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Politics

Avoiding the Sino-American Technology Trap

Jun 18, 2018 Laura Tyson

The Trump administration is right to push back against China's violations of world trade rules, particularly with regard to advanced technologies. But US high-tech industries' ability to weather the challenge posed by China will depend less on curbing China’s progress, and more on supporting innovation at home.

BERKELEY – With its ambitious Made in China 2025 strategy, China has made clear its objective to secure global economic leadership in advanced technology industries. This places it in direct competition with the United States – which currently leads in those industries – in what is emerging as an undeclared but intensifying cold war over technologies with both commercial and military applications.

With its investments in such dual-use technologies, China is seeking more than to compete commercially with the US; it is also seeking greater military and geopolitical power. And it has deployed a variety of methods – including weak intellectual property (IP) protections, technology transfers as a condition for joint ventures with Chinese partners, evasion of export controls, and regulatory harassment – to acquire such technologies from the US and other trading partners.

China’s intentions and practices have long been an irritant in Sino-American relations. The so-called Section 301 trade investigation launched by President Donald Trump’s administration last year charged that China’s trade and industrial policies, which provide advantages to specific technology industries, violate both US and international trade law.

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0 Comments on this paragraph, 6 Comments on this article

Subhash Garg Sep 25, 2018

China has been around thousands of years longer than the US. It has decided to systematically sabotage and weaken American industry by taking over the world's manufacturing. In other words, this is a determined and ruthless adversary willing to fight on multiple fronts. Unfortunately, as this piece demonstrates, American intellectuals aren't up to the match. They simply cannot think of China's actions as a coordinated long-term war.
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Barry Rosenfeld Jun 24, 2018

China is able to develop long term strategies because it has a political system that is relatively static. The US cannot do so because it's political system is under continual change. Consequently, the notion of a US "industrial policy" is not relevant to the US - unless a stable consensus is formed by major private sector economic actors.

After WWII it was clear that the US had a comparative advantage in manufacturing and in industrial sectors in which technological advances in military equipment could be adopted to civilian production. Private economic interest in these areas were the driving force for liberalizing trade. With economic recovery in Europe and Japan this lead evaporated and the US arbitrarily abandoned the Breton Woods system that it largely had created.

Similarly, the drive to include China in the WTO and to open China to US exports was due to the strong consensus in US industrial corporations and financial institutions that access to the China market would be to their benefit - and offshoring production would dampen, if not erode, the power of labour in the US. Can one think of an industrial policy, which must be long term in not an oxymoron, that has the consensus of major players in the US economy today?

Tyson should remember the result of the half-baked initiative of subsidizing new technologies in energy generation that wasn't based on a long-term development strategy because it didn't have wide support in the business community. It was on her watch.
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Michael Public Jun 19, 2018

China and the US are two nations born for the Thucydides Trap. Things are really going to heat up once the AI technology starts reaching mass adoption.
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Godfree Roberts Jun 19, 2018

"The Trump administration is right to push back against China's violations of world trade rules, particularly with regard to advanced technologies".

No one puts a gun to Boeing’s head when it decides to accept this arrangement from China. It presumably agrees to make the deal because it expects to make a profit even with the required technology transfer.

To take an analogous situation where the US courts came down on the other side, the Supreme Court recently ruled that employers can require workers to accept arbitration — giving up their right to sue — as a condition of employment. The court said that workers freely choose an employment package and if they don’t want to sign away their right to sue, they can work for a different company. So here we have the US government saying that Boeing and other multinationals need protection from big bad China, because otherwise they will sign contracts that are bad for them, but an individual worker, taking a job from one of these companies, doesn’t need protection.

The class issues are even more extreme with patents and copyrights. These government-granted monopolies are forms of protectionism. Yes, that’s “protectionism,” as in the opposite of free trade.

Unlike the usual trade barriers in the form of tariffs or quotas, these monopolies don’t raise the price of items by just 10 percent or 25 percent; they raise the price of protected items by several thousand or even tens of thousands of percent. Drugs would be cheap without these protections and software would be free.

Bill Gertz’s 1999 book entitled “Betrayal: How the Clinton Administration Undermined American Security and his 2000 book entitled ” The China Threat: How the People’s Republic Targets America”? Mr. Gertz examined in detail how the Clinton/Gore Administration transferred cutting edge nuclear, military and other technology from classified status to Commerce and then openly sold the technology to China.

GE transferred its aerospace and its imaging IP to China in exchange for market access, and GE is just the tip of the iceberg. All were short-term decisions that are coming back to haunt us.

China is a minor infringer of IP compared, say, to South Korea. To check this, start at the US premier venue for IP cases, the Federal Court’s Northern District of California, where most complainants will file suits against Chinese entities. A database of Intellectual Property Cases can be found here: dockets.justia.com/browse/circuit-9/state-california/court-candce/noscat-10.

For the WTO’s international forum for Trade-Related Aspects of Intellectual Property Rights, TRIPS, start here: http://www.wto.org/english/docs_e/legal_e/27-trips_04d_e.htm

For Chinese IP court filings and decisions is here: chinaipr.com/category/beijing-ip-court/. It's a fast-moving scene, as you can imagine, but most sites have free subscriptions that will keep you up to date.
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Patrice Ayme Jun 19, 2018

The US Patent System has been gutted (prior to Trump). China has gone the other way, instituting short term patents, valid just 8 years, without analyzing the validity of these patents. As a result, many inventors, worldwide, find out that their inventions are "prior art".

Under Obama, the US law was tweaked to make patent enforceable only if an "economic damage" could be proven. This is impossible for small inventors. Thus this Obama tweak has made it possible for monopolistic corporations to steal all inventions with impunity.

To compete in Intellectual Property, the US will have to revert these advantages conferred to monopolists by the preceding US administration. Not competing in IP is to opt for slavery, very soon.
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