The Trump Administration achieved one of its biggest trade victories on Tuesday when China’s National Development and Reform Commission announced new punishments for Chinese theft of intellectual property (IP).
Though the mainstream media has barely covered it, this new commitment from China amounts to one of the most impactful victories in the trade battle to date. Every year, American companies fall victim to hundreds of billions of dollars worth of IP theft at the hands of the Chinese.
China’s IP abuses against the U.S. come in a number of ways: Forced technology transfers are one of the major offenses, wherein China’s “joint venture requirement” forces U.S. companies looking to do business in China to transfer their technology to Chinese firms.
American firms are likewise coerced into providing China’s state-owned enterprises with below-market acquisition and licensing terms. China then asserts ownership over the licensed technology, as well as ownership of any later technological advances. If U.S. companies refuse to hand over their secrets, the Chinese government carries out police raids on company offices.
Other methods of Chinese IP theft include copyright infringement, large-scale counterfeiting of goods, and software piracy. Corporate espionage is a problem, too: Beijing recruits employees within certain U.S. companies to sell those companies’ secrets.
“You can’t find a company that hasn’t been assaulted, and half of them don’t even know it,” says Dr. Richard Ellings, executive director of the Commission on the Theft of American Intellectual Property.
The estimated cost of these violations? Anywhere from the low end of $225 billion, up to $600 billion per year, according to a 2017 report from U.S. Trade representative Robert Lighthizer.
With this change in policy, however, offenders will be noted on a registry, which financial institutions will reference when lending money and granting access to foreign exchange. Offenders’ access to capital and government funding will be cut off, as will their access to foreign trade and company registration.
As recently as last month, China denied IP theft even occurred. Any claims of Chinese wrongdoing are based on hearsay and ignore reality, a spokesman for China’s Ministry of Commerce claimed.
And buried even deeper in Tuesday’s announcement was another big win for the U.S. in regards to the opioid epidemic. According to the White House Press Secretary, China has agreed to designate Fentanyl as a controlled substance, meaning that the distributors of Chinese Fentanyl in the U.S. will be subject to China’s maximum penalty under the law.
Fentanyl is the deadliest drug in our country today, and a 2017 congressional report identified China as the primary source of origin for Fentanyl in the United States. In 2017, the drug was responsible for the deaths of 30,000 Americans, according to the National Institute on Drug Abuse.
All of this speaks to a simple point: Commerce is an instrument of national policy, to be used to achieve both political and economic ends.
China certainly understands this. Chinese tariffs have been crafted to specifically target red-state industries, such as automobile manufacturers and soybean farmers. In other words, Chinese tariffs are designed to specifically weaken Trump’s base.
The American Founders understood this, too. Throughout the Federalist Papers, Publius makes the point that trade in a commercial republic is a method of achieving national greatness.
Independence doesn’t just mean the absence of foreign rule, Publius argues. It also means that other nations will not prescribe for us the conditions of our political existence. In a world of competing nations, commerce isn’t simply for cheaper material goods: It is a means to achieve national independence and the conditions needed to maintain it.
And it’s an instrument Trump is wielding effectively.
“I am a Tariff Man,” Trump tweeted Tuesday. “When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power.”
With this, Trump is telling other nations: If you want the privilege of access to our market — the largest consumer market in the world — you must treat us right, or face the consequences.
And China is responding accordingly.
Of course, Beijing may not follow through on their promises. But tariffs brought China to the table, and they know the consequences of breaking their promises may prompt serious action on the part of the U.S.
Because now, they’re dealing with a Tariff Man.
Garrison Grisedale is a senior studying politics