The U.S. Doesn't Even Enforce Trade Rules, Never Mind Enact Favorable Deals
Before new treaties are written, let’s hold 34 known countries accountable for intellectual-property theft
As politicians debate the merits of new trade deals such as the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, it’s worth asking how well the U.S. is doing enforcing current trade rules.
“Imitation may be the sincerest form of flattery, but in the realm of intellectual property, imitation is often theft.”
As do many other countries, America produces wheat, oranges, automobiles, petroleum and practically every product of value. Relative to some countries, we can produce certain products at higher quality and lower cost. Relative to others, our performance is worse.
One area where the U.S. consistently outperforms the rest of the world is intellectual property, where we have a real competitive advantage. People around the world seek to emulate America. They identify with American art, music, software and clothing designs. They enjoy the American Internet, American pharmaceuticals, American patents and, in many ways, all things American.
Imitation may be the sincerest form of flattery, but in the realm of intellectual property, imitation is often theft. In many countries around the world, American intellectual property is routinely stolen.
Each year, the United States Trade Representative (USTR) publishes a report on intellectual-property theft around the world. This year’s report, published in April, lists 11 countries on the “Priority Watch List” that have “the most significant concerns regarding insufficient [intellectual-property rights, or IPR] protection or enforcement or actions that otherwise limited market access for persons relying on intellectual-property protection.” Those countries are Algeria, Argentina, Chile, China, India, Indonesia, Kuwait, Russia, Thailand, Ukraine and Venezuela. Another 23 countries are on a “watch list.”
The USTR report states that China’s counterterror law required telecommunications operators and internet providers to “disclose critical proprietary intellectual property to regulators.” When the United States objected, some, but not all, of these provisions were rolled back.
Further, the report states that “Chinese regulations, rules, and other measures frequently call for technology transfer and, in certain cases, appear to include criteria requiring that certain IPR be developed in China, or be owned by or licensed to, in some cases exclusively, a Chinese party.”
The report says: “Widespread online piracy and counterfeiting in China’s massive e-commerce markets result in great losses for U.S. right holders involved in the distribution of a wide array of trademarked products, as well as legitimate music, motion pictures, books and journals, video games, and software.”
In Russia, according to the USTR report, many websites, including VKontakte, enable online piracy. USTR says Russia is not prosecuting those who operate those websites. Russia turns a blind eye to counterfeit goods, “including counterfeit seeds, agricultural chemicals, electronics, information technology, auto parts, consumer goods, machinery, and other products.” Imitation pharmaceuticals continue to be manufactured and sold in online pharmacies.
“American businesses have grown inured to intellectual-property theft. They expect theft in countries around the world. They expect our government to do little in response. ”
USTR reports that in India, about 20% of pharmaceuticals sold are fake. American pharmaceutical companies face delays in approving their products. Newly proposed India Patent Rule Amendments would “pressure patent applicants to localize manufacturing in India and require the submission of sensitive business information to India’s Patent Office.”
American businesses have grown inured to intellectual-property theft. They expect theft in countries around the world. They expect our government to do little in response. The combination of theft and no enforcement reinforce one another.
Intellectual property is also effectively stolen when American corporate employees are thrown in prison or harassed in a government shakedown; when American companies are hauled into foreign courts and accused of stealing their own patents; and when American internet companies are kicked out of countries that foster their own imitative companies to displace the American ones.
The tragedy is not just for American businesses but for ordinary Americans. Millions of Americans in all walks of life earn their livelihood from creating, protecting and promoting intellectual property. Millions of other people around the globe earn a livelihood stealing American intellectual property. Every day in every corner of the world, American intellectual property is stolen. Americans lose.
Although our government identifies some theft of American intellectual property around the world, we do little to prevent such theft and even less to punish countries that foster intellectual-property theft. Offending countries face little more threat than “bilateral negotiations,” no doubt a plum assignment for ambitious foreign-ministry bureaucrats in countries that steal American intellectual property.
Worse, many of the same countries are on the “priority watch list” year after year. China and several other countries have been on the list for many years. The reason is obvious: There is no credible threat or punishment from stealing American intellectual property. In a civilized society, theft does not pay. But the global market for intellectual property is far from civilized, and theft apparently does pay.
For decades, our government has done little to protect American intellectual property other than publish a few reports and give a few speeches. America continues to provide full access to American markets for offending countries. Pirate countries have little, if any, incentive to respect our property. The wonder is not that some countries steal our intellectual property; the wonder is that all countries don’t steal our intellectual property given the weakness of our response.
“The wonder is not that some countries steal our intellectual property; the wonder is that all countries don’t steal our intellectual property given the weakness of our response.”
America should take a tough line with countries on the USTR’s Section 301 Priority Watch List. There are a number of solutions, none of them easy. For instance, we could limit their commercial activities in the United States. Alternatively, we could limit imports of those products with their intellectual property — or ours.
When an American company is being harassed in a foreign country, such as China, America could take a more visible and aggressive stance to defend them. We could haul the ambassador in and ask what is going on. If China holds up our imports, we could hold up its imports.
If the country is on the special watch list, the Commerce Department could request that the International Trade Administration do audits of intellectual-property protection in those countries. It could limit, and not expand, the commercial activities of countries on that watch list. If a country appears for a second year on the list, the Commerce Secretary could prepare a special report to the president on remedial actions.
Today, Americans create the most intellectual property in the world. We should channel some small part of the American genius toward crafting government responses that give all countries incentives to respect and to protect our intellectual property rather the current incentives for the exact opposite.
This piece originally appeared on WSJ's MarketWatch
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Diana Furchtgott-Roth is a senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter here.
This piece originally appeared in WSJ's MarketWatch