Punishing Trade Pirates? It’s Complicated

China’s “Trade Pirates” see their “procurement” of American industrial secrets as — Helloooo, Donald — their “China First” policy!

There’s a hierarchy of larceny in our world, from pickpockets to the Wall Street syndicates running sophisticated mass swindles. But atop the heap are “bandit nations” — countries whose industrial and political elites conspire in economic espionage aimed at stalking and stealing the ideas, technologies and innovations of other economies. Their global robbery, “intellectual property theft,” plunders billions of dollars a year. Recently, U.S. corporate leaders have been in a sputtering rage over these state-sanctioned criminal enterprises. “Pirates!” they shriek, accusing China, Russia, some European competitors and even developing nations of spying, hacking and otherwise filching U.S. patents and such.

Pirates? Well, what else to call a country that makes such robbery core to its economic development strategy? (WARNING: Inconvenient historical truth dead ahead.) You could call it the United States of America.

In the 1790s and early 1800s, America’s basically agrarian economy was dependent on cotton, tobacco and other raw farm commodities. For value-added finished goods, we were a captive market of England and other manufacturing nations. To survive, much less advance, our new nation desperately needed its own processing and manufacturing industries. But how, without the technology or skills? Our founders’ answer: Steal them.

No less an eminence than Alexander Hamilton led America’s elite ring of state-run thieves. As America’s first treasury secretary, Hamilton declared that the U.S. must “procure all such machines as are known in any part of Europe.” His Treasury Department dispatched an agent abroad to “procure” machine drawings, and it initiated bounties to lure England’s textile designers and skilled operators to pass automation techniques to our government and industrialists-on-the-make.

Of course, the outraged Brits rushed to protect both their secrets and their iron grip on the U.S. market, assessing severe fines (up to 500 pounds per violation — $99,000 today) on anyone trying to take industrial designs out of country. Nonetheless, determined Americans kept stealing and soon built their own competitive textile industry.

Two centuries later, we are like old England, and China is the bad-boy disrupter of the global corporate order. Its leaders — like Hamilton — have little respect for other countries’ intellectual property laws. A big difference, though, is that China is not a backwater; it’s a global industrial power.

Still, industrial property protectionism is a tricky topic: No one has sympathy for Big Pharma when it uses brute political force to extend product monopolies that let drug companies charge outrageous prices. But if, say, America Corp. creates a new wing design, shouldn’t it be able to sell its made-in-America plane to China without transferring its wing technology, too? While Chinese officials deny such theft, they (among other countries) are widely known to run a sustained, sophisticated operation to “extract” and duplicate our technology. They can then set prices below U.S. production costs — thus sucking global manufacturing and jobs to China.

But where is our moral authority to condemn and punish them? Donald Trump can fulminate all he wants and even launch an ill-considered, mad-dog tariff war, but China’s leaders see the “procurement” of American industrial secrets as — Helloooo, Donald — their China First policy!

Indeed, since 2015, China has been investing billions in an ambitious 10-year “Made in China 2025” crash program to dominate the global market in 15 “industries of the future” (including alternative energy equipment, high-speed rail, robotics and electric cars). Yes, this massive offensive includes sending moles and other agents into the inner sanctums of such giants as Boeing and GM to purloin their latest designs and materials. But the Chinese program has been abetted by some surprising partners: the very U.S. corporations complaining so loudly about Beijing’s thievery.

Drooling at short-term profits from access to China’s billion-person market, Western CEOs have been selling their corporations’ futures by handing over their patented jewels in exchange for import licenses and access to China’s low-wage non-union workers. In addition, Chinese companies have obtained keys to industrial secrets simply by investing in U.S. firms — $135 billion between 2005 and 2016 in partnerships and joint ventures.

Follow the bouncing ball: (1) To punish the Chinese for taking the technology that our CEOs hand to them, (2) Trump (backed by some congressional Dems) has imposed a mountain of tariffs on goods China exports to the US, which (3) will raise the prices for U.S. consumers and (4) has prompted Beijing to impose retaliatory tariffs on U.S. grain and other products, thus hurting our farmers, other producers and consumers.

Jim Hightower