Experts Split on Path U.S. Should Take To Quell Harmful Effects of Chinese Trade, Market Practices

Rep. Randy Forbes, R-Va., said the issues raised by Chinese business practices have been happening for a decade, and pose a difficult problem for the U.S. "I think we have one hand tied behind our back, but we are very limited on what we can do with the other hand," Forbes said, speaking of the potential actions the U.S. could take to combat the problem. He said he worries the U.S. has policies that are harmful to innovation, and that China's strategy is creating an unlevel global playing field for technology companies. "There are two things I worry about when it comes to innovation ... what China is doing and what we are doing to ourselves," said Forbes, adding that the U.S. has higher business taxes and litigation costs and more regulations than international competitors. "We have to look at ourselves," he said. "Our innovation is the cutting edge advantage that we have."

China is becoming more aggressive in its market practices, which experts say can be detrimental to the U.S. economy, and to combat them Forbes suggested the U.S. become more vocal in its discussion of the issue. American businesses with investments in China are in a tough position, he said, because if they speak out against the Chinese and their intellectual property theft from various technology companies, they will be shut out from doing business in the country and effectively lose "a seat at the table." Forbes also suggested more action could be taken by the federal government. "The government needs to create some sort of accountability" to ensure China is being held responsible for breaking commitments it has made since joining the World Trade Organization (WTO) in 2001, he said. "How do we hold China accountable if the rules don't mean anything?" said Forbes.

Robert Atkinson, ITIF president, said there's no question about the strategy deployed by China. "That's essentially to foreclose foreign, including U.S., technology participation in the Chinese market," said Atkinson. "They are going to use that protected market to then launch attacks at the global market share of foreign technology companies." Atkinson said China hasn't lived up to the promises it made the WTO, and is using the group essentially as "protection against unilateral actions from the U.S. and other countries." The Chinese government learned it has a giant stick it can use to threaten American companies, Atkinson said, which includes cutting off market access and issuing fines if businesses refuse to give Chinese companies their core technologies. The problem is especially bad for the U.S. semiconductor industry, said Bill Whyman, head of technology strategy research at Evercore ISI. "The Chinese are making a major renewed push in the semiconductor industry," he said, saying China's government "deeply controls the very sinews of that marketplace. ... I think it will be a big challenge for foreign companies to participate in the development of the Chinese technology sector."

While every speaker Thursday acknowledged the negative effects caused by China's practices, some disagreed on the action the U.S. should take to combat the problem. Derek Scissors, resident scholar at the American Enterprise Institute, said technology might be the most prominent area where China is stealing U.S. innovation, but it's not the government's place to get involved. "It's not the U.S. government's problem to open market access to China," he said. Scissors warned against certain government actions and responses. "I do not want more bureaucracy at all," he said. "Creating new offices is not going to help this at all. We should not be negotiating a bit with the Chinese." Atkinson disagreed, suggesting a path of "constructive confrontation. ... Unless the Chinese know that there are going to be severe consequences to their actions, they simply won't stop."