The US Trade Act of 1974, amended in 2018, is described as ‘An act to promote the development of an open, nondiscriminatory, and fair world economic system, to stimulate fair and free competition between the United States and foreign nations, to foster the economic growth of, and full employment in, the United States, and for other purposes.’ 1 It is a complex piece of public law that runs to 272 pages and covers ‘Negotiating and Other Authority’ (Title 1), ‘Relief From Injury Caused By Import Competition’ (Title II), ‘Relief From Unfair Trade Practices’ (Title III), ‘Trade Relations With Countries Not Receiving Nondiscriminatory Treatment’ (Title IV), ‘Generalized System Of Preferences’ (Title V), ‘General Provisions’ (Title VI), ‘Tariff Treatment Of Products Of, And Other Sanctions Against, Uncooperative Major Drug Producing Or Drug transit Countries’ (Title VIII), and ‘Supplemental Agricultural Disaster Assistance’ (Title IX). The Act was passed to help industry in the U.S. become more competitive or phase workers into other industries or occupations, providing the President with fast track powers to negotiate trade agreements. It also gave the President broad authority to counteract injurious and unfair foreign trade practices. Section 301 in particular authorizes the President take all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international trade agreement or is unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce. The United States Trade Representative (USTR) also can initiate a Section 301 investigation and the law does not require that the U.S. government wait until it receives authorization from the World Trade Organization (WTO) to take enforcement actions.
Following President Trump’s Section 301 Decisions, the USTR launched a new WTO challenge against China claiming unfair treatment for U.S. companies and innovators trying to do business in China. In particular, the accusation is that China is breaking WTO rules by denying U.S. patent holders basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends. As the Office of the (USTR) backgrounds the issue:
Following a Memorandum from President Trump, on August 18, 2017, the U.S. Trade Representative initiated an investigation under Section 301 of the Trade Act of 1974 into the government of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. Following a thorough analysis of available evidence, USTR, with the assistance of the interagency Section 301 committee, prepared findings showing that, among other acts, policies, and practices, China uses discriminatory licensing requirements to transfer technologies from U.S. companies to Chinese companies. 2
The Office of the United States Trade Representative (USTR) released the results of its inquiry in the report entitled Findings of The Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 of The Trade Act of 1974 3 that begins with a statement of the core element of Section 301 and provides background to the investigation by referring to the President’s Memorandum to the Trade Representative:
China has implemented laws, policies, and practices and has taken actions related to intellectual property, innovation, and technology that may encourage or require the transfer of American technology and intellectual property to enterprises in China or that may otherwise negatively affect American economic interests. These laws, policies, practices, and actions may inhibit United States exports, deprive United States citizens of fair remuneration for their innovations, divert American jobs to workers in China, contribute to our trade deficit with China, and otherwise undermine American manufacturing, services, and innovation. 4
To simplify, the U.S. and the current President expressed concerns ‘about a wide range of unfair practices of the Chinese government (and the Chinese Communist Party (CCP)) related to technology transfer, intellectual property, and innovation are longstanding’ (p. 4). In a definitional section of technology and technology transfer the report indicates the U.S. stakes and the way in which China has eroded the U.S.’s global position in high-tech manufacturing:
Technology and innovation are critical factors in maintaining U.S. competitiveness in the global economy. Among all major economies, the United States has the highest concentration of knowledge- and technology-intensive industries as a share of total economic activity. And in high-tech manufacturing, the United States leads the world with a global share of production of 29 percent, followed by China at 27 percent (p. 6).
The U.S. document details China’s technology drive that seeks to reduce its technological dependence on others by fostering both ‘indigenous innovation’ and ‘re-innovation’ of foreign technologies through its 5-year plans, the National Medium- and Long-Term Science and Technology Development Plan Outline (2006–2020) (MLP), and the Made in China 2025 Notice. 5 The MLP notes key sectors and priority areas as well as designating eight fields of ‘frontier technology’ including biotech, information technology, advanced materials, advanced manufacturing, advanced energy technology, marine technology, laser technology, and aerospace technology. The document also highlights four major scientific research programs that include: protein science, nanotechnology, quantum physics and developmental and reproductive science. As the USTR notes the MLP strategy is a top-down national strategy that prioritizes certain technologies for development, establishing a web of polies and practices that advantage Chinese firms in the local market and achieves import substitution in ‘enhancing the absorption, digestion, and re-innovation of introduced technology’ [MLP §§ 2(1), 8(2)].
The Made in China Notice released in 2015 targeted ten strategic advanced technology manufacturing industries, including advanced information technologies and robotics alongside technologies in aviation, maritime, rail, new energy vehicles, electrical generation, agricultural machinery, new materials, and pharmaceuticals. The USTR notes the elements of China’s approach: central planning, plan mobilization in all sectors, leveraging of state resources and finance, civil-military integration and the two-way transfer, backbone enterprises in technology development, technological breakthroughs in key areas, import substitution policies, and promotion of Chinese industries in the domestic market. On the basis of this strategy China aims for 40% self-sufficiency by 2020 and 75% self-sufficiency by 2025.
Clearly, China has made incredible progress from the days of copy strategies to support and develop a world class indigenous technology sector that will propel China into the leading world position in high-tech industries in a few years, threatening the U.S. Silicon Valley leading position in new digital technologies, and competing successful in world biotech, nano-tech, new materials and energy technology markets. As Lorand Laskai (2018) comments: ‘In the saga of the U.S.-China economic rivalry, Made in China 2025 is shaping up to be the central villain, the real existential threat to U.S. technological leadership.’ 6 He notes also that Chinese planners have studied and learned from Germany’s ‘Industry 4.0’ 7 based on adoption of intelligent systems and full automation in manufacturing that is commonly seen as the basis for the fourth industrial revolution clustered around converging technologies 8 encouraging ‘the global artificial intelligence race’ 9 (Peters, Citation2012, Citation2017, Citation2018; Wei & Peters, Citation2018). The report does not mention deep machine and quantum computing in which China has made large investments earlier than US and others countries (Peters, 2018).
The rest of the USTR documents aspects of China’s alleged unfair technology transfer regime
China’s Unfair Technology Transfer Regime for U.S. Companies in China
China’s Discriminatory Licensing Restrictions
Outbound Investment
Unauthorized Intrusions into U.S. Commercial Computer Networks and CyberEnabled Theft of Intellectual Property and Sensitive Commercial Information
Other Acts, Policies, and Practices of China
Appendices, including public submissions
I will not comment on these aspects, prejudge issues, or attempt to evaluate them. That’s the job of the WTO. But I will make a theoretical observation under the heading ‘So much for neoliberalism.’ We have had 50 years of neoliberal theory that talks market fundamentalism and warns of government intervention. I do not need to rehearse these articles of faith here. Perhaps the tables have turned in the era of monopoly digital capitalism when the field is dominated by (soon-to-be) trillion dollar multinationals that seemingly can do what they like outside national tax laws? The big five Amazon, Apple, Facebook, Microsoft, Google—defining a new historical stage of capitalism—are matched by the growth of Chinese internet companies, Alibaba, Baidu, Tencent, JD.com, NetEase. 10 There are already fears that the U.S. ‘big five’ could destroy the ‘Tech Ecosystem’. 11 They will not only dominate the foreseeable future but seem to operate more like governments. 12 There is also the flourishing of the new concept ‘technonationalism’ used with increasing frequency to describe the threat of China. Thus, Amol Rajan (2018) writes:
One of the most important stories in the world right now is the battle to own the future by investing in technology, in which non-democratic states are becoming more assertive, strategically effective and—unencumbered by voters' preferences—able to think in epochal rather than electoral cycles….
Techno-nationalism marries two trends that are central to our current historical moment. First, the remarkable acquisition of power through data and ‘network effects’ of just a few companies based mainly near San Francisco, and the escalating battle between these companies and Chinese rivals. And second, the decline of the post-1945 Western-led world order. https://www.bbc.com/news/technology-45370052
These fears of Chinese technology drive Washington that is abuzz with Chinese ‘techno-nationalism’ and the prospect of when China rules the web as the techno-service state. Here is another example—Adam Segal (2018) writes for Foreign Affairs:
In Xi’s words, cyber-sovereignty represents “the right of individual countries to independently choose their own path of cyber development, model of cyber regulation and Internet public policies, and participate in international cyberspace governance on an equal footing.” Three technologies will matter most for China’s ability to shape the future of cyberspace: semiconductors, quantum computing, and artificial intelligence. https://www.foreignaffairs.com/articles/china/2018-08-13/when-china-rules-web
One significant theoretical question is which economic system will be more successful? Neoliberal America or Socialist China? Free capitalist America or State Socialist (capitalist) China? Are these even real alternatives? The global techno-ecosystem may be constrained by techno-nationalism but it also may be enhanced through global penetration. This is partly a question of international law in telecommunications and internet that is yet to be written.
One thing for sure is that the trade wars initiated by Trump (maybe we could be excused for using the expression ‘trumped up’?) are in large measure spooked by fears of China’s coming dominance in the technological era of the future development. This fear and the eclipse of American technological dominance is one of the real sources of Trump’s trade war with China.
Beijing Normal University, Beijing Shi, China
[email protected]
Notes
4 Addressing China's Laws, Policies, Practices, and Actions Related to Intellectual Property, Innovation, and Technology, 82 Fed. Reg. 39,007 (Aug. 17, 2017).
5 Notice on Issuing the National Medium- and Long-Term Science and Technology Development Plan Outline (2006–2020) [hereinafter “MLP”] (State Council, Guo Fa [2005] No. 44, issued Dec. 26, 2005) and Notice on Issuing “Made in China 2025” (State Council, Guo Fa [2015] No. 28, issued May 8, 2015).
9 https://www.cfr.org/event/global-artificial-intelligence-race, https://www.cfr.org/event/artificial-intelligence-race-and-new-world-order
10 For robotics see http://www.chinadaily.com.cn/business/2017top10/2017-05/16/content_29359368.htm
Related Research Data
References
- Peters, M. A . (2012). Bioinformational capitalism. Thesis Eleven, 110, 98–111.
- Peters, M. A . (2017). Technological unemployment: Educating for the fourth industrial revolution. Educational Philosophy and Theory, 49(1). doi: 10.1080/00131857.2016.1177412.
- Peters, M. A . (2018). Deep learning, education and the final stage of automation. Educational Philosophy and Theory, 50(6-7), 549–553.
- Wei, Z. , & Peters, M. A . (2018). ‘Intelligent capitalism’ and the disappearance of labour: Whitherto education? Educational Philosophy and Theory, doi: 10.1080/00131857.2018.1519775