IP trade wars spill over to other sectors.

Sixth, any trade war launched in the intellectual property area will likely lead to collateral damages and unintended consequences in other trade or trade-related areas. Even worse, the resulting financial losses could far exceed the gains made in the intellectual property area. To illustrate the difficult trade-offs confronting the USTR, there is no better example than the strategic efforts that China took in the mid-1990s to pit US domestic interests against each other. In response to the United States’ trade threats in 1995, China suspended the negotiations with American automakers over the creation of local joint ventures to manufacture mini-vans and passenger cars. When the United States deployed similar coercive tactics a year later, Premier Li Peng played the ‘Europe card’ and went to France to sign a $1.5 billion order for 30 short-haul Airbus planes. By dividing the US business community, China successfully undermined the effectiveness of the USTR’s coercive tactics and the possibility for a trade war (Zeng, 2004, p. 52). As one of the editors of this volume declared, ‘the dispute over intellectual property protection exposed a fundamental dilemma in U.S. trade policy toward China: the United States could not punish China for its misbehavior without negatively affecting many powerful and active domestic constituents’ (ibid., p. 170).