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Thinking Seriously About Responding to the Theft of IP

Here’s a letter to a correspondent who “worries about our trade with China”:

Mr. E__:

Thanks for your e-mail.

Objecting to my recent letter in the Wall Street Journal, you write: “Let’s hit the Chinese hard, fast, and where it hurts by stopping Chinese imports until they [the Chinese] stop stealing our IP.”

With respect, I disagree. I do so mainly because to “hit the Chinese hard, fast, and where it hurts” is to also hit Americans hard, fast, and where it hurts. Each dollar of Chinese imports into America is a benefit to Americans. Further, the dollars earned by Chinese exporters are spent and invested in the global economy. These dollars make their way – some directly, others indirectly – back to the U.S. as either demand for American exports or as investments in the American economy, also creating benefits for Americans.

I disagree with you also because intellectual property is private property – by which I here mean that intellectual property is not “ours” just because it’s owned by some fellow citizens. For example, Apple’s proprietary software belongs to Apple Inc. and not to me or my siblings. At best it’s unclear why American owners of intellectual property who choose to do business in China should not themselves shoulder the chief responsibility for protecting their IP.

Three reasons combine to counsel caution before using allegations of IP theft to justify trade restrictions. First, private owners of IP can themselves take measures – including refusals to do business in China – to protect their property from Chinese theft. Second, to the extent that our government is involved, it should first attempt to resolve IP issues by using the WTO’s dispute-resolution provision under its TRIPS (“Trade-Related Aspects of Intellectual Property Rights”) agreement. (See this 2019 Mercatus Center paper by Dan Griswold and me.) Third and most importantly, trade restrictions unavoidably inflict damage not only on those Chinese officials and pirates who are guilty of IP theft, but also, and substantially so, on Americans (and on Chinese citizens) who are guilty of nothing more than being caught in the crosshairs of governments waging trade wars as each pursues an idiotic mercantilist agenda.

At the very least, snagging government-granted protection from foreign competition shouldn’t be as easy as screaming “IP theft!”

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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