Trump’s probe on China intellectual property theft could spur change

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WASHINGTON (Reuters) – U.S. President Donald Trump returned to Washington on Monday to authorize an inquiry into China’s alleged theft of intellectual property, a step that analysts say is aimed at pressuring Beijing into a negotiated settlement to revise its practices.

Trump broke from his 17-day vacation in New Jersey to sign a presidential memorandum at the White House, set for 3 p.m. The order will instruct U.S. Trade Representative Robert Lighthizer to look into whether to investigate China’s trade policies on intellectual property, which the White House says are harming U.S. businesses and jobs.

The action is likely to escalate tensions with Beijing at a time when Washington has asked for its help on North Korea.

“Much work to do. Focus on trade and military,” Trump said on Twitter in reference to the upcoming announcement.

China’s policy of forcing foreign companies to turn over technology to Chinese joint venture partners and failure to crack down on intellectual property theft have been longstanding problems for U.S. administrations.

Although Trump constantly criticized China’s trade practices on the campaign trail, his administration has not taken direct action against Beijing. It declined to name China a currency manipulator and has delayed broader national security probes into imports of foreign steel and aluminum that could indirectly affect China.

U.S. President Donald Trump walks across the South Lawn after arriving via Marine One at the White House in Washington, U.S. August 14, 2017.Jonathan Ernst

In an editorial on Monday, the state-run newspaper China Daily said the investigation will “poison” relations and warned the Trump administration not to make a rash decision it could regret.

The investigation could take up to a year, according to administration officials, opening the door to a settlement before a possible investigation is launched.

Matthew Goodman, a senior adviser for Asian economics at the Washington-based Center for Strategic and International Studies, said Beijing would likely resist negotiating under the threat of trade sanctions but could be amenable to a backdoor deal.

“I’m sure they will formally reject this if an investigation is launched and there is an implication this is going to require negotiation to resolve it,” Goodman said. “But will they quietly be willing to talk about some of the underlying concerns?”

Jonathan Fenby, an analyst at the TS Lombard consultancy, said China was not interested in a short-term trade fix with the United States and will resist “attempts to tie it down.”

Trump had been expected to seek a so-called Section 301 investigation earlier this month, but an announcement was postponed as the White House pressured for China’s cooperation on North Korea.

Section 301 of the Trade Act of 1974, a popular trade tool in the 1980s that has been rarely used in the past decade, allows the president to unilaterally impose tariffs or other trade restrictions to protect U.S. industries from “unfair trade practices” of foreign countries.

Reporting by Lesley Wroughton; Editing by Leslie Adler