Rational political observers can say what they will about former President Donald Trump’s trade policy. It had myriad flaws and more than likely harmed the nation’s economic wellbeing as well as the country’s relationships with many strategic international partners. However, for all those many flaws, there existed at least one kernel of truth – Trump’s bold and repeated assertions of intellectual property (IP) theft from American companies by Chinese actors.
Unfortunately, it has become increasingly easy for this truth to become obfuscated. For example, Chinese President Xi Jinping recently said, “Intellectual property is the core factor of global competitiveness.” Many might view this as an encouraging sign that one of the world’s leading economies is taking this view on IP protections. However, the facts on IP from Beijing tell an entirely different story. As has become quite clear in recent months, information that comes from the Chinese government is hardly trustworthy and should be viewed with extreme skepticism.
According to the IP Commission, China is the global leader in IP infringements in all categories. Despite this glaring statistic, for a long time, China has denied that this has been an issue. Meanwhile, American companies are struggling. In a recent CNBC survey, roughly one in five companies report having their intellectual property stolen by Chinese companies in the past year alone. The number increases to roughly one in three over the past decade. The problem is hardly isolated.
The widespread theft of U.S. IP does not just damage the direct victims because it has far broader implications for the entire economy. According to reports, Chinese IP theft costs the U.S. economy anywhere between $225 billion and $600 billion in a given year. In 2020, that would mean that up to 3% of our entire gross domestic product is lost to IP theft. This scourge is why we cannot take President Xi’s claims at face value until we start seeing meaningful change when it comes to U.S. IP.
Not only is IP important for taxpayers and consumers, it is important for the federal government, as well. IP intensive industries, aided by existing protections, add roughly $100 billion to federal coffers every year. Given the accelerating debt and deficit numbers, lawmakers cannot afford to dismiss IP. For the fiscal health of the nation, IP abuses need to be taken more seriously.
Data also show that IP protections are vital for a thriving economy. Research has found that there is no government role more effective to promote innovation than robust patent protections and IP laws. Industries with stronger IP safeguards are also more likely to attract greater investments in research and development. Not only do infringements on IP harm the economy, but protections are a proactive good for families, developing businesses, and the country as a whole.
There are a number of ways to go about ameliorating this issue. One would be to finally fill the position of chief innovation and intellectual property negotiator within the office of the U.S. Trade Representative. This position was created through the Trade Facilitation and Trade Enforcement Act of 2015. It was meant to establish an advocate for stronger IP protections in trade agreements. However, the Trump administration, despite its great rhetoric on the issue, never filled the position. Some House Democrats are now urging President Joe Biden to finally appoint someone to this position.
There are indications that China’s record on IP is getting better. All improvements should be encouraging and be welcomed. Given its rapidly developing economy, it is very possible we can expect further improvements. However, the aforementioned records of theft and violations are enough cause for concern that U.S. policymakers need to remain vigilant and avoid complacency despite some of the more optimistic signs.
The new administration should continue to raise the same issues as the previous one when it comes to China’s violation of IP law. It should also avoid the pitfalls of its predecessor on trade policy and be proactive in ways the U.S. has not to ensure the improvements we’ve seen continue and that our trade relationship with Beijing becomes even more mutually beneficial than it has been.
Daniel Savickas is a policy analyst for the Taxpayers Protection Alliance.