I. Introduction

After thirteen rounds of high-level consultations, China and the United States (U.S.) eventually reached the historic Phase One Agreement in December 2019, where the second chapter embodied bilateral consensus upon protracted technology transfer disputes. The U.S.-China technology transfer debate can be traced back to the 2012 Special 301 Report issued by the Office of the United States Trade Representative (USTR), in which the U.S. for the first time expressed its concerns upon China’s technology transfer regime. The concerns have been kept in the USTR Special 301 Reports for the next five years, during which time China’s responses to the U.S. concerns were mainly communicated through high-level bilateral dialogues platforms, whereby China repeatedly pledged technology transfer liberalization. However, the U.S. seemed to be dissatisfied with China’s performance of its commitments and adopted a more aggressive strategy to reinforce its claims. The more aggressive strategy consists of approaches both inside and outside the World Trade Organization (WTO) framework. The rationale behind U.S. dual-track strategy is that no provision in WTO agreements directly regulates technology transfers. Instead, technology transfers may trigger WTO disputes only if China’s measures concerned violate its commitments under WTO multilateral agreements, especially national treatment in TRIPS and/or GATS and IP protection obligations in TRIPS. Being well aware of WTO limitations, the U.S. brought a WTO case against China and meanwhile imposed additional tariffs on Chinese imports, hoping China would make concessions outside WTO forum to fulfill all its concerns. Specifically, U.S. has three concerns over China’s technology transfer regime: first, China’s regime is an unfair arrangement to U.S. companies for the presence of foreign ownership restrictions, wide discretion left to officers, and sensitive technical information disclosure in administrative approvals; second, China’s regulations discriminate against U.S. enterprises by imposing additional licensing restrictions; and third, policies of the government instruct or encourage Chinese companies to acquire U.S. technologies through outbound investment. While the WTO case the U.S. initiated against China’s discriminatory regulations for violating national treatment (TRIPS Article 1.1) and intellectual property (IP) protection obligations (TRIPS Article 28) took care of U.S.’s second allegation, the first and the third allegations, i.e. the unfair arrangement claim and the outbound investment claim, were not covered. Consequently, under the urge of the U.S., the two allegations remained were written in the Phase One Agreement as “international obligations” which are legally binding on China and complementary to China’s WTO commitments.

The key question here is whether the Phase One Agreement puts an end to the technology transfer debate between the U.S. and China. To answer this question, this note begins with an overview of controversial issues throughout the technology transfer debate in Section II. In the light of this overview, Section III provides a textual observation of the Phase One Agreement with the aim of identifying U.S. concerns covered by the agreement and remaining issues. Section IV further discusses the implication of the Phase One Agreement on bridging U.S.-China technology transfer divergence by estimating both its shortages and progressions. Section V sets forth the conclusions.