One of the main arguments for imposing tariffs on China is that China is undermining the intellectual property of US companies. China can now either retaliate against US tariffs or take this opportunity to help redesign the international intellectual property system, says CEPR’s Dean Baker
GREG WILPERT: It’s The Real News Network. I’m Greg Wilpert, coming to you from Quito, Ecuador. The Trump administration announced that this coming Friday it will present its list of Chinese imports that will be subject to new tariffs. The list could affect as much as $50 billion worth of Chinese imports. The reasoning behind these tariffs is that China does not do enough to import U.S. products, that it unfairly requires U.S. companies that invest in China to share their technology, and that U.S. patents and copyrights are not sufficiently protected in China. These new tariffs come on the heels of tariffs imposed on steel and aluminum from the European Union, Mexico, and Canada, possibly setting off a trade war not only with China, but also with its European and North American allies.
Joining me to discuss a possible trade war and what that could mean is Dean Baker. Dean is senior economist at the Center for Economic and Policy Research in Washington, D.C., which he co-founded. He is also the author of the book “Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.” Welcome back, Dean.
DEAN BAKER: Thanks for having me on.
GREG WILPERT: Dean, you recently wrote an article for the website Truthout in which you suggested a trade war with China might be an opportunity for resetting trade relations, specifically in the area of international copyright and patent law. What’s the scenario here? How could a trade war with China lead to changes in copyright and patent law?
DEAN BAKER: Well, it’s very interesting. What’s going on here is you have Trump kind of lashing out blindly. And just to be clear, there are grounds for complaints about what China does, and particularly with its currency. It has kept its currency down, which makes its goods cheaper relative to our goods, relative to other countries’ goods in the international market. And that’s a big source of our trade deficit with China.
So, so there is a legitimate complaint there. But there are a whole range of other issues that Trump and others have raised. And one of the ones that they focused on is this idea that China is somehow stealing our technology. And two ways in which that comes up. One is that it’s claimed, I’m sure there’s evidence for this, that they don’t honor patents, copyrights of U.S. corporations, to the extent that they should. And may or may not be true. Let’s assume it is. The other one, and this has been put very explicit, they require companies, say, Boeing’s one that’s come up. But other big companies that want to invest, they require them to share their technology. They have to have a Chinese partner. And the idea is that the Chinese partner will learn the technology, and then, you know, three, four, five years out it can be a competitor of Boeing, or a supplier of Boeing. And the argument is that that’s causing them to, to lose their intellectual property.
Now, how does this trade war end up breaking up our system of intellectual property? Well, suppose China gets upset Trump puts all these additional tariffs on, while they could respond by saying, OK, here’s another round of tariffs. And maybe they’ll do that. But what they could also say is, well, we don’t care about your intellectual property. You know, we’re going to go ahead and use it. And if you don’t like it, there’s really nothing you could do about it. And to my view that would really be a great thing. I don’t really care that Boeing might lose some of their profits, or Microsoft might lose some of their profits. There are actually benefits the classic story gains from trade. The Chinese companies would be able to produce these items for lower cost if they don’t have to respect U.S. intellectual property claims. We could buy them. We’d get them at lower prices.
So in principle, I mean, I have no idea how China’s government will choose to respond or where this ends up. But that has to be on their mind. They’re not stupid people. And if they decide they’re going to respond not by playing this tit for tat with tariffs, but to say that we don’t care about your intellectual property, we could end up a very good place from that.
GREG WILPERT: So if the, so if the existing copyright and patent system were to change for the better, how would it have to change? I mean, what would it look like in this kind of, let’s say, more positive scenario of an outcome of a possible trade dispute?
DEAN BAKER: Well, patents and copyrights are really antiquated ways in which to finance innovation and creative work. I mean, and just to be clear, we do have to pay people who innovate, people do creative work, writers, musicians. They absolutely should be paid. But this is a really antiquated way of doing it. So if instead we said, OK, let’s find mechanisms to pay them up front, we already do that in different contexts. So the National Institutes of Health spends over $30 billion a year in biomedical research. Let’s double that, let’s triple that. Then we’re not dependent on drug patents as a way for drug companies to recover their research costs. We can pay, we already do, to some extent, pay musicians, pay other people, and put money on the table for them. I mean, one thing I proposed is a voucher system where everyone gets a 100 bucks a year to give to creative work of their choice, and then it’s all in the public domain. We have to find some way to coordinate internationally. I mean, that was something you’d have to work through, but already international coordination as we see is a very very difficult thing to do.
So we have to develop alternative mechanisms for financing, but the key thing is that if we pay for the stuff up front, drugs are suddenly cheap. No one ever has a problem paying for prescription drugs that they need for their health or their life. All these other items would be cheap or cheaper, or in many cases free, if we’re talking about things like music, recorded music and video material. So we could end up in a very different place. And again, I know that seems farfetched, but I begin the piece by saying, look, we’re talking trade war. Maybe that’s a good metaphor, maybe it’s a bad metaphor. History of wars is they often end up in very unexpected places. And we’ll see where this ends up.
GREG WILPERT: I mean, one other thing that seems interesting, what this reminds me of is, in his book “Kicking Away the Ladder” by Ha-Joon Chang, he mentioned specifically that the United States actually didn’t pay much attention at all to copyright or patent when it was beginning its industrial development, and only after it had established itself as a major economic power did, did it start wanting to impose a much stricter and increasingly more strict copyright and patent systems. I mean, this is something that you think China is basically learning from the what the U.S. did in this case? And maybe this is something that other countries should be copying as well, this, their approach their approach to, to copyright and patent?
DEAN BAKER: Certainly. I mean, they’re quite, quite explicitly are looking to find what mechanisms to force technology transfer so that they can get on a level playing field. And you know, the story I know Ha-Joon-, I know Ha-Joon well, but also his book. It’s a well-known story that if you go back to the 19th century, we originally developed our first steam-powered factories, we smuggled blueprints and engineers out of England because they had an official secrets law. This violated their official secrets law. They were claiming this as their intellectual property. So that’s how we, our industrial revolution the U.S. began. And in terms of British copyrights, we didn’t begin to honor them in the U.S. to well into the 19th century. So there’s plenty of precedent here.
And again, you know, my point here is the-. We have patents, we have copyrights. That’s one way to finance innovation, creative work. It’s I think very far from the best way, and it’s really becoming very difficult in a digital world and internationalize system. We should be looking to other mechanisms.
GREG WILPERT: Okay. Well, we’ll leave it there for now. I was speaking to Dean Baker, senior economist at the Center for Economic and Policy Research. Thanks again, Dean, for having joined us today.
DEAN BAKER: Thanks for having me on.
GREG WILPERT: And thank you for joining The Real News Network.