Is China Stealing America’s IP?

  • May 22 2018
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  • Category: Blog

The U.S. has proposed intended tariffs by the way of more than $150 million in Chinese products in response to the U.S.’s belief that China has been unfairly accessing American trade secrets. U.S. officials believe that China is attempting to cheat its way into dominance over high-value technological fields including artificial intelligence, reusable energy, and telecommunications. According to the blue-ribbon commission on the Theft of American Intellectual Property, the total cost on the U.S. economy from IP theft is estimated at between $225 billion and $600 billion annually. China is reported to lead as the number one IP infringer.

How China is Infringing Upon U.S. Technology

When it comes to joint American-Chinese ventures, often, American businesses have begun to limit the amount of technology that their Chinese partner may receive. According to a 2017 survey by the U.S.-China Business Council about 19% of American businesses located in China say that they have been asked to transfer their technology to their Chinese partner. About 60% of these American firms say that they made the transfer begrudgingly, while another 10% of firms withdrew from the business transaction in question because they found it to be unacceptable.

According to the Office of the U.S. Trade Representative, China also uses arduous administrative reviews and licensing processes in order to force the disclosure of sensitive, technical information. Many American businesses report that reviews and licenses are one of the largest hurdles for those looking to do business on the Chinese market. The Office also asserts that Chinese companies are being directed to invest in U.S. companies in order to gain access to their cutting edge intellectual property. Despite Chinese buyers’ contention that they have no ties to the government, the U.S. continues to block Chinese acquisitions under the assertion that leadership in advanced technologies is of national interest. Also according to the Office of U.S. Trade Representation, the Chinese government has been committing cyber theft of American trade secrets for over a decade, in the interest of gaining competitive advantage.

The Bureau of Industry and Security, working in tandem with McAfee, has estimated that the cost of this cyber theft ranges between $140 billion and $175 billion, which is equivalent to 0.87 percent of GDP.

Actions Looking Forward

Considering the cost of this theft of U.S. IP, it remains obvious that something must be done to prevent China (among other countries) from obtaining access to our trade secrets. The question that remains is not one of if, but of how. What actions should be taken to protect us? Will raising tariffs alone be enough to derail these practices? Other options include pursuing relief within the Chinese Courts for criminal or civil penalties under the Economic Espionage Act or the dispute resolution process as has been established by the World Trade Organization’s Trade Related Aspects of Intellectual Property (TRAP) Agreement. With so much business carried out through the two countries, it should prove very interesting and extremely important as to how we will tackle this problem if we are to maintain a good working relationship with China.