Protectionism and China’s High Tech Procurement Rules

2009-12-18

China on Tuesday defended rules that foreign companies claim lock them out of the multibillion dollar market for selling computers and office equipment to government departments.

Beijing stipulates that sellers of high-tech goods must have them accredited based on "indigenous innovation" — meaning they must contain Chinese intellectual property — to be included in a government procurement catalogue.

Accredited products will be favoured, according to the policy, which foreign firms say effectively excludes them from the process.

"The indigenous innovative product accreditation project is in line with … international rules," foreign ministry spokeswoman Jiang Yu said in a fax to AFP. (AFP)

This is not a new story, but the latest rules are a recent development.

Is all this in line with international rules? Sure, if you buy the story that the new policy does not discriminate between Chinese and foreign companies. Right.

Sure, I suppose you could make the argument that there is no National Treatment type of violation since a foreign company has the opportunity to invest here in China and innovate, eventually fulfilling the requirements of the new rules.

This of course is an incredibly simplistic argument that would never work if it was ever really adjudicated. But that's not the point anyway.

A friend of mine who is a government procurement guru believes that this is another chapter in the story of a struggle between the Ministry of Commerce and their efforts to get China to sign on to the WTO government procurement rules, on the one hand, and the MOST, MOF and NDRC on the other hand, which are pushing for more local protection. (He also admits that this could simply be a good cop/bad cop situation, with the latest rules a negotiation ploy.)

On the IP front, the government does indeed want to reward local innovation, from local or foreign companies, so I think MOST is interested in this new policy for a variety of reasons.

Anyway, this is fun stuff. We'll see whether this has any effect on future discussions on the WTO/GP front.

Tags: China Law, Intellectual Property