Timothy Geithner refuses to call China a “manipulator” of its currency rate, as many in Congress want him to do. Yet the Treasury secretary spares no words about another unfair trade practice in China: The theft of software, movies, technology, and other American innovations that deprive the US of billions of dollars and hundreds of thousands of jobs.
Here’s how Mr. Geithner described Chinese stealing of American intellectual property rights during congressional hearings Thursday:
“Rampant,” “widespread,” “huge,” “negative,” “piracy,” and (the word with the most punch), “unacceptable.”
Just a day later, China again showed how unethical it can be in the outright taking of inventions. The Wall Street Journal reported that Beijing is asking foreign automakers that want to make or sell electric cars in China to, in effect, hand over their secret technology. (Call it grand theft electric auto.)
China seeks to dominate the world electric-car market by 2020, using a policy called “indigenous innovation.’’
Such tactics are akin to the subtle but coercive methods that Japan often used during its postwar rise as an economic superpower. China is following the Japanese model in many ways, but in its theft of foreign copyrights, trademarks, and patents, other nations, including the US, and corporations, must stand up to stop it.
With one-fifth of the world’s population, China is simply too big to get away with setting a standard for industrial robbery. This Chinese practice is “aimed at putting us at a competitive disadvantage,” says Obama’s chief enforcement official for intellectual property rights, Victoria Espinel.
To be sure, many parts of China’s government are trying to crack down on piracy, such as the counterfeiting of foreign brands. Laws are passed, say US officials, but enforcement remains weak.
Of all the imports stopped by US Customs for copyright or patent infringement, 80 percent come from China. And in a survey of foreign business people working in Asia, China ranks third behind Indonesia and Vietnam as the riskiest place to retain intellectual property rights.
The Treasury secretary claims China may be waking up to the issue. “Frankly, it’s a terrible problem for China. I mean, how do you, as a country, encourage innovation, encourage future growth, if you don’t give your innovators the property rights that come with their ideas?” But he says, Chinese officials admit they are not doing enough, either with tough laws or enforcement.
Fortunately, the US is getting serious. Congress held hearings on the issue this summer. And in June, the Obama administration set up a special office to coordinate antipiracy efforts and issued a 61-page strategy to enforce intellectual property rights. Such efforts include opening special offices in China to catch thievery, and working with cooperative Chinese officials.
“A lot of people in China are very worried about this, too,” Geithner says.
It may take a while for China to realize that proper law enforcement of intellectual property is in its own interest. Culturally it is difficult, as China still puts economic growth ahead of many other considerations and sometimes regards the West as owing it something.
Last year, the US won two cases against China relating to intellectual property rights at the World Trade Organization. A third case was also settled favorably for the US. Such legal battles are necessary in the long march to turn China around and help the US maintain its advantage as a knowledge-based economy.
As President Obama said last March, “Our single greatest asset is the innovation and the ingenuity and creativity of the American people. It is essential to our prosperity and it will only become more so in this century. But it’s only a competitive advantage if our companies know that someone else can’t just steal that idea and duplicate it with cheaper inputs and labor.”