Over at EconLog Scott Sumner has an excellent post titled “Let’s transfer more technology to China.”
And here’s a comment, slightly modified, that I left on Scott’s post:
Scott: I join David Henderson in applauding the excellence of your post.
I comment here only to make more explicit a point in your post that deserves to be further spotlighted. It’s this: there’s a tension between those who worry that Chinese theft of American intellectual property dampens Americans’ incentives to create more innovative ideas worthy of being protected as intellectual property, and those who oppose the voluntary sale or transfer of American intellectual property to the Chinese. For government to restrict us Americans from selling or voluntarily transferring our intellectual property to the Chinese would be for government to dampen our incentives to create more innovative ideas worthy of being protected as intellectual property – exactly the same negative effect that is believed to occur if, when, and to the extent that the Chinese steal Americans’ intellectual property.
Consistency requires that those who fear that Americans’ inventiveness is dampened by Chinese theft of American intellectual property should be among the most ardent opponents of attempts to prevent the voluntary sale or transfer of such property from Americans to the Chinese.
Note that even preventing American firms from agreeing to transfer intellectual property to the Chinese government in exchange for the Chinese government granting U.S. firms access to the Chinese market could have a dampening effect on American innovativeness. I say “could,” not “would necessarily” or even “would likely.” But simply “could.”
If the prospect of access to a market as large as the Chinese market is sufficiently valuable to American firms, and if American firms believe that a cost-justified means of securing that access is to transfer intellectual property to the Chinese government, American firms will have stronger incentives to innovate in ways that result in new ideas protected as intellectual property – intellectual property that could then be used as payment for access to the Chinese market. And, therefore, if Uncle Sam’s trade policy successfully reduces American firms’ ability to exchange their IP for access to the Chinese market, the innovativeness of American firms might decline.
Again, I have no idea if the possibility that I here identify is anything more than one of the countless theoretical possibilities that has no real prospect of ever occurring in reality. That is, I don’t know if this possibility rises to the level of being a probability or even a plausibility. Likely neither, actually. Nevertheless it seems worthwhile to note.