April 06, 2018 5:18 PM
FILE – President Donald Trump signs a presidential memorandum imposing intellectual property tariffs and investment restrictions on China in the Diplomatic Reception Room of the White House, March 22, 2018.
U.S. President Donald Trump on Thursday threatened tariffs on an additional $100 billion worth of Chinese goods, on top of the $50 billion in import taxes he already has proposed against Beijing. Though none of the tariffs have taken effect, it’s the latest posturing in a trade dispute that some fear could escalate into a trade war.
How did this all start?
For decades, Trump has complained about China’s trade practices. One of his main complaints is what he calls Beijing’s theft of U.S. intellectual property.
Last month, Trump cited IP theft as justification for his proposed tariffs on $50 billion in Chinese goods. China retaliated by threatening its own tariffs on the same amount of U.S. goods. Trump then escalated the dispute, saying he would consider tripling the amount of goods to which tariffs would be applied.
What is intellectual property theft?
China gains access to U.S. technology by employing several tactics, which many observers have said are unfair or illegal.
Beijing has long required that U.S. businesses transfer technology to Chinese companies as a precondition of entering the Chinese market. For instance, if you are a U.S. carmaker who wants to sell automobiles to China, Beijing requires that you team up with a local Chinese company, or face steep tariffs on imported vehicles.
In other cases, China requires U.S. companies to comply with localization requirements by storing sensitive data in the Chinese mainland. That increases the risk of intellectual property theft through means such as cyberattacks.
How much IP does China steal from the U.S.?
It’s difficult to quantify the value of technological knowledge. But according to an estimate last month by the U.S. trade representative, Chinese theft of American intellectual property costs between $225 billion and $600 billion every year.
That rate is unsustainable, said top White House economic adviser Larry Kudlow. “We can’t afford to give up our technology,” Kudlow said Friday. “When they steal our technology … they’re stealing the guts of our American future.”
What does China say?
The Chinese government has always denied carrying out the cyberattacks that frequently target U.S. companies.
As for accusations of forced technology transfer, Beijing often sidesteps the issue, instead citing stats that suggest U.S. companies are eager to do business in China.
“In 2017, China paid $28.6 billion in royalties to foreign rights owners, up from $1.9 billion in 2001 when the country joined the World Trade Organization [WTO],” read a Friday editorial published by the state-run Xinhua news agency.
“China’s development has come as a result of China’s hard work, not ‘intellectual property theft,’ ” it added.
How do U.S. companies feel?
Some major U.S. companies appear reluctant to criticize Beijing publicly, for fear of jeopardizing access to the world’s second-largest economy. But it’s safe to say that many U.S. businesses are not thrilled with Beijing’s behavior.
Three-quarters of companies recently surveyed by the American Chamber of Commerce said they feel increasingly unwelcome in China. Nearly half of the group’s members said foreign businesses are treated unfairly by Beijing compared with local businesses.
Will Trump’s tariffs help?
So far, China has given no signs of making concessions. Instead, Beijing has dug in, proposing painful retaliatory tariffs and vowing to fight “to the end” to defend its interests.
Trump has said he’s open to negotiations, but China’s commerce ministry on Friday insisted talks are impossible in such a heated context.
