the current state of affairs has adverse impacts on their wellbeing. In order to safeguard their economic performance in the global arena, it is imperatively important for them to review their standpoints about the important issue of Intellectual Property Rights. If both of them go ahead to impose the sanctions, this can strain the economic relations that they share. To some extent, it can culminate in trade war that compromises the ability of nations to engage in productive activities. Furthermore, the US congress might decide to terminate China’s most-favored-nation status that it currently enjoys. This has the implication of raising the US tariffs on a significant percentage of the products that it exports to China. Additionally, the sanctions will equally impact on the trade relations between the two countries and other states such as Hong Kong and Taiwan. In particular, relative investors and stakeholders might decide to withdraw from the operations. Of great significance however is the possibility of China to lose important investors who might have interests in its high-tech industry. In this regard, it is worth acknowledging that the United States is relatively more powerful than China. Power has enabled it to remain influential in the economic sphere. In this respect, it influences global decisions regarding wide ranging economic issues. It participates actively in critical decision making too. Further, it has made significant investments in the global market. In essence, the country’s economy is stable. Thus although it is likely to suffer negatively from the effects of China’s sanctions, the extent of the negative impacts are likely to be less compared to the effects that would be felt by China. Nonetheless, economic analysts posit that China is an important and fast growing market for the United States. Compared to other states, it has the fastest growing economy and is likely to provide a huge consumer base for United States’ goods and services. From this point of view, straining trade relations between the countries is likely to lock the United States out of China’s market. Also worth appreciating is the recognition that most of the apparel industries that are found in China and which export products to the United Sates are owned by Taiwan and Hong Kong investors. These intricate economic relations are likely to be undermined if the relations between the two states are strained. Notably, other international instruments have equally participated in compelling China to address inconsistencies in its International Property Rights. Institutions such as the World Trade Organization have previously pressured China to enforce the agreements that it made previously. This institution recognizes that the efforts that have been undertaken by China to address the concerns have been very minimal. Notably, the enforcement standards that are assumed by the country are also below the statutory requirements. Further, the general procedures and enforcement mechanisms assumed by China are unyielding. In this respect, very little has been done to address factors pertaining to border control and protection of Intellectual protection Rights. Respective institutions appreciate the fact that China has indeed done very little to address the concern. From an individual point of view, it is important for a country to protect the Intellectual Property Rights of another country. This is instrumental in ensuring fair play as all parties have a chance to benefit from the efforts of the producer. Piracy, as a competitive strategy has adverse implications on the wellbeing of the producer. In particular, the producer does not have a chance to benefit optimally from his efforts. Although China needs to survive in the current highly competitive economy, it should adopt approaches that are economically viable. This would aid in enhancing its performance and ensuring sustainable development. Notably, China has also suffered negative impacts as a result of its laxity and failure to implement and enforce Intellectual Protection Rights in a timely manner. To begin with, its products have also been pirated, further denying domestic producers a chance to benefit fully from their efforts. Statistical evidence in this respect ascertains that counterfeit products assume a significant 8% of the country’s Gross Domestic Product (Fishman 72). Its domestic film industry has been the worst hit by the negative implications of piracy. In this respect, current research indicates that almost half of the films that are affected by piracy in China are Chinese (Fishman 72). This clearly implies that just like the United States and other nations, China is also suffering from the detrimental implications of piracy. Understanding China’s Position At this point, it cannot be disputed that China is also likely to incur certain economic losses as a result of its behavior and general approach to economic growth and development. The position that it has currently assumed can be explained by different reasons. To begin with, it is worth acknowledging that the country has just undergone certain transformations in its economy. Initially, the government played an integral role of commanding and controlling its economy. Currently, the country has a market based economy that is characterized by the freedom to explore various economic aspects. To a certain extent, it might be unfamiliar with the issue of Intellectual property Rights and as such, its government can be experiencing significant difficulties in trying to convince the population to curb piracy tendencies. The Chinese leaders are also working hard to improve the technological industry of China. In essence, they are taking practical measures to ensure that the country continues to produce high tech products. Since it has limited resources, the intellectual property rights of other countries and especially those of the United States provide a viable source from which it can benefit. Presumably, this can be used to explain why China has been tolerant of the malpractice, regardless of knowing very well about the implications of the same. Another reason that can be used to explain this state of affairs pertains to lack of critical legal instruments and sophisticated systems to bring the violators to book. This is attributed to the fact that it is a developing country which has limited resources to execute its services with ease. Seemingly, the implementation and enforcement of relative rules and regulations is likely to take time. From this point of view, the operations and efforts that the country is taking can be understood and appreciated. The role of the Chinese companies in fighting the malpractice can also not be underestimated. Since they are equally affected by the negative impacts of piracy, they are expected to be on the forefront in fighting the vice. Presenting relative concerns to relevant stakeholders can go a long way in triggering change in the economic approaches that are currently assumed by the company. This is particularly so because the pirates would feel that they are hurting their economy the most. Thus they are likely to refrain from relative activities and assume morally acceptable behaviors. In addition, they would put pressure on both the local and central governments to take measures towards curbing the practice. Efforts from within the organization would be more productive than those from outside the organization. Also worth appreciating is the role of local government officials in fighting piracy. In this respect, the central government of China has exhibited a willingness to fight piracy and restore sanity in the Chinese economy. The local government is however reportedly reluctant because of the adverse implications that relative measures can have on the local economy. Arguably, completely eliminating piracy can result in low tax revenue, unemployment and a host of other benefits. Undoubtedly, local government officials benefit in certain ways from the malpractice. In particular, this is attained through incidences such as bribery and other forms of corruption. In this consideration, eliminating piracy can be counterproductive for the local government. Finally, the current regulations and rules are compounded by a host of limitations that compromise their effectiveness. An evaluation of the regulations indicates that they are erroneous and contradictory. For this reason, they are unlikely to be effective in curbing the malpractice in an effective and timely manner. The preceding reasons seek to explain why China is stuck with its current decision. Nonetheless, the lasting effects are more detrimental than the short term benefits. Regardless of the abovementioned reasons, China needs to assume responsibility for its operations. It should aim at aligning its business activities to the moral, legal and economic provisions that govern sustainable development. This way, the outcomes are likely to be more rewarding. Conclusion In sum, the economic relations between China and America have been characterized by a host of complexities. As it has come out from the review, America is an economically established country that has strong economic ties with various countries. Amongst these is China, an economically emerging country which is very economically ambitious. The two countries established trade relations that are mutually benefiting. They are aimed at strengthening trade relations and providing an atmosphere that would support sustainable economic growth and development for each country. Nonetheless, the approach that has been undertaken by China has had detrimental impacts on these relations. As indicated earlier, piracy and relative practices by this country have violated the intellectual property rights of the United States. Seemingly, this has also had adverse impacts on the relations that China established with other economically upcoming countries such as Taiwan and Hong Kong. In essence, it has destroyed the US market in developing countries by offering cheap products. The Chinese economy has suffered relative negative implications too. Regardless of this, it has taken minimal efforts to address the issue accordingly. This can be attributed to various reasons that range from poor policy framework to lack of sufficient resources to address the concerns accordingly. If allowed to persist, the current scenario can further strain the relations between the two countries. Although both countries will be economically affected, China will suffer the most because it is not as economically endowed as its counterpart. Works Cited Fishman, Ted. How the rise of the next super power challenges America and the world. USA: Scribner, 2006. Print. Karabell Zachary. Superfusion; How China and America became one economy and why the world’s prosperity depends on it. USA: Simon & Schuster, 2009. Print. Keller Perry. Obligations and property rights in China. USA: Ashgate, 2011. Print. Morrison Wayne. China-US Trade Issues. USA: Congressional Research Service, 2011. Print. Oi Jean and Walder Andrew. Property rights and economic reform in China. USA: Simon & Schuster, 1999. Print. The United States International Trade Commission. China: effects of intellectual property infringement and indigenous innovation policies on the US economy. USA: USITC Publication, 2011. 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