Opinion

IP Theft and Trade Barriers Are Institutionalized Cheating

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Posted: Oct 24, 2019 11:15 AM
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IP Theft and Trade Barriers Are Institutionalized Cheating

Source: AP Photo/Damian Dovarganes

Quick, name that country:

Ranks of researchers come study or work in the United States.  They’re scattered among our emerging technologies and industrial sectors.

Its nationals, agents and moles steal American intellectual property.  Its companies buy or invest in U.S. firms in key economic sectors.

It forces American companies to transfer their IP and proprietary technology, as well as enter joint ventures with domestic entities (some state-owned, others state-subsidized) as the price of access to that country’s market.

The country’s government centrally runs its economy.  Its government picks winners and losers.  State-subsidized companies there don’t actually have to compete with foreign rivals because the former are in their government’s hip pocket.

It’s China, right?  Today, yes, but also Japan.

Japan’s mercantilist, protectionist, industrial policy model, with its economic rising sun referred in the 1970s and ‘80s as Japan Inc., amounted to “the same systematic industrial planning that Japan had used to guide its economy during the war,” economist Pat Choate notes.

China has paid attention.

Foreign central planners have targeted sectors such as automobiles, computers, electronics and manufacturing.  Their expropriation of American IP, trade barriers blocking Western competitors and currency manipulation to make their exports cheaper have dulled America’s competitive edge.

China and other foreign competitors play dirty pool to put our technologies and products into their industrial favorites’ hands.  Commonly, foreign governments demand U.S. innovators to license their inventions at bargain-basement rates or else the foreign government denies access to its market, while domestic firms make and sell the stolen technology without having to pay U.S. owners a licensing fee or royalties.

Recently, the Trump administration designated China as a currency manipulator.  Indeed, it is.  And we shouldn’t lose sight that Japan directly intervened in currency markets, devaluing the yen against the dollar, 376 times between 1991 and 2016.

As a result of systematic cheating, American-born industries, including key manufacturing sectors like textiles, semiconductors and machine tools, have been hollowed out here and been displaced by other countries’ national champions.  The foreign firms directly benefit from central industrial planning and official scale-tilting; unfair competitive practices that back domestic industry players;  massive trade deficits;  mafia-grade IP expropriation and strong-arm tactics;  weaponizing “competition” laws to injure American firms; and denying due process.

It’s the equivalent of setting slugging records powered by steroids — institutionalized cheating.  Such underhanded misconduct advantages companies such as Huawei and ZTE, the Chinese telecom giants.

“The countries outcompeting us [have] . . . comprehensive trade strategies and everyone pulling together,” Sen. Ernest Hollings said.  And they don’t hesitate to break the rules of fair competition.

This foreign freeloading and outright theft erodes America’s industrial competitiveness.  Such lack of respect for the rule of law and fair competition hurts U.S. economic and national security.  It robs millions of Americans across the country of good-paying jobs that don’t require their collegiate indebtedness.

The United States is a rules-based society.  Our strengths include private property rights, the rule of law and a free enterprise economy that rewards innovation and private risk-taking.  Our regulatory burden is heavier than it should be, but hardly equal to the economic effects of favoritism practiced overseas.

Uncle Sam doesn’t pick winners and losers.  Successful American companies aren’t state-owned or politically favored national champions.  U.S. firms answer to owners and investors who may freely vote with their wallets.

Thus, if America is to lead the world in cutting-edge technologies like 5G wireless connectivity, artificial intelligence, biopharmaceuticals, medical devices and self-driving vehicles and retain robust industrial sectors in these fields, we must play to our strengths.

President Reagan took measures to mitigate the Japanese economic threat.  Reagan secured voluntary antidumping restraints on steel, autos, semiconductors and machine tools.  His administration won a foothold for U.S. access to certain Japanese markets and got Japanese manufacturers to build U.S.-based plants.  His Plaza Accord weakened the dollar against the yen to counter Japan’s currency manipulation and reduce the trade deficit.

Reagan also convened a Commission on Industrial Competitiveness.  The commission identified innovation as our competitive edge and the cornerstone of our economic success and competitiveness.  “Innovation spurs new industries and revives mature ones,” it said.

The Young Commission viewed secure intellectual property as integral to private sector innovation.  IP boosts research-and-development investment and a diverse, flourishing U.S. manufacturing sector to commercialize R&D’s fruits.

“When intellectual property rights are fully protected under the law — in the same way that tangible property is — the competitive edge that U.S. industries gain from new technologies is preserved,” the commission said.

Only with secure IP rights can U.S. firms maintain technological superiority in advanced technologies and the American lead in areas like 5G.  U.S. medical device and pharmaceutical companies need IP rights to discover and develop new therapies and cures.

The president should create a new commission on industrial competitiveness for the 21st century.  Its members should be the patent owners, business leaders and venture capitalists in cutting-edge technological fields. 

Bottom line, securing patents and IP, along with the U.S. government having our companies’ backs against foreign trade cheating and institutionalized IP theft, will determine whether America or another country prospers from our innovation.