U.S. Secretary of State John Kerry will land in Beijing this week. There are plenty of issues for him to discuss with the new Chinese leadership. The dangerous situation on the Korea peninsula demands top attention. But China’s theft of U.S. intellectual property is also reaching crisis levels.
Businesses in the United States are losing billions of dollars – our economy is losing an estimated million jobs – because China and other countries are stealing our intellectual property. It has been estimated that of the S&P 500, 81 percent of their market value is derived from their intangible portfolios. Intellectual property and trade secrets are often the crown jewels of a company.
China sends spies into American companies or hacks remotely into U.S. computer systems. They siphon off the core strength of the U.S. economy: our innovation, our designs, our blueprints and our plans for the future. It could be argued that China’s growth strategy is built on intellectual property theft. By forcing foreign companies to partner with Chinese companies, they create an easy way for foreign company secrets to be stolen. The U.S. trade representative consistently places China on its “priority watch list” for its high level of intellectual property theft and state-sanctioned transfer of intellectual property from U.S. companies to Chinese firms.
Business as usual for them means stealing research rather than developing it through their own investment. American companies spend more than $400 billion on research and development each year – more than double the amount Chinese companies spend. Stolen research effectively subsidizes the Chinese automobile and technology industry. It is also important to remember these stolen designs are not just of the next video game system – they are also highly classified defense systems that allow the United States to maintain its military superiority across the globe.
While some intellectual property theft is done in person, cyber attacks are the primary way for the Chinese to infiltrate corporations. In his confirmation hearing, Secretary Kerry called cyber-security the “21st century nuclear weapons equivalent.” If that is true, the administration must do more to protect Americans before we fall irreversibly behind in our capacity to combat this evolving threat. We would not expect individual Americans to stand up to a nuclear threat. But unfortunately, the administration’s attempt to combat the theft of trade secrets is largely centered on convincing U.S. companies that they need to build up their own cyber defenses.
Intellectual property theft is a state-sponsored attack on our country, and we must get past merely investigating the individual thieves. China “needs to be held accountable for specific, quantifiable commitments to reduce levels of intellectual property piracy” asserts Robert Atkinson of the Information Technology and Innovation Foundation.
When Secretary Kerry is in China, he can make it clear to the Chinese government that state-sponsored attacks on U.S. companies cannot continue. He could underscore that intellectual property infringement discourages American companies from investment in China. He must also make clear that there will be costs if theft persists.
The administration should work with the World Trade Organization and other international organizations that set the trading rules to ensure that China plays by the rules. So far, China is enjoying all the benefits of an open trading system without the commitment to not cheat. The administration should also include strong intellectual property requirements in the Trans-Pacific Partnership – a trade agreement that includes many Pacific Rim countries – to create incentives for protection against China’s trade threats.
And Congress should consider passing legislation that enables victims of state-sponsored intellectual property theft to sue – in the same way they can against state-sponsors of terrorism. China must face a negative consequence for their actions in the terms they understand. Money.
Congressman George Holding represents North Carolina’s 13th District, including Wake Forest, Nashville, Goldsboro, and Rocky Mount. Congressman Holding sits on the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet and the House Foreign Affairs Subcommittee on Asia and the Pacific.