Intellectual property hawks, President Trump in particular, have a bone to pick with China. Beyond the president’s familiar talking point that Chinese workers are “stealing” American jobs, he’s also among the ranks of those who maintain that China is “stealing” American firms’ intellectual property.
In fairness to critics of PRC’s policies, a great deal of the “theft” is backed by the Orwellian-sounding Ministry of State Security, in what can be reasonably characterized as espionage (such as was the case for the designs of the F-35 fighter).
What action is the administration taking to combat such activities? Writing in The Hill, The American Enterprise’s Claude Barfield favorably opines on the administration’s Strategy:
Against this background and the larger U.S. struggle to curb a myriad of Chinese protectionist practices, including the public vow (the Made in China 2025 plan) to replace key foreign technologies with domestic sources within the next decade, on Nov. 1 the Department of Justice (DOJ) launched the “China Initiative.”…
In, addition, the U.S. government upped the ante in the campaign against Beijing’s flagrant and persistent IP theft operations by also banning the sale of parts and components by U.S. companies to Jinhua [a Chinese state-owned enterprise the Administration is concerned poses a national security threat if it acquires American IP].
Finally, last week the Trump administration for the first time publicly accused Xi Jinping of breaking the promise to cease passing along the fruits of economic espionage directly to Chinese companies.
There’s something to be said for blocking access to technology with actual national security implications, though Trump’s defense of tariffs on steel imports on national security grounds justifies some skepticism of this claim.
But what are the actual costs of Chinese IP theft? Barfield cites a $600 billion figure used by the 2017 IP Commission Report, though that is a high estimate. The report’s estimate is actually $225 billion–the $600 billion figure is a high-end estimate.
That sounds like a lot, but let’s not forget that much of the value of intellectual property comes from the rents provided to monopolists. While these figures can be represented as an “annual cost to the U.S. economy” in reality it’s the annual cost to patent (read: monopoly) holders.
And, of course, let’s not forget the benefits to the Chinese people. Such “so-called theft,” as Dean Baker put it, could serve as a great equalizer by making technologies available to Chinese firms, making economic growth for the developing country easier. This would reduce global inequality by increasing economic growth and reducing the profits of the super-rich patent holders.