Free Traders Can Support the Administration on China IP Theft

Most arguments for trade retaliation are complete garbage and hurt Americans most of all, but today’s action on China will be fine, and might even help.

President Donald Trump speaks before he signs a presidential memorandum imposing tariffs and investment restrictions on China in the Diplomatic Reception Room of the White House, Thursday, March 22, 2018, in Washington. (AP Photo/Evan Vucci)

It’s true that most trade action turns out to be like the steel and aluminum tariffs: a cash grab for cronies. But today’s action against China has a completely different basis to it.

Instead of saying ‘they charge less, it’s not fair,’ here we can actually demonstrate that China is systematically defying treaty, Chinese firms are violating US law, and Americans are being directly harmed by it all.

They’re stealing our technology. That sounds like a weird phrase, but patents are real, they’re enshrined in the Constitution, and American firms (along with those firms of our allies) have to obey them. China however is not only ignoring American property rights, but is forcing the handover of proprietary technologies.

Quoting the White House’s press release, giving examples of the kinds of activities the President is legally empowered to take trade action against:

  • China requires foreign companies that access their New Energy Vehicles market to transfer core technologies to a joint venture and disclose development and manufacturing technology for the entire vehicle.
  • China imposes contractual restrictions on the licensing of intellectual property and foreign technology into their country, but does not put the same restrictions on contracts between two Chinese enterprises.
  • A Chinese government-backed fund helped Apex Technology Co., a Chinese investment consortium, acquire a U.S. computer-printer maker which had previously sued Apex over patent infringement.
  • In 2014, the U.S. charged five Chinese military hackers for cyber espionage committed against U.S. corporations and a labor organization for commercial advantage.

The Chinese do not respect the rule of law or American property. They should not be able to turn around and profit from that, selling dangerous knockoffs that are as likely to catch fire as to work correctly, bilking Americans and forcing firms to compete with their own designs.

Free marketers generally oppose free riders. China is acting as a free rider on American investment in research and design. The administration is fighting that, and that’s okay by me.

This attack can hurt China. They’ve developed a large manufacturing surplus, and depend on the ability to send their excess to countries like ours in order to maintain their economic and social order. The more we hit that, the more we threaten to undermine the Communist regime.