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Cablegate: Indigenous Innovation - Demarche Delivered Again,

VZCZCXRO8809
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3379 3510954
ZNR UUUUU ZZH
P 170954Z DEC 09
FM AMEMBASSY BEIJING
TO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHUL/AMEMBASSY SEOUL PRIORITY 1439
RUEHKO/AMEMBASSY TOKYO PRIORITY 0155
RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 7270
RUEHIN/AIT TAIPEI PRIORITY 7440
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY

UNCLAS BEIJING 003379

SENSITIVE
SIPDIS

STATE FOR EAP/CM - WKELIN, SFLATT
STATE FOR EEB/CIP - SFLYNN, FSAEED
USTR FOR AWINTER, TWINELAND, JGRIER, JMCHALE
COMMERCE FOR ITA - IKASOFF, NMELCHER, JWU
DOJ FOR CCIPS - MDUBOSE, SCHEMTOB
FBI FOR LBYRANT
STATE FOR WHITE HOUSE OSTP AMBASSADOR RICHARD RUSSEL
NSC FOR MHATHAWAY

E.O. 12958: N/A
TAGS: ECON ETRD PGOV SCUL SOCI CH
SUBJECT: INDIGENOUS INNOVATION - DEMARCHE DELIVERED AGAIN,
MFA BELIEVES POLICIES NON-DISCRIMINATORY

REF: A. SECSTATE 124680
B. BEIJING 3296

1. (SBU) Summary. Economic Minister Counselor delivered
reftel demarche regarding indigenous innovation to a National
Development and Reform Commission (NDRC) official December 9.
The official took note of USG concerns over the Circular and
promised to "respond accordingly." Separately, a Ministry of
Foreign Affairs (MFA) spokesperson on December 14 asserted
China's indigenous innovation policies "comply with relevant
WTO rules" and "treat both domestic and foreign-invested
enterprises equally." The spokeswoman did not address
industry concerns over the requirement that intellectual
property in indigenous innovation products be developed
locally. The MFA comments, however, have not been published
and appeared to be a preliminary response only and thus may
not be the Chinese government's final position on this issue.
End Summary.

2. (SBU) Economic Minister Counselor William Weinstein
delivered the demarche concerning the Circular on the 2009
National Indigenous Innovation Product Accreditation Work
(Circular) to NDRC Counselor Qi Chengyuan December 11. EMIN
emphasized the Circular undermined clear commitments made by
the Chinese during both the Joint Commission on Commerce and
Trade (JCCT) and the Strategic and Economic Dialogue (S&ED)
to treat products of Foreign Invested Enterprises operating
in China the same as domestic products. He stressed that the
Circular discriminated against foreign companies and
therefore also violates the fundamental principle of
non-discrimination that is the cornerstone of the rules-based
international trading system. EMIN further noted that
industry and foreign governments were not given an
opportunity to comment on the Circular before it was
promulgated, raising transparency concerns that are
fundamental in ensuring non-discriminatory treatment of
foreign companies and goods. (Note: Ref b reports other
channels through which this same demarche was delivered).

3. (SBU) NDRC's Qi acknowledged USG concerns and several
times asked for clarification. Qi said the NDRC would
analyze these concerns, discuss them with the relevant
ministries, in particular with the Ministry of Science and
Technology, and "respond accordingly."

4. (SBU) Separately, on December 14, MFA spokeswoman Jiang
Yu, in an unpublished oral response to a press inquiry on the
Circular, stated China's indigenous innovation policies
accord with "international rules," and "comply with relevant
WTO rules." Jiang further stated China's "indigenous
innovation product accreditation work treats both domestic
and foreign-invested enterprises equally without
discrimination." "All eligible products can be accredited,
and all types of enterprises are treated equally," according
to Jiang.

5. (SBU) Comment. In her comments, Jiang did not address
specific industry concerns over requirements that local
intellectual property be developed and IP rights originate in
China in order to qualify as "indigenous innovation." These
latter stipulations effectively exclude foreign-invested
enterprises from participation in the indigenous innovation
accreditation process given well-known IPR concerns in China
that dissuade FIEs from innovating in China, and leaving them
unable to benefit from the preferential incentives in
government procurement under the accreditation process. The
fact that Jiang's response has yet to be published on the MFA
or other official website suggests a final PRC position still
has not been issued. The Embassy will meet with the Ministry
of Science and Technology December 18 in a continued effort
to get USG and industry concerns over the Circular addressed.
End Comment.


GOLDBERG

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