Broad sanctions fail – finding specific instances of IP theft as basis for retaliation key.

[Derek Scissors is a senior fellow at the American Enterprise Institute (AEI), where he focuses on the Chinese and Indian economies and on US economic relations with Asia. He has worked for London-based Intelligence Research Ltd., taught economics at Lingnan University in Hong Kong, and served as an action officer in international economics and energy for the US Department of Defense. He also served as a commissioner on the US-China Economic and Security Review Commission. Dr. Scissors has a bachelor’s degree from the University of Michigan, a master’s degree from the University of Chicago, and a doctorate from Stanford University.], 14 October 2021, “Can Biden Stop China's Intellectual Property Theft?”, https://nationalinterest.org/blog/reboot/can-biden-stop-chinas-intellectual-property-theft-194751

The Wall Street Journal published a story yesterday on Chinese courts declaring their firms can’t be sued anywhere in the world for theft of intellectual property and in two cases threatening fines of $1 million per week if suits go forward. The US government is aware but has done nothing. This is just one, recent event in decades of intellectual property (IP) theft and coercion by China and utter American failure to respond.

The US started protracted negotiations with China over IP in 1986. In March 2021, the IP Commission confirmed that theft costs America hundreds of billions of dollars annually and the People’s Republic of China (PRC) is the biggest culprit. It seems those original talks didn’t work. In 1995, the Clinton administration brokered an IP truce to avoid a $1 billion exchange of sanctions. Threaten $1 billion, then get to steal tens of billions annually — who says Beijing doesn’t know a good investment when it sees it?

In 2006, the Bush administration initiated the Strategic Economic Dialogue. To be fair, it gave a pass to all sorts of harmful Chinese behavior, IP was only one part. In 2015, the Obama administration agreed with Xi Jinping to halt cyber-enabled IP theft. Months later, the Ministry of State Security initiated the Cloud Hopper campaign attacking American and other companies.

Thirty years of abysmal American policies very briefly looked to be ending when the Trump administration launched a Section 301 inquiry into Chinese IP coercion. Almost immediately after the decision was made, though, President Trump decided it justified across-the-board tariffs. Across-the-board tariffs don’t identify bad IP actors and, therefore, can’t discourage IP coercion.

The bookend Trump administration IP failure came in 2020, with the “phase one” trade deal. It has no status in American law and thus no true enforcement mechanism. Shockingly, Beijing didn’t meet its 2020 import commitments, and the US did nothing. Phase one also had an IP component. There the US didn’t bother to check if the PRC had gone beyond publishing new rules, when it had ignored published rules for 35 years.

The recent decisions by Chinese courts display open contempt for American policy. One firm specifically protected is Huawei, which faces federal charges of racketeering and trade secret theft and is supposedly the top China priority for many Members of Congress. Want to file an IP lawsuit against what the US considers a criminal entity? Beijing punishes you. Washington pretends China’s IP behavior is better.

Reagan, Bush, Clinton, Bush, Obama, Trump — bipartisanship has been alive and well on this issue. Now the Biden administration. It’s off to a familiar start by seeming to retain the Trump phase one deal but doing nothing to enforce IP provisions, nor engaging in any other meaningful IP enforcement.

It’s true that new China policies are expected shortly. But given Joe Biden’s previous inability to see either the PRC or Xi Jinping clearly, it’s hard to imagine the new policies will have any teeth. Given our track record back to 1986, it’s almost impossible to imagine they will have IP teeth. More likely tens of billions of dollars’ worth of knowledge will continue to be lost to China, while Democrats and Republicans alike express empty outrage.