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US President Donald Trump (left) and China's President Xi Jinping at the Great Hall of the People in Beijing. Photo: AFP
Opinion
Opinion
by Robert Boxwell
Opinion
by Robert Boxwell

To protect US trade, Donald Trump needs to stand firm on intellectual property protection demands with China

  • If the US loses its technological edge, the trade war is irrevocably lost. Not just Trump but many Americans believe it would be better to have no deal at all than one that fails to satisfy the US on the intellectual property issue
Robert Boxwell
Robert Boxwell
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Over the weekend, US President Donald Trump threatened to dramatically increase tariffs on imports from China, concluding in a pair of tweets that, “The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”

With almost any other US president, you might reasonably conclude that “no” means “no”, but not Trump.

So, who knows.

US Trade Representative Robert Lighthizer, whose job is made harder every time Trump or one of the others on the team spout some happy nonsense about getting close to a deal, was presumably pleased with Trump’s clarity after he made a dizzying comment to reporters on Friday.
US President Donald Trump, shown at a 2017 Beijing news conference with Chinese President Xi Jinping, has threatened to dramatically increase tariffs on imports from China. Photo: Bloomberg

“We’re getting close to a very historic, monumental deal,” he said. “And if it doesn’t happen, we’ll be fine too. Maybe even better.”

For China-trade hawks in the US, however, recent reports about various US demands being watered down are disturbing.

And a report last week in the Financial Times rang the loudest alarm:

“Mr Trump has softened his administration’s opening position on what it originally characterised as ‘Chinese government-conducted, sponsored, and tolerated cyber intrusions into US commercial networks’” – economic espionage – saying it’s now likely to accept a “watered-down … alternative”.

How China’s blatant IP theft, long overlooked by US, sparked trade war

But it’s not just trade hawks who believe that watering down any part of the intellectual property protections the US is seeking would be the gravest of mistakes.

Despite Trump’s initial complaints about the bilateral trade balance or China’s currency manipulation, the real problems have always been American access to Chinese markets and protection of US intellectual property.

Many Americans believe it would be better to have no deal at all than one that fails to satisfy the US on the intellectual property issue.

Part of the IP issue is the handing over of patents and trade secrets by US companies that want to do business in China.

Beijing says that handovers are business decisions made willingly by companies in exchange for access to China’s markets.

American CEOs say that, while there are no formal requirements, they know they won’t get into the market if they don’t hand over these secrets.

The state-sponsored hacking and cyber theft coming from China, however, is an entirely different matter and has been going on for the better part of two decades.

In 2012, Keith Alexander, then the head of the US National Security Agency, called China’s intellectual property theft through cyber espionage the “greatest transfer of wealth in history”.

And while Beijing denies that it even happens, former US president Barack Obama secured commitments from Xi in 2015 to stop it.
How IP, censorship have haunted the history of China-US trade talks

If the frequency of reports of arrests of IP hackers are an indication, little has changed since then.

Many in the US believe nothing on the table is more important or crucial for the long-term economic health of the US than putting an end to IP theft once and for all.

Lighthizer, testifying before the House Ways and Means Committee in February, said “the most important single thing that we are going to do is stop the non-economic transfer of technology; that technology really is what separates us from the rest of the world”.

He added: “If we end up losing that technological edge, where we are No 2 in technology, then the world is going to look very different for our children.”

The theft of American intellectual property costs the US economy between US$225 billion and US$600 billion, according to a February 2017 report by the IP Commission, which is co-headed by former US ambassador to China Jon Huntsman.
The US “must preserve our lead in research and technology and protect our economy from competitors who unfairly acquire our intellectual property”, according to the national security strategy issued by the White House in December 2017.

It added that “China and Russia want to shape a world antithetical to US values and interests”.

Last month, FBI director Christopher Wray called China’s hacking a threat to US economic and national security, saying: “Put plainly, China seems determined to steal its way up the economic ladder, at our expense.” The list goes on.
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None of this is surprising to Americans who look around and see what drives their economy and don’t want to view it in the past tense.

For the better part of a century now, US technology development and innovation have been out in front of the rest of the world in many areas critical to the US economy.

Trump is the first president to do more than just name and shame Beijing and others in an effort to protect that US lead.

The voices that skewered him when he started the trade war last year have gone silent. Republicans and Democrats alike want the IP protection problem resolved.

Even if it means walking away from “a very historic, monumental deal”, Trump has to finish that job.

Robert Boxwell is director of the consultancy Opera Advisors

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