The plan is perceived as punitive measures caving to the US security establishment that wants to decouple from China

Overall, China’s IP regime has made significant strides in just a few decades. For instance, China’s world leadership in patent quantity—though not in quality—signals its commitment to develop a robust innovation ecosystem at home. Minimum damage payouts for violations have continually increased, as have durations of patent protection. China even became the most litigious country in terms of the number of IP-related cases as early as 2005, and the number of cases has increased at a rate of over 40 percent per year for the past two years.

In 2014, China debuted three specialized IP courts, and there are as many as 19 more in the pipeline. And contrary to popular expectations, foreign plaintiffs have actually fared better in patent litigation in these courts than their Chinese counterparts. Even the 2016 Special 301 Report by the generally bellicose USTR noted “[w]elcome developments” and “progress toward effective protection and enforcement of IPR in China.” China now ranks second globally (excluding tax haven countries) in annual spending on acquisition of foreign IP as well as in gross research and development expenditure. In short, change is occurring at China’s own initiative, and U.S. companies have taken note: In a American Chamber of Commerce in China survey, 96 percent of respondents stated in 2018 that China’s enforcement of IP rights improved or stayed the same in the last five years compared with 86 percent in 2014.

In spite of China’s very real progress, the United States continues pressuring the country to further improve IP protections. It also wants to levy tariffs as punishment for infractions without Beijing retaliating. Yet the lessons of history suggest that a punitive approach is misguided. A more constructive approach would involve a two-pronged strategy, built firstly on sustained efforts to improve institutions for legislating and enforcing effective IP protections while acknowledging the long-term nature of the process. The United States could also exert meaningful influence through multilateral channels by calling on allies to demand reciprocity and by pushing to strengthen the role of international arbitration courts. External pressure should play an important role, but ultimately China’s internal incentives will carry more weight.

The second prong of the strategy would address the concerns of the U.S. security establishment that seeks to slow down China’s rising innovation capacity and even decouple the two economies. Trying to slow Chinese innovation will simply weaken its incentive to strengthen IP rights. Rather than go against the grain, the United States should instead commit to working with China to foster open innovation and design knowledge transfer systems that both sides would see as fair and mutually beneficial. Many in Washington would counter that an innovative China poses a national security risk, particularly in key industries with dual-use technologies like 5G and artificial intelligence. These risks should be acknowledged, but they can be mitigated; however, Huawei and other private companies cannot be expected to overcome deep-seated trust problems on their own. The United States should compartmentalize the issue by building a collaborative regulatory framework rather than imposing blanket restrictions.

Ironically, if the West wants China to get better at protecting IP, it also needs to work with China to help it to become a more innovative nation.