China’s cyber security law rattles multinationals

Reported by Yuan Yang for Financial Times

While the new law is causing angst in foreign boardrooms, the personal data privacy provisions are in line with worldwide practice, said Scott Thiel, partner at law firm DLA Piper in Hong Kong. For example, it accords with Europe’s General Data Protection Regulation, he said.

No it is not.

Reasons to keep or eliminate NAFTA

Carlos Alvarado wrote in 200 Billion Reasons for Keeping NAFTA

If President Trump’s administration wants to keep U.S. investors in Mexico happy, he will definitely need to think carefully about NAFTA. Chapter Eleven will be certainly a relevant part of the negotiations between NAFTA’s three signatories, but if President Trump is really ready for leaving NAFTA, he should have a plan B for protecting the more than US $200 billion invested by U.S. investors in Mexico. In the meantime, do not be surprised if notices of intent of arbitration under NAFTA’s Article 1119 from U.S. investors to Mexico increase significantly, in order to gain the benefit of NAFTA’s substantive protections and anticipate establishment of jurisdiction of an investment arbitration panel.

If he hates companies investing in Mexico so much, he would purposefully undermine protection for US FDI there.

The world moves on while the Trump administration stays in the GATT era.

Song Jung-a, reporting for Financial Times

The Trump administration is to review and reform the US trade deal with South Korea, Mike Pence said on Tuesday, citing a widening bilateral trade deficit and obstacles for American businesses in the east Asian nation.

“We have to be honest about where our trade relationship is falling short,” the US vice-president told US and Korean business leaders in Seoul. “Our businesses continue to face too many barriers to entry, which tilts the playing field against American workers.”

The US has to “level that playing field”, he added, saying “we will work with you” as we “reform Korus [the Korea-US trade deal] in the days ahead”.

Push for bilateral with the focus on goods continues. The world moves on while the Trump administration stays in the GATT era.

From ASIL annual meeting: TPP lives on

From TPP, Brexit, and After: The Uneasy Future of Deep Economic Agreements:

Christina Davis remarked that TPP broke the mold of East Asian regional trade agreements (RTAs), largely due to US leadership in pushing for new rules on labor, environment, digital trade, state-owned enterprises and competition -- features that persist past the US exit from TPP. For instance, the new administration’s stated goals for renegotiating NAFTA mention adding TPP disciplines; Vietnam is still moving forward on its TPP-related labor policy reforms.

Japanese Prime Minister Abe pushed Japan to join the TPP negotiations to advance domestic agricultural policy reforms. Moreover, geopolitically TPP signals deepening of the Japan-US relationship; TPP excluding China is part of that message. Japan has become the lead advocate for TPP, after the US election. Japan scores foreign policy gains from continuing to support TPP.

Kathleen Claussen of USTR (speaking in a personal capacity) noted the importance of Congress in determining US trade agreements’ template and agenda. To understand agreements’ impact, she suggested focusing on the process before entry into force when parties evaluate what implementation actions are necessary.

US pushing a bilateral deal with JApan

Shawn Donnan and Demetri Sevastoulo, reporting for Financial Times

The intervention came ahead of a visit to Japan this week by Mr Ross and vice-president Mike Pence for talks aimed partly at convincing Tokyo to open negotiations over a bilateral trade deal following the US withdrawal from the 12-country Trans-Pacific Partnership.

. . .

He said the “exploratory trip” to Japan was intended to see if Prime Minister Shinzo Abe, who visited the US in February, would agree on a “path forward” for a bilateral agreement. “The question will be whether they are ready to consider the concept,” he said.

He acknowledged that Mr Abe had expended significant political capital on the TPP but he derided efforts to revive the agreement. “It doesn’t make that much sense to do a TPP without the US. We’re the biggest market after all,” he said. “And I think you folks are aware there is no political will in the US for a new TPP.”

Any bilateral agreement with Japan would have to see Tokyo add to the concessions it made in the TPP, which he characterised as “minor gains” for the US in agriculture and intellectual property, and he said the US would not accept anything less.

“A card laid is a card played. And even though that hand [the TPP] is cancelled, somebody has put something on the table in writing that is an agreed thing,” he said. “It will be our intention to make it very hard for them to go back.”

That's why you don't usually like to negotiate with someone who is inclined to withdraw from the deal reached.

Japan launches push to save TPP

From Bangkok Post:

Tokyo had expressed reluctance to have the TPP come into force without Washington amid concern that Japanese exporters, such as automakers, would gain little benefit without the United States, the biggest market in the grouping.

But with free trade perceived to be under threat with the rise of protectionism since the Trump administration took office, calls have been growing in the government for Tokyo's leadership in keeping the momentum for free trade.

On Saturday, Chief Cabinet Secretary Yoshihide Suga indicated Tokyo's readiness to proceed with TPP implementation while ensuring US understanding, saying in an interview with Kyodo News, "We have a feeling that the 11-nation framework should be given weight."

. . .

Under the current rules, TPP implementation requires ratification by nations accounting for 85% of the combined GDP of the 12 member countries. The deal was therefore effectively dead in the wake of the withdrawal of the United States because the country represents over 60% of the trade bloc's GDP.

But Mr Trump, who took office in January pledging to pull the United States out of what he called a "job-killing" free trade pact, has not opposed the remaining 11 nations implementing the TPP.

One proposal to lower the threshold for bringing the pact into force envisions a separate protocol to allow the TPP to be applied to any remaining member that agrees to it, the source said.

“The decision of the decade” – US reaction to the UK’s landmark Unwired Planet FRAND judgment

Richard Lloyd, writing for IAM, citing former Unwired Planet CEO Boris Teksler

The key take away from Justice Birss’ opinion is his recognition that SEP FRAND issues can and should be resolved on a global basis, and not through piecemeal litigation on a country-by-country basis. Justice Birss took the bilateral FRAND obligations principle of the ECJ decision in Huawei v ZTE and applied that principle to an entire worldwide SEP portfolio. His approach, if adopted, will finally provide a much more efficient mechanism to resolve and hopefully avoid disputes about the appropriate value for a worldwide portfolio licence on FRAND terms.

Sounds judicial overreach to me. Also, how do overlapping and contradictory decisions among different courts be efficient?

U.S. business wary of skin-deep results from Trump-Xi trade talks

Michael Martina for Reuters:

On the market access side, lowering restrictions on foreign investment in Chinese banking, securities, investment management, futures, insurance, credit ratings and accounting sectors, as Beijing has already promised, would help China improve the quality financial of instruments and make their markets more stable and professional, said McGregor.

"If you look at the things that China is talking about opening, it's all areas where China needs help," McGregor said.

That is the offer. And Trump's demand has been redirected to North Korea.

Heavily influenced by the last person to whom he has spoken

Edward Luce, writing for Financial Times:

Then there is Mr Trump’s capricious nature. Friends of the president say he is heavily influenced by the last person to whom he has spoken. In recent days that has included Xi Jinping, China’s president. It has also included a number of Middle Eastern leaders. Each of them is happy with Mr Trump’s abrupt recent policy changes.

Financial Times on The astonishing reinvention of Donald Trump

Samsung alleged to work with NPE in Polaris-Kingston case

Heck Ellis summarized the filing of Kingston in the Polaris' patent infringement suit, in which an interesting strategy utilized by Samsung was revealed.

In May 2015, Samsung and Polaris entered into an agreement under which the Korean company agreed to pay the WiLAN subsidiary 50% of the future purchase price of the Qimonda portfolio, up to €16 million ($17 million), should Polaris acquire the rights. (The following month, WiLAN announced it had purchased the Qimonda portfolio from then-owner Infineon for $33 million. Infineon had itself acquired the patents a few months earlier as part of a settlement agreement with Qimonda's insolvency administrator.).

In return for a licence to the Qimonda portfolio, Samsung agreed to “not challenge the ownership, validity, enforceability, novelty, obviousness, or utility of the Qimonda… patents, to not assist anyone adverse in interest to a Qimonda… patent, and to not dispute infringement of any Qimonda… patent”.
“Particularly pertinent to Kingston’s counterclaims,” under the terms of Samsung’s agreement with Polaris, the Korean company was given the right to specify 15 Qimonda patents and “discuss in good faith with Polaris either giving Samsung an exclusive licence to them or having Polaris file patent infringement lawsuits against specified, agreed-upon third parties”.

Polaris agreed to pay Samsung a royalty equal to five percent of Polaris’s gross revenues from licensing the Qimonda portfolio. Polaris owes Samsung royalties up to the amount Samsung paid to Polaris to assist its purchase of the patents from Infineon.

If substantiated, Samsung in essence control these patents through an NPE. It's deal with Polaris perhaps is more like a funding mechanism in exchange for such control.

Ahead of major decision, Trump is struggling to deliver on his trade promises

By Damian Paletta in Ahead of major decision, Trump is struggling to deliver on his trade promises

Despite Trump's promise to challenge Xi on trade during the Mar-a-Lago meeting, they said the gathering was intended to serve as just the beginning of negotiations and allow the leaders to get to know each other.

To known each other better so that Trump could know how unrealistic his position was.

And they are considering more executive orders that could prod China on its trade practices, such as one that would launch an investigation into the use of subsidies to unfairly distort trade practices.

CVD is nothing new.

India’s bilateral investment pacts under cloud

India has discontinued bilateral investment treaties (BITs) with most of its prominent trading partners, with termination notices given to as many as 58 countries, including EU states.

All the BITs expired on April 1. According to sources, just a handful of countries — Tajikistan, Turkmenistan, Kyrgyz Republic, Switzerland, Oman, Qatar, Belarus, Thailand, Armenia, UAE and Zimbabwe — have agreed to renegotiate the treaties after the draft model BIT was approved by the Union Cabinet in December 2015.

India’s bilateral investment pacts under cloud

China knows how to deal with Trump

China knows that Trump wants "tweetable result", and so they gave him the 100-day plan. According to the report of Financial Times,

Some doubt what can realistically be achieved. “Will Trump even have a full team in place to conduct the negotiations effectively within 100 days, since he does not have either a China strategy or a China-Asia team in place?” asks Steve Tsang, director of the SOAS China Institute in London. “This is at best aspirational.”

Phil Levy wrote in Buying A Little Time On China Trade,

One of the headlines that emerged was official impatience – a 100-day deadline to make notable progress. At the senior leadership level, the Trump administration took office so deeply confused about trade deficits that President Trump had to order a 90-day study. As that will run contemporaneously with the China deadline, they seem unlikely to sort out a strategic vision in time. Meanwhile, the norm of summitry is that the leaders agree on a path and instruct their minions to make it so. The problem is that there is a distinct shortage of Senate-confirmed minions. The normal follow-up would involve Deputy U.S. Trade Representatives and Assistant Secretaries of State shuttling from Washington to Beijing and overseeing arduous discussions about details. It is invariably this sort of preparatory work that allows the leaders to later convene and issue proclamations of success. But President Trump has yet to nominate any Assistant Secretaries of State or Deputy U.S. Trade Representatives. Once nominated, they will require Senate confirmation – a lengthy process that has currently entangled the nominee for U.S. Trade Representative, Robert Lighthizer. Given the paucity of vision among senior officials and the outright paucity of junior officials, the one thing the Trump administration seems to need badly is more time. Yet they emerged from the summit trumpeting tight deadlines.

Still, what the US wants, . . .

According to Andrew Nathan, a Sinologist at Columbia University, plenty of low-hanging fruit is on offer. “US negotiators are pushing on a door that is relatively easy to open when they place a priority on improving the trade balance not by limiting Chinese exports to the US, but by increasing US exports to China,” he said.

China can offer .

China will offer the Trump administration better market access for financial sector investments and US beef exports to help avert a trade war, according to Chinese and US officials involved in talks between the two governments.

Because China knows how to deal with leaders like Trump,

Chinese officials have told visitors to Beijing that they think they can navigate what they expect to be Mr Trump’s transactional approach to the relationship. “They are taking the sort of approach that they take to developing countries: How much will it take to buy you off?” said one person who recently met with policy makers in the Chinese capital.
“It sets up a negotiation process tailor-made for Trump-type announcements about concrete deals for the export of this or the export of that, which make a splash but are too discrete to have a structural effect on the overall US trade deficit,” Prof Nathan said.

On the other hand, Trump Administration is preparing for an executive order focusing on anti-dumping, another short term tool.

The Trump administration is working on an executive order that would initiate investigations into "unfair" product dumping from foreign companies — an action that could lead to tariffs on a wide range of products. These plans are very fluid, and internal disagreements remain about how aggressive this order should be. Here's what I've learned from administration sources:

  • Steel and aluminum will be targeted.
  • Other products, including household appliances, could be targeted as well.
  • If the investigations result in new import duties — as some senior Trump officials believe should happen — it could make some consumer goods more expensive and could hurt the stock prices of American companies that rely on cheap steel imports. A good number of American manufacturing companies, however, could benefit from this hit to their low-cost competitors.

Also by Phil Levy

Former Treasury Secretary Larry Summers argues that many of the Trump administration’s fixations in China trade – such as bilateral trade deficits and currency manipulation – are misguided. There is an opportunity cost to pursuing them. Time spent demonstrating that China is not manipulating its currency is time not spent on more fundamental issues, such as the health of the institutions propping up the global economic system. Summers concludes that the United States and China need a high-level strategic dialogue. This is not a new idea. The Bush administration established a Strategic Economic Dialogue (SED) with China. The Obama administration was inordinately proud of itself for inserting an ampersand and pursuing a Strategic & Economic Dialogue. The reporting did not make clear what the Trump administration’s moniker would be, but there will be high-level dialogues with China. They will be strategic. And economic. The value of such dialogues depends critically on two things – the strategic vision of the lead players, and the ability of more junior officials to lay the groundwork.

As always, battle on trade within the administration continues.

In addition, an official said, the White House is moving out a senior economy policy official, Andrew Quinn, who had helped negotiate the Trans-Pacific Partnership, former President Barack Obama’s signature trade initiative. Mr. Quinn had become the subject of a battle between two camps in the White House: economic nationalists, who wanted him out, and more mainstream backers of free trade, who defended him.

Alas, when China has the upper hand, a trade war is temporarily averted, which would help the US from digging a deeper hole. Who would think of that?

EU considering excluding UK from trade talks before Brexit

Brussels is eyeing the exclusion of Britain from updates on EU trade talks amid concerns that the UK could take advantage of sensitive information [in its own post-> > After a briefing last month by Michel Barnier, the EU’s chief Brexit negotiator, the European Commission warned that there needed to be a “discussion about the treatment of sensitive information in the context of certain trade negotiations, to which the UK would continue to have access to while it remained a full member of the union”.

. . .

The situation is complicated by the fact that the EU has the exclusive right to negotiate trade deals for member states, meaning the UK has no legal right to initiate formal bilateral talks with other countries before Brexit happens in 2019.

Trade experts say one option would be for the UK to opt out of the information loop during the Brexit process in exchange for an agreement with Europe to allow it begin bilateral talks before it leaves the bloc.

Financial Times

This option is not optimal. Does the UK have the resources to initiate formal negotiations before the Breixt? Does anyone have any ideas what to negotiate with the UK Before the deal between the EU and the UK is clear?

Unwired Planet v Huawei

Fresh off the press is today's decision from Mr Justice Birss in Unwired Planet v Huawei [2017] EWHC 711.

There are some interesting FRAND findings. I am curious about the reasoning about why the insistence on a worldwide listener is FRAND.

(6) FRAND characterises the terms of a licence but also refers to the process by which a licence is negotiated. Although an implementer does not owe a FRAND obligation to ETSI, an implementer who wishes to take advantage of the patentee’s FRAND obligation, must themselves negotiate in a FRAND manner.

(7) Offers in negotiation which involves rates higher or lower than the FRAND rate but do not disrupt or prejudice the negotiation are legitimate.

(8) An appropriate way to determine a FRAND royalty is to determine a benchmark rate which is governed by the value of the patentee’s portfolio. That will be fair, reasonable and generally non-discriminatory. The rate does not vary depending on the size of the licensee. It will eliminate hold-up and hold-out. Small new entrants are entitled to pay a royalty based on the same benchmark as established large entities.

(9) The non-discrimination limb of FRAND does not consist of a further “hard edged” component which would justify a licensee demanding a lower rate than the benchmark rate because that lower rate had in fact been given to a different but similarly situated licensee. If FRAND does include such a component, then that obligation would only apply if the difference would distort competition between the two licensees.

– by Annsley Merelle Ward in BREAKING: Birss J hands down first FRAND decision in Unwired Planet v Huawei

Not gonna be a clean break

Apple has not presented any evidence to substantiate its assertion that it will no longer require Imagination’s technology, without violating Imagination’s patents, intellectual property and confidential information. This evidence has been requested by Imagination but Apple has declined to provide it.

Further, Imagination believes that it would be extremely challenging to design a brand new GPU architecture from basics without infringing its intellectual property rights, accordingly Imagination does not accept Apple’s assertions.

Discussions with Apple regarding license agreement - Imagination Technologies

Trump-Xi meeting: How Trump seeks to push his trade agenda forward

Rather than a willingness to make fundamental changes to their economies, experts said the Chinese were more likely to come bearing political enticements, like promises of investments in manufacturing plants.

"The risk is that the Chinese see President Trump as very transactional by nature and they would be all too happy to say, 'OK tell us what you want us to buy of yours,' rather than focus on the fundamental changes they need to make to their economy," said Michael Froman, the former US Trade Representative under President Barack Obama.

– by Jeremy Diamond in Trump-Xi meeting: How Trump seeks to push his trade agenda forward on Trump-Xi meeting: How Trump seeks to push his trade agenda forward

Net Asian FDI falls to record low

A paper co-authored by Mr Wuttke, China Manufacturing 2025, spoke of restrictions being tightened in many areas, with foreign hybrid and electric carmakers facing “intense pressure to turn over advanced technology in exchange for near-term market access” due to new legislation, information technology companies “seeing market access constrict further”, and other sectors unbalanced by government subsidies to favoured domestic companies and biased government procurement rules.

Financial Times

They don't need you as badly as before.

Editorial of Wilbur Ross — Donald Trump will make trade fair again

And how much of the problem is lack of reciprocity? US tariffs on imported cars are 2.5 per cent, but American exports of similar vehicles carry tariffs as high as 25 per cent.

Financial Times

There are so many problems of this editorial. The above quote shows how deep the misunderstanding this administration has. Reciprocity has never been about the same product. The US has its bargain on other products and other agreements.