China and the Latin American Market

Many in the IP-addicted community, and several others looking East most of the time have been and are used to see China and IP as a difficult marriage in a game of endless catch-up: domestic regulations striving to meet international standards, drafting and redrafting laws and regulations, complying with Western standards and accumulating enormous backlogs, breaking IP filing records, leading in counterfeiting and piracy world records, showing impressive recovery and determination, and occasionally falling behind again.

Since the “reform and opening up” policy initiated by the visionary Deng Xiaoping of 1978, the patent and the trademark laws alone went through a total eight amendments while the Central Government started including IP in every agenda of nearly every quinquennial plan until when in 2008 the most ambitious, aggressive and long reaching IP plan was enacted and pointed at reaching unprecedented goals by 2020.  Targets were and remain enforcement, standards, domestic innovation, government procurement and more.

The same people, whom, as me, have acknowledged the heroic and speedily race of the dragon in building muscle, recently discovered a more subtle tone to the roar: the role of China in international, multi- and bilateral negotiations on IPRs.  The undisputed role as factory of the World for years, as benchmark, as dealmaker- and breaker, has now become a rather vocal presence also in negotiations on IP protection and its enforcement, and in trade agreements.

China’s pragmatic approach to the international chessboard of trade has made another move as it became clear how the country would steer into the direction of securing resources and economic alliances, through regional trade and formalizing them in agreements (RTAs).  China started the process in 2003 when it signed the CEPA (Closer Economic Partnership Agreement) with Hong Kong and carried on in negotiating more with Iceland, Pakistan, India, Macau, New Zealand, ASEAN, Australia and Chile.  The main feature of these agreements indicates how China has started to drift away from being just an FTA-standard setting contributor with its vast weight, and rather becoming a pioneer for trade integration.

One would suppose that the recent China-Switzerland FTA could become a model for how much importance China poses to questions of IP protection, enhancement and opportunity in trade agreements. The reality seems to be that China remains a very selective and picky player and adopts a criteria based on the strengths of the contracting party. Agreements with countries such as Pakistan, Singapore, Macau, Iceland do not actually spell out well defined IP provisions or programs or include none at all. In RTAs with three countries of the Americas, such as Chile, Costa Rica and Peru, the documentation unveils only a mild approach on IP interaction with China, relegating IP matters to just a few articles and preferring more broad assumptions such as social and economic welfare enhancement and so on. With Chile in particular, the parties have set out articles regarding Geographical Indications (Art. 10); encouraged research in science and technology (Art. 106.1) and, just shortly after provisions on Cultural Cooperation, an article denoting a generic tone of cooperation between the countries (Art. 111) which makes it ever more evident that for these countries it is not yet time to expect a far reaching an agreement as the one between China and Switzerland which regulates IP, to a large extent covering copyrights, trademarks, patents, and plant varieties. 

Probably the most relevant provision and its Annex, for IP related issues in the agreement with Chile is to be found under Geographical Indications.  The products at stake are less numerous than what was hoped for, where the GIs covered are only a wine from Shaoxing the Anxi Tieguan Yin tea, and pisco from Chile.

China imports about 23% of all Chilean yearly trade and is the second largest exporter to Chile, after the U.S., counting for 18% of overall Chilean imports by country.  Given the strong impetus of Chilean economy and foreign direct investment into China, it is likely that not too long down the road from now Chile may play even a more crucial role for China in South America, hence gaining more credit for farther reaching agreements in the area of IP with China.

Post written by Ricardo Benussi (Business Advisory Associate --Italian Desk -- Dezan Shira & Associates)