US President Donald Trump's administration has based its decision to impose trade tariffs on China, and risk a broadly catastrophic trade war, on a report that does not stand up to scrutiny. The decision, it seems clear, was made before the report was even written.
BEIJING – No one wins in a trade war. Yet US President Donald Trump seems determined to pursue one with China, which he accuses of causing America’s trade deficit, violating World Trade Organization rules, and using unfair practices to acquire foreign technology. While most economists marvel at Trump’s ignorance of how trade balances work, many broadly agree with his charges regarding intellectual property (IP). But the evidence supporting these claims is also weak, at best.
The so-called Section 301 trade investigation launched by Trump’s administration last year accused China of acquiring foreign technologies using discriminatory licensing restrictions, unfair technology-transfer agreements, targeted outbound investment, unauthorized intrusions into US commercial computer networks, and cyber-enabled IP theft. “The weight of the evidence,” the report concludes, shows that China uses foreign-ownership restrictions to force US companies to provide their technologies to Chinese entities.
But the case is not nearly as strong as the report makes it out to be. For starters, because Chinese firms are not starved for capital – thanks to China’s chronic savings glut – gaining access to foreign technologies is their main motivation for trying to attract direct investment from abroad. Under WTO rules, they are free to seek technology transfer from their foreign partners on a commercial and voluntary basis.
BEIJING – No one wins in a trade war. Yet US President Donald Trump seems determined to pursue one with China, which he accuses of causing America’s trade deficit, violating World Trade Organization rules, and using unfair practices to acquire foreign technology. While most economists marvel at Trump’s ignorance of how trade balances work, many broadly agree with his charges regarding intellectual property (IP). But the evidence supporting these claims is also weak, at best.
The so-called Section 301 trade investigation launched by Trump’s administration last year accused China of acquiring foreign technologies using discriminatory licensing restrictions, unfair technology-transfer agreements, targeted outbound investment, unauthorized intrusions into US commercial computer networks, and cyber-enabled IP theft. “The weight of the evidence,” the report concludes, shows that China uses foreign-ownership restrictions to force US companies to provide their technologies to Chinese entities.
But the case is not nearly as strong as the report makes it out to be. For starters, because Chinese firms are not starved for capital – thanks to China’s chronic savings glut – gaining access to foreign technologies is their main motivation for trying to attract direct investment from abroad. Under WTO rules, they are free to seek technology transfer from their foreign partners on a commercial and voluntary basis.