By Daniel Gallington and Abraham Wagner
The Trump administration is taking seriously the entire spectrum of economic challenges related to China that impact our nation. For decades, prior administrations have either ignored the issues or accepted Chinese lies, fabrications and excuses without any pushback. Fortunately, there are no internal political battles over this area — so we can expect the excellent team President Trump has assembled to “work these issues” will succeed.
Since the 2016 presidential campaign, Mr. Trump has been outspoken and consistent: That the enormous trade imbalance with China and the grossly unfair tariffs imposed on American exports must end. The trade imbalance is now on the order of $300 billion annually, and every day artificially low-cost Chinese goods enter the United States with minimal import tariffs.
At the same time, U.S. exports to China are slapped with obnoxiously high duties — a sad fact that not even progressive Democrats think is a good idea. Yet, no prior administration has had the courage to tackle the problem — and the Chinese, who are anything but stupid, have learned that they can get away with economic murder and build their wealth on the backs of American taxpayers.
Following Mr. Trump’s initial tariff action, he and Chinese President Xi Jinping declared a trade truce, agreeing to hold off on new tariffs following months of escalating tension and to negotiate over the next 90 days. Our Trade Representative, Ambassador Robert Lighthizer, is leading the negotiations with China. Highly respected in the financial community as a tough negotiator, Mr. Lighthizer will address tariffs, market access and also Chinese intellectual property theft — where the White House has especially signaled a much harder U.S. line.
The wide scale stealing of U.S. intellectual property by the Chinese is now squarely in the negotiating mix and finally getting some well-deserved attention.
For decades, the Chinese have been stealing the United States blind. When CDs were the rage, there were at least four factories in China, owned by politically well-connected Chinese, turning out millions of forged copies of copyrighted entertainment and software. U.S. efforts to stop this were lame, and the Chinese both ignored the issue and lied about it. When asked in “negotiations” they forgot they spoke English or just sat silently. On the hardware side, some 70 percent of all Apple computers sold in Asia were illicit Chinese copies. No prior administration has done anything about this outrageous conduct.
More recently the Chinese theft of intellectual property has risen to new and more sophisticated levels, aimed not simply at “products” but at the U.S. technology base and in an effort to make China the world technology leader. Apart from the Lighthizer negotiations, the Justice Department is playing “hard ball” with the Chinese and recently indicted Huawei Technologies Co., China’s largest smartphone maker, with bank fraud and stealing trade secrets, along with indicting its chief financial officer Meng Wanzhou, daughter of Huawei’s founder.
Ms. Meng was arrested in Canada and is currently being detained in Vancouver pending extradition to the United States to face criminal charges. The indictment alleges that Huawei stole robotic technology — designed to test smartphones — from the American cellular company T-Mobile. Whether Ms. Meng will actually be extradited or face trial in the United States is still an open question, but even if she enters some plea agreement and Huawei pays an astronomical fine for her release, the case makes a basic point: China has again been caught red-handed in the theft of intellectual property (IP) and the United States is finally willing to take serious legal action.
Note here that the case against Huawei is not all that new, and goes back some 10 years — during two Obama administrations that failed to bring criminal charges. Beyond the Meng indictment, the Huawei case illustrates how it was settled company policy and practice to simply steal American technology, and employees were rewarded for doing so, and doubtless this goes far beyond Huawei. This practice is an essential part of the Chinese national culture — and for the first time, a U.S. administration is calling them out and imposing significant civil and criminal penalties for their continued and unabated practice of IP theft.
It’s not that President Xi or his colleagues “don’t get it.” Mr. Xi got his PhD. from a U.S. university and many of China’s other leaders studied here as well — they certainly understand the U.S. system of intellectual property protection. They just don’t want to pay for it, and for more than a generation, they have done a spectacular job of building the Chinese economy. However, a key part of this strategy involves the unabashed IP stealing from the United States.
The last piece of the Chinese theft equation is yet another form of intellectual and industrial espionage against the United States, and on a truly massive scale: Currently, there are some 100,000 Chinese students in the United States on student visas, and many others working here on other visa categories who are required — as a basic condition of their permission to leave China — to bring U.S. technology back. Because of the vast size of these practices, the U.S. intelligence community has a hard time coming to grips with the nature and scale of this espionage enterprise.
This is no longer the world of a single James Bond character stealing a secret; it’s a massive operation focused on taking the entire U.S. technology base. The United States is just now coming to appreciate the magnitude of this threat and can formulate effective responses before the Chinese succeed and the United States loses the technology battles of the future. However, getting the Chinese to change their behavior will be no easy task, even for Mr. Trump and the Lighthizer team. Finally, we should expect the Chinese to cheat on any deal they make, so there will have to be built-in oversight and inspection provisions in any agreement.
• Abraham Wagner and Daniel Gallington served in senior national security positions.
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