China appears intent on using its intellectual property laws to unfairly dominate markets and, while Beijing has made some progress strengthening patent, copyright and criminal statutes, implementation and enforcement remain insufficient, according to a US government report released on Wednesday.

"China must provide a level playing field for IP protection and enforcement,"said the US Trade Representative (USTR) office's annual Special 301 report, which catalogues intellectual property infringement by trade partners.

The document noted that China is the leading source of counterfeit and pirated goods ranging from cosmetics and fertilizer to medicines, accounting for 83 per cent of all products seized in the US in 2020 for these violations.

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While the USTR has kept this designation on China for years, Covid-19 test kits made the list of counterfeit goods for the first time.

A container delivery truck passes containers stacked at the Port of Long Beach in Long Beach, California in July 2018, including one from COSCO, the Chinese state-owned shipping and logistics company. Photo: AFP alt=A container delivery truck passes containers stacked at the Port of Long Beach in Long Beach, California in July 2018, including one from COSCO, the Chinese state-owned shipping and logistics company. Photo: AFP>

"Statements by Chinese officials that tie IP rights to Chinese market dominance continue to raise strong concerns," the report said.

"Despite recent trademark law amendments, the limited success brand owners have had in challenging bad faith registrations is insufficient when compared to the overwhelming number of bad faith trademark applications filed and registrations granted," it added.

USTR reviewed over 100 trading partners for the report and placed 27 of them on watch lists. China was among six other countries - Argentina, Chile, India, Indonesia, Russia, and Venezuela - put on a priority watch list of the worst offenders by practices or impact.

While Ukraine made 2021's priority watch list, the report said that its review of the Eastern European country "has been suspended due to Russia's premeditated and unprovoked further invasion ... in February 2022" and that the conflict also severely limited USTR's ability to engage Russia on IP protection and enforcement issues.

USTR's latest report represents another point of friction in a bilateral trade relationship that has been deteriorating for years. US President Joe Biden's administration has grown frustrated with China as negotiations for a potential "phase-two" trade agreement have faltered.

The phase-one trade deal, which included commitments by Beijing to strengthen its protections for foreign copyrights, trade secrets and other forms of intellectual property, was signed on January 15, 2020, by former US president Donald Trump and Chinese Vice-Premier Liu He, with its provisions taking effect one month later.

"It has become increasingly clear over recent years and in the past few months that China continues to double down on a state-centred economic system and plans that do not include meaningful reforms that address our concerns, or those of our allies," US Trade Representative Katherine Tai testified to the House Ways and means Committee last month.

The talks "have been unduly difficult and we need to turn the page on the old playbook", she added, urging Congress to pass bipartisan legislation aimed at boosting US competitiveness.

The Biden administration has also faced bipartisan pressure from Congress to make the process of gaining tariff exemptions easier.

After an initial public comment period, the administration reinstated over 350 tariff exemptions on Chinese imports. But that represents only a small fraction of the total tariffs enacted by the Trump administration, which grew to cover some US$300 billion-worth of Chinese imports.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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