China’s Embrace Of An Intellectual Property System Imposed On It By The United States

The two biggest scientific powers, the U.S. & China, need to rethink the world’s intellectual property-based innovation system to safeguard citizen interests or else this privatization of technology, an arms race mentality in science, will produce a dark, dystopian future none of us really want explains Peter Drahos

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Story Transcript

LYNN FRIES: For The Real News I’m Lynn Fries in Geneva.

2017 was a record year for international patent filings at the World Intellectual Property Organization. Country rankings as source or origin of those patent applications is a closely watched statistic. With the question being, who filed the most applications? Results showed China moved into second position as a source of international patent applications filed via WIPO in 2017, closing in on long- time leader, the United States. Among the top 15 performing countries, only China posted double digit growth in 2017. And since 2003, China’s growth rates of international patent applications have exceeded 10% every year.

So what do these statistics on China tell us? The World Intellectual Property Organization runs 3 international filing system used by all the major corporations of the world, most notably multinational corporations racing to expand vast IP portfolios. WIPOs press conference on 2017 results made clear that it’s the system for patents that gets the most attention. That’s because it’s technology and a very good indicator of the relative strengths in the fields of technology of the various countries of the world, so explained WIPOs Director General, Francis Gurry. Here’s a clip from that press conference.

FRANCIS GURRY : “I mean the articulated expressed strategy of the Chinese leadership is to go from Made in China to Created in China. So if you like in very simplistic terms to go from being the factory of the world to the laboratory of the world

What we have seen is I think an extremely strategic approach adopted by China which is coming from the top of the leadership of China, an emphasis on innovation by President Xi Jinping and by Prime Minister Li Keqiang and the rest of the state leadership. And a number of careful policies put in place in order to develop the technological capacity of China covering fields such as artificial intelligence, advanced manufacturing and so on. So this I think is the reality of what we’ve seen in the course of the last 20 years. And the reality is that a new competitor has arrived and it’s a very strong competitor as the figures would show.”

LYNN FRIES: Joining us to discuss this and related issues is Peter Drahos. We last spoke with Professor Drahos from his office at the Australian National University. Today, Peter Drahos joins us from Italy where he is a Professor of Law & Governance at the European University Institution. Welcome, Peter

PETER DRAHOS: Hello, Lynn

LYNN FRIES: You’re an eminent figure in the world of intellectual property. So I wanted to get your take on these IP stats. What do you think? Do you think they are a good indicator that China has arrived as a major technological competitor?

PETER DRAHOS: Look I think that’s the right reading of the statistics. Of course, patent statistics are only one measure of innovation but they do show that China is placing a huge emphasis on developing in certain areas – in the electricity area, in the digital communications area, in the computer area along with chemicals. And at the same time they are trying to get the commercial benefits of this drive to develop as a scientific power. And it’s been a story of remarkable progress. If we think back to the fact that China really only began to shift towards a market economy in the early 1980s.

LYNN FRIES: So in your view China has learned to play the IP game?

PETER DRAHOS: Yes that’s exactly correct. It’s become very adept. It’s a fast learner. We see this in monumental patent filings. I mean applications now of well over a million. We see astonishing trade mark numbers.

LYNN FRIES: The U.S. has accused China of intellectual property theft. Comment on that in the broader context of this shift by China to a market economy.

PETER DRAHOS: The problem for China is that it has been a factory for the world but this has come at a great environmental cost. So it wants a different kind of economy. An economy in which it captures more value from the things that it makes but it would also like to make things that are less polluting, so called knowledge economy things – more software, more high technology products. So the desire in all countries to capture more wealth at lower environmental costs is a goal that they all share. Now U.S. accusations against China when it comes to intellectual property infringement, of course, have some basis in fact. Any country that seeks to improve its innovation system will look at innovation leaders. And the United States is undoubtedly an innovation leader. And so China looks at what U.S. science does, what U.S. companies do and it seeks to learn from that. But at the same time, China has also made great strides in improving its own intellectual property system. I think we should give China a lot of credit for first of all enacting intellectual property standards that in many ways were pushed upon it before it would have liked to have adopted those standards. I mean China as a poor country was not really ready to embrace intellectual property at the point that the U.S. was insisting that it do so. But China basically complied with U.S. demands. It enacted standards that are compliant with the World Trade Organization Agreement, the TRIPS related agreement on intellectual property rights. And so as I said I think some credit should be given to China for having enacted those standards and trying to get better compliance. And of course if you want to build an economy on the basis of innovation, then to some extent you have to an intellectual property system that people use and play by its rules. Otherwise you won’t capture those value chains that bring you wealth.

LYNN FRIES: What are your thoughts on the U.S. tariffs imposed against China by the Trump Administration. And China’s retaliatory tariffs and claim filed against the United States at the WTO?

PETER DRAHOS: Yes, look, I think most observers would say that this is a lose-lose game really. I mean the United States if we think about this historically had the most leverage over China when China was first of all seeking access to the U.S. market as an exporter and so it wanted the United States to grant it Most Favored Nation status. Obviously that gave the United States a great deal of bargaining power. And secondly, the United States had a lot of leverage over China because China wanted to become a member of the GATT, the General Agreement on Trade and Tariffs or what then became or evolved into the World Trade Organization. So those two things, Most Favored Nation and membership of the World Trade Organization, gave the United States a great deal of bargaining power. But actually even in the early 1990s when the United States really began to threaten China with trade retaliation the Chinese responded with some counter-retaliation. I mean they began to list certain goods that U.S. companies were exporting into China. And ultimately in the early 1990s, what we saw was that the United States and China reached an accommodation. They came up with some Memorandum of Understanding. Everyone more or less said they had got a good deal. And that was that. Now I would be very surprised if something similar here didn’t happen given the fact that China now is the world’s second biggest economy. At some point, it’s going to chug past the United States and become the world’s biggest economy. And the idea that China will roll over or cow-tow on something so public, on something that is so central to its own image of itself, I think is very, very implausible. So one would expect here ultimately, while there may be some more escalation and some more thunder and so on, I think in the end we’ll see what we saw in the 1990s which is some Memorandum of Understanding. Some sort of agreement in which both sides will say that they got a good deal and the trade economy will go on

LYNN FRIES: Which implies that although trade threats may have been effective for the U.S. in the past, those days are gone.

PETER DRAHOS: Look I think that is certainly right. The United States cannot push China in the way that was able to in the 1980s, in particular, and in the 1990s. Its relative power over China has declined. And if you have a look at the import-export relationships between China and the United States as well as the broader global agendas everyone’s talking about – climate change or world security. Their interests are so intertwined that an all-out trade war that would ruin relationships with them seems a terrible option. And I think maybe interest groups in the United States would not support such a blitzkrieg approach to handling China. I think many interest groups in the United States particularly if this was to escalate would ultimately lobby the United States trade representative, would lobby the President, and would really ask for common sense to prevail because there are just too many interests that would be adversely affected by a deep and scouring trade war.

LYNN FRIES: What if rather than a lose-lose trade war, common sense were to prevail. What would it look like?

PETER DRAHOS: Well I think probably China would agree to do a bit more on compliance with intellectual property standards. The United States would offer some more capacity building. Already there are lots of initiatives between the United States and China when it comes to capacity building in intellectual property. Many U.S. experts travel to China and offer their views and their assistance. There is close cooperation between the Chinese patent office and the United States patent office. So I think at a technical level, a technocratic level, we see lots of cooperation. And eventually once the dust settles and people stop threatening billions of dollars of tariffs what we would probably see is some sort of agreement to do more in the intellectual property area. China might offer more market access, a little bit more transparency. It’s that sort of thing that I think we would see if common sense were to prevail.

LYNN FRIES: What I hear from what you’re saying is the world’s two biggest economies need to cooperate rather than wasting time and resources in a lose-lose trade war.

PETER DRAHOS: Well absolutely. I think the trade war will get us nowhere. I mean I think all that will happen will be that we’ll see markets frightened. We’ll see a lot of interest groups lose on both sides. I mean the U.S. farmers will obviously be affected and ultimately U.S. high technology companies that assemble goods in China will also end up losing. Obviously Chinese companies that are seeking to export into the U.S. market will lose. So there will be a bunch of losers, a very long list of losers. So no one is going to win from this.

I think the more important issues though are the issues that we are alerted to by scientists. I mean we are in a serious ecological and climate situation. We’ve had warnings now for decades of degenerating ecosystems. All around the world we are seeing climate related problems, declining outputs, agricultural outputs in some countries. For example, in South Asia the problems with the monsoon, problems with heat and so on. And so what we really need are the two biggest scientific powers and I would say that by now China is probably the world’s second largest scientific power; we really need cooperation on what are major global problems and will become major global catastrophes. So the last thing we want is a trade war and more imperatively we want countries cooperating on science. We want countries sharing knowledge about how to address problems whether they’re health problems – pandemics, epidemics – or whether they’re climate problems whether they’re ecological catastrophes the consequences of drought. There’s a long list of things that we need to talk about as a global collective. And that’s what China and the United States really need to be talking about

LYNN FRIES: And under the current IP regime is that plausible?

PETER DRAHOS Well that’s a good question. My own view is that China’s embrace of intellectual property rights is to some extent a mistake. Because it creates almost an arms mentality, a kind of arms race in which the game mainly is getting scientists to apply for as many patent applications as you possibly can. And if you think about it for a moment the intellectual property based innovation system that we have is really a failure. I mean think about the price of medical drugs, for example, the price of pharmaceuticals. We now have pharmaceuticals in the United States –cancer treatments- that are approaching half a million dollars. I mean that’s unsustainable for American citizens and its certainly unsustainable for poor people and it’s unsustainable for Chinese citizens. Likewise think of the price of text books or think of the fact that so much knowledge is hidden behind copyright paywalls. And the way in which publishing cartels block citizens from getting access to knowledge that their tax dollars have paid for. So it’s an absurd system. It’s an irrational system. So the idea that China is embracing this system, a system that in a sense the United States imposed on them, I think is a grave error. And we’re all going to suffer for it. What I mean is that global citizens everywhere are going to pay the consequences of this. You know we need knowledge that’s produced with public tax dollars to be freely available. You know you and I should be able to get the knowledge that we want buy visiting the website and downloading what we want. We shouldn’t have to pay $30 or $40 for a scientific article if we are interested in that scientific article. That’s simply absurd. We shouldn’t have to worry about cancer treatments that are going to cost us hundreds of thousands of dollars that may send us into bankruptcy. And that’s the kind of thing that the patent system has delivered for us. So I think both countries need to rethink this agenda. And certainly if China cares about equality, if it cares about inequality about doing something about inequality, it should be addressing these issues. And it should be showing more leadership on these issues.

LYNN FRIES: What about the careful planning and extremely strategic approach on the part of Chinese leadership in achieving their goals in the top fields of technology. We heard at the WIPO press conference, in the words of Francis Gurry, the plan is for China to go from being factory of the world to laboratory of the world. China is already gene-editing humans. And with an online population greater than the entire population of the United States, it’s making rapid advances in artificial intelligence. We see a former top deputy helping lead artificial intelligence strategy at Microsoft is now in Beijing, at Baidu, a premier AI company in China. The conventional wisdom being to train the algorithms that will deliver intelligence, you need data. And the company with the most data wins. Give us some perspective on all this.

PETER DRAHOS: The United States should be thinking about the longer term picture here. It is undoubtedly true that a country that has access to hundreds of millions of citizens can in effect conduct the largest scale experiments in scientific history. So if we think of the Chinese population all those that are on the internet as an experimental population. So let’s say that that’s roughly a billion people, then essentially that source of big data will allow Chinese scientists to develop learning algorithms at a rate and at a scale that is historically unprecedented. Now the problem is this. When you run scientific experiments at a university you need clearance from the university ethics committee. I mean that’s fundamental. That’s a fundamental prerequisite – informed consent. But actually what we see happening in the world is that many experiments are taking place on citizens without their informed consent. And actually what we are also seeing is really manipulation of citizens’ preferences. Using big data and using highly forensically targeted algorithms. Now as I say China has a comparative advantage in the sense that it has a very large population upon which to experiment. Now my own view is that this is ethically highly questionable. And there are many issues about whether we as citizens want to be experimented upon. Now of course whether the Chinese government will be consulting its citizens, whether the Chinese government will be protecting the interest of Chinese citizens when it comes to this kind of experimentation is an open question. But I again think we need some leadership on these issues. I think we need a discussion of what sort of collective approach we would like. And I think citizens everywhere would like some more discussion of this. I don’t think it’s in the long term interests of the United States to enter a sort of arms race in this area. Because I think that’s going to produce a frightening kind of dystopian world. We have a lot of choices about the future that we can create. And unfortunately, I think intellectual property, the privatization of science, an arms raced mentality when it comes to the use of science, is going to produce the sort of sci-fi future that none of us really want, a kind of dark, dystopian one. We could have a very different one of course.

LYNN FRIES: The Obama Administration in promoting the Transpacific Partnership argued that it was of strategic important for the U.S. to join the TPP to contain China. Now that the Trump Administration may well do a U-turn in that direction, what’s your assessment of the merits of that argument?

PETER DRAHOS: China has many options here. It doesn’t really have to worry about the TPP all that much. I mean it’s launched its own Belt and Road Initiative. An initiative that’s looking at integrating the economies of fifty or sixty countries looking at the ways city economies in China can be integrated with the city economies of central Asia and ultimately Europe. I mean this is a big and bold vision, one that doesn’t rely on trade agreements. So that I do think that engendering some sort of competitive arms race mentality is a mistake. I think one should be reaching out to China seeking to cooperate on issues like the future of Big Data and AI [Artificial Intelligence] and thinking about the kinds of ethical guidelines that we need in this area, the kind of protocols that we need in this area that would safeguard citizens’ interests. I mean , it’s very important that scientists in China, that scientists in the United States and scientists in Europe as well as citizens groups and on all become part of this large conversation about where we want to take technologies. Turning this into just trade talk and just competition is a mistake. And I also think that if the United States thinks that it is somehow going to discipline China with this kind of talk and these kinds of tactics, it’s really a mistaken view of the world.

LYNN FRIES: To wrap up in a closing comment, talk about the concentration of ownership of intellectual property rights in the hands of so few multinational corporations, whether they’re U.S. or Chinese corporations. And what that means for inequality not only between countries but within countries.

PETER DRAHOS: Well this is a complex economic question of course – the relationship between intellectual property and inequality and it’s really an area that’s been under-explored. But in a nutshell, let me say this. Intellectual property is a winner takes all system. So if you have the patents over the latest artificial intelligence technology or you own key trademarks you basically are in a position to license or to control the development of a particular technology and capture all the wealth from that technology. So what that essentially means is that the winner takes all and you a long tail people who are excluded. If you want competition, if you want competitive markets, you would reduce the role of intellectual property because essentially what that means is then lots of players come in and you get marginal cost pricing. So my own view is that intellectual property fundamentally contributes to inequality. And that’s both within countries because the large corporations amass huge amounts of wealth over which I might add they pay virtually no taxes as has become clear in the United States and Europe and Australia and many other countries. They amass large patent portfolios that bring them large amounts of wealth, this wealth being held in tax havens. And which do very little for equality, right. Essentially they are in a position to buy out their competitors making competition in the market place very difficult. So, what we are going to see ultimately I think are rising genie coefficients, rising inequality. So I think we need to have a conversation about the relationship between intellectual property and inequality.

LYNN FRIES: And the way you see it this is related to issues of representation, democracy?

PETER DRAHOS: Well of course, I mean if you create large concentrations of wealth it’s standard interest group theory, you create extraordinarily powerful lobbies. So in authoritarian states, these large lobbies become a part of the elite. In democracies, you in a way create interest groups that make the workings of democracy very difficult because they it’s these interest groups that can essentially afford campaign contributions that control the media in various ways or influence the media. So, high levels of inequality are a fundamental problem for democracies. There is very little doubt or disagreement about that.

LYNN FRIES: We have to leave it there. Peter Drahos, thank you.

PETER DRAHOS: Thank you, very much.

LYNN FRIES: And thank you for joining us on The Real News Network.

END

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