Human development is not determined by the mechanics of Darwinian evolution, wrote t he French philosopher Henri Bergson, but by our own creative impulses. The advent of farming, industrial manufacturing, the scientific method, digital technology — these have shaped modern life most. Last week, we considered the dangers of reducing the trade deficit with China, but what about the trade war's central aim of preventing intellectual property theft? If Bergson was right, and what we make defines us, then how do we protect our inventions?
China has repeatedly attempted to steal American intellectual property, President Donald Trump said in April , after the U.S. Trade Representative proposed up to 25% tariffs on $50 billion worth of Chinese imports for what the agency called "harm caused by China’s unreasonable technology transfer policies." These technology transfers arise from China's foreign-ownership restriction laws, which require foreign businesses to form joint ventures with domestic Chinese companies to sell their goods in China. These ventures often include some type of technology transfer, exposing foreign businesses to theft.
Th e Chinese wind turbine company Sinovel was recently fined $1.5 million, for example, because it stopping paying on its $700 million deal to use American Superconductor (AMSC) software after two of its employees bribed an AMSC worker for stolen source code. AMSC reportedly lost $1.4 billion in market value and had to cut 70% of its workforce. But it's difficult to hold China accountable since these technology transfers are "based on mutually agreed terms," as Chinese Ambassador to the WTO Zhang Xiangchen recently said. In addition, the victims themselves are so dependent on China that, as American economist Martin Feldstein writes, "Although the Chinese practice violates WTO rules, it is difficult to bring a successful technology-transfer case because American companies fear retaliation by Beijing."
On the other hand, China's policies stop foreign companies from dominating its infant industries, and despite Western praise of free markets, that's not unlike Austria, Britain, France and the Netherlands once allowing domestic patents of foreign inventions, or the current U.S. trade war with China, for that matter. South Korean economist Ha-Joon Chang has said:
When they were trying to catch up with the frontier economies, the NDCs [now-developed countries] used interventionist trade and industrial policies in order to promote their infant industries. The forms of these policies and the emphases among them may have been different across countries, but there is no denying that they actively used such policies. And . many of them actually protected their industries a lot more heavily than what the currently developing countries have done. If this is the case, the current orthodoxy advocating free trade and laissez-faire industrial policies seems at odds with historical experience, and the developed countries that propagate such a view seem to be indeed 'kicking away the ladder' that they used in order to climb up to where they are."
But while " there is no denying that they actively used such policies," we shouldn't gloss over the fact that "forms of these policies and the emphases among them may have been different across countries," because some of those differences matter. China may be playing an ancient game, which affords it some moral cover, but as Bergson would say, the tools make all the difference — and what makes China different are digital tools that unlock new methods of intellectual property theft, as in the case of Sinovel. Foreign nations may not be able to criticize China too heavily without being hypocritical, but they should still protect themselves, and it's not clear that slapping China with tariffs is the best way to do that.
Not only is the impact of these technology transfers debatable, but Beijing is already working to police intellectual property theft. As with the trade deficit, what matters here is seeing U.S. businesses in China thrive, which similarly can best be accomplished through cooperation rather than confrontation. This is one area where sharing information with China is clearly in our best interest, and as the world leader in intellectual property law, we're ideally suited to the task.
A more challenging question is how to defend against intellectual property theft when the property being stolen is a nebulous cultural concept, like a certain design principle or an aesthetic sensibility such as Japanese minimalism. What defenses do we even have available in these contexts, and should we even try?