'Brute Force' Tariffs Seen by Panelists as Unlikely to Resolve Chinese IP Theft
The problem with intellectual property theft is not only not going to be solved by tariff threats, experts said, it's likely to get worse in coming years. "I don't believe a set of punitive tariffs will bring about change in China whatsoever," said Mary Lovely, a China scholar at the Peterson Institute for International Economics. She said the pressures to steal intellectual property to support economic growth will increase, but also cautioned that "there are many ways China acquires technology, some of which don't violate international norms, and some of which do."
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Derek Scissors, a China expert at the American Enterprise Institute, said China's involvement in state-backed enterprises has become more intense, and mergers are making these companies more massive, which is not a recipe for home-grown innovation.
Bruce Andrews, a managing director at Rock Creek Global Advisors, served in the Commerce Department during the Obama administration, and said he's a veteran of many rounds of U.S.-China Joint Commissions on Trade and Commerce. He praised the Trump administration for recognizing that the U.S. has not been strong enough in the past in confronting Beijing's abuses. But, he said of the Trump approach, "It's all brute force, and unfortunately, I don't think it's going to be successful because that's not going to work with Chinese culture," which places a high value on saving face.
Andrews said that China is expert at dividing and conquering with Western countries trying to sell into the Chinese market, but he also said that Trump's decision to place 25 percent tariffs on European countries has moved them to act in a way Obama never could, as America asked them to confront Chinese overproduction in steel.
In addition to subsidized commodity production, IP theft and forced joint ventures, the U.S. is concerned about China's plan to dominate technology fields it identifies as critical in the future, such as electric vehicles and artificial intelligence. Scissors said those who dismiss Made in China 2025 as a command economy approach doomed to fail are missing the point. "It won't work for China," he said. "That doesn't mean they can't hurt us a lot. They are big."
Lovely said the U.S. should make clear to China that if it does end up producing 80 percent of the world's electric vehicles, "you will not be exporting them to the United States."
Will tariffs on $250 billion in Chinese imports come to pass? Scissors said the initial $36 billion will, but a deal that will lower the bilateral trade deficit will be struck in August (see 1806190034). However, he said, it won't last but about 16 months. "I don't think this is the low point for U.S.-China relations," he said.
Lovely said, "I hope personally [a deal] is not just about some agricultural products and some energy products," but said she also doubts a deal can be reached in the near term. In China, the threats have made it politically difficult for leaders to cave. And in the U.S., she said, "the more the administration stirs up their base about trade, they're also putting themselves into a corner."
Andrews said not only does he not know where it's going to go, he wonders about a scenario in which Trump reaches a deal, and then it is criticized in the media -- will he stick with it? He pointed to how Trump signed the omnibus spending bill, but when Fox News criticized it as big spending, he tried to back away from it. Andrews said to an audience member asking what happens next: "The answer to your question is: 'Who the hell knows?'"