President Trump is scheduled to sign an executive action Monday directing the United States Trade Representative to determine whether to investigate any of China’s acts, policies or practices that may be harming American intellectual property, innovation and technology by encouraging or requiring the transfer of American technology to China. With this action, the president is demonstrating his strong commitment to using all appropriate means to ensure that foreign countries do not plunder American’s treasure trove of IP.
From business processes to software codes, as well as other patents, trade secrets and copyrights, America’s IP is being forcibly transferred or stolen at an alarming rate. According to the 2017 report of the Commission on the Theft of American Intellectual Property, the annual cost to the United States economy of IP theft alone “could be as high as $600 billion.” General Keith Alexander, former director of the National Security Agency, has called this “the greatest transfer of wealth in history.” Allowing such behavior to continue unchecked will imperil America’s current position as a leader in technology and the world’s most innovative economy. Many US companies have raised concerns about losing IP to an array of foreign countries, but their concerns about China’s pervasive and strategic behavior are the most pressing. As part of a far-ranging strategy, China has adopted an industrial policy specifically designed to force the transfer of technology from American businesses to Chinese firms in order to gain an unfair advantage and build a dominant global presence. China’s joint venture requirement for certain American companies is the poster child for its strategy. Companies that want to produce in China and sell into the Chinese market must enter into joint ventures that result in their technology being turned over to their Chinese partners. The United States, on the other hand, imposes no such reciprocal requirements.
Increasingly, China is also forcing US companies to localize their research and development – the seed corn of future IP – on Chinese soil. Further, China is coercing American firms into providing its state-owned enterprises with below-market acquisition and licensing terms while asserting ownership over any improvements made to the licensed technology. Despite repeated attempts by the US government to negotiate fair and reciprocal rules regarding IP protections, China keeps tightening the screws. Last November, it passed a new cybersecurity law, despite deep concerns from the American business community that it may give China legal authority to require data localization, restrict cross-border data flows and impose national security reviews. In addition to the obvious problems with these actions, they also may create a backdoor method to accessing United States data, encryption and source code under the guise of Chinese national security. More broadly, China’s “secure and controllable” standards discourage Chinese firms from buying United States products and technologies, impeding United States exports.
These forms of state-sponsored forced technology transfer are truly a devil’s bargain. When an American company turns over its technology in exchange for access to the Chinese market of today, it has effectively created a Chinese competitor in the global markets of tomorrow. President Trump is firmly committed to pursuing trade and investment relationships that are both fair and reciprocal and that promote America’s leading role in global innovation. The Trump Administration, however, will not tolerate the forced transfer and theft of America’s IP and technologies.
The administration has already intensified its scrutiny of China’s unfair IP right policies. But more needs to be done, and the president is committed to using all appropriate means to ensure that this theft does not continue unabated. While the United States is a country of free traders and open investment opportunities, China’s strategic campaign to acquire American IP is a call to action. The Trump administration will not turn a blind eye to this assault on America’s economic future and national security innovation base. With his action today, President Trump is signaling to the world that protecting American IP and technologies is one of his highest national priorities.
Published in Daily Times, August 21st , 2017.