China’s Foreign Trade Comeuppance

China USA concept Shutterstock/NothingIsEverything

James Edwards Intellectual Property Consultant
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China has cheated its way into a trade investigation for stealing American firms’ intellectual property, with the realistic prospect of consequences at the other end. But China is by no means the only foreign country cheating the United States.

The Trump administration’s U.S. Trade Representative is investigating China’s institutionalized theft of American cutting-edge inventions. Its abhorrent practices amount to Chinese government coercion of American companies as a condition for gaining access to Chinese markets.

What is the investigation likely to detail? The U.S. Trade Representative’s Special 301 report this past spring said: “China imposes requirements that U.S. firms develop their IP in China or transfer their IP to Chinese entities as a condition to accessing the Chinese market. China also requires that mandatory adverse terms be applied to foreign IP licensors, and requires that U.S. firms localize research and development activities.”

Further, “China is home to widespread infringing activity, including trade secret theft, rampant online piracy and counterfeiting, and high levels of physical pirated and counterfeit exports to markets around the globe.”

The price of market entry in China and elsewhere is steep. These nations require American businesses to disclose their proprietary intellectual property to favored domestic “businesses” (some hardly more than front groups, to one degree or another state-owned or operated).

President Trump has the backbone and, as conservative icon Phyllis Schlafly said, is the first “effective national political spokesman for the American worker.” Her early endorsement of Mr. Trump in the Republican primary came in large part because “Donald Trump has made a point of challenging Communist China on its three main threats to the United States: currency manipulation, a systematic effort to destroy our manufacturing base, and industrial espionage and cyber warfare.”

The trade representative’s 301 investigation will uncover many gory details; however, many other nations than just China competitively disadvantage U.S. firms. American businesses with IP-centric business models are hit particularly hard. These include U.S. leaders of the global market in mobile wireless communications, advanced manufacturing, motion picture and music sectors, biopharmaceuticals, medical devices, and agricultural and industrial chemicals.

The size of the Chinese and Indian markets, given their behemoth populations and growing middle class, often leads major American companies to believe they cannot leave them untapped. Otherwise, our competitors from Europe, Japan and other nations would corner those markets. Their absence would deprive the United States of gaining at least some short-term economic benefit from American commerce done there.

Further, it would disadvantage U.S. interests if critical technological standards for such IP-dependent commercial areas as the coming 5G wireless infrastructure, personalized medicine, and biotech were set or controlled by foreign competitors instead of by Americans.

This perspective on global economics makes it vital that the U.S. government finally act and halt the foreign theft of American private intellectual property and systematic anticompetitive practices against our companies.

To the Trump administration’s credit, it’s acting on its recent report on trade enforcement, which states: “USTR is committed to calling out foreign countries and exposing the laws, practices, and other measures that fail to provide adequate and effective intellectual property (IP) protection and enforcement.” This report cites IP enforcement as a “critical component of the administration’s aggressive efforts to defend Americans from harmful IP-related trade barriers.”

An executive order early this year identified several trade competitors on the winning side of large trade imbalances with the United States: Canada, China, France, Germany, India, Indonesia, Ireland, Italy, Japan, Malaysia, Mexico, South Korea, Switzerland, Taiwan, Thailand and Vietnam. Initiating a 301 investigation into China’s misconduct constitutes one step following up on the new trade enforcement priorities. There’s more work to be done.

The price for access to U.S. markets must include an end to foreign patterns and practices of IP and R&D theft; ending mandatory technology transfer and abuse of antitrust laws to cripple American companies; U.S. inspection and accountability rights; competitors’ finally abiding by rules-based competition; and payment of damages and reparations both to the U.S. government and American companies for years of deliberate IP theft, trade imbalance and goods-dumping.

After all, without market access to the United States, then China, Taiwan, South Korea and the rest forego billions in yearly exports to America. Protecting our private property and industrial competitiveness, restoring fairness and the rule of law, protecting our national sovereignty and finally righting the listing ship of international trade so that America is no longer on the losing end must count more than importing tons of unfairly underpriced and subsidized goods, from T-shirts to advanced computer chips.

James Edwards is executive director of Conservatives for Property Rights and patent policy advisor to Eagle Forum Education & Legal Defense Fund. The views expressed are his own.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.