Trump Targets China Trade as Frustration Over Help with Korea Mounts

President orders investigation into practices that allow theft of U.S. firms' intellectual property

by Brendan Kirby | Updated 14 Aug 2017 at 2:15 PM

President Donald Trump’s action Monday targeting China’s systematic theft of intellectual property of U.S. companies doing business there will go a long way toward fulfilling his campaign promise to refocus trade, an adviser said Monday.

The adviser, speaking at a background briefing ahead of the president’s signature kickoff of the probe, said Trump would order U.S. Trade Representative Robert Lighthizer to open an investigation into China’s practices.

“It opens the door to a fairly wide-ranging inquiry which can result in fairly aggressive actions to stop China … The big picture here is that China has an industrial policy,” the adviser said. “One of the major pillars of that industrial policy is what China itself calls ‘the acquisition and absorption’ of Western technology. And they generally do it by any means necessary.”

One report pegs the loss to U.S. corporations at $600 billion a year.

China reacted negatively. A state-run newspaper said Trump's actions would "poison relations between the two nations."

But trade hawks in the United States greeted the action with skepticism. Kevin Kearns, president of the U.S. Business and Industry Council, noted the Trump had promised on the campaign trail to label China a currency manipulator on Day One. But the president backed off that after meeting at his Mar-a-Lago estate with Chinese President Xi Jinping.

Trump also has oscillated between taking tough actions on unfair trade practices and dangling a more lenient approach as a carrot to induce China to do more to rein in North Korea.

"Trump has a very confused China policy," Kearns said. "It's like stop-and-go traffic on the Beltway. You have no idea whether you will get to your destination."

The White House adviser said Monday that the U.S. trade representative's investigation would proceed independent of policy toward North Korea.

China achieves its goals through direct and indirect means. For instance, it often requires foreign companies to enter into joint ventures with Chinese companies as a condition of doing business in the country, and requires them to share technology with those Chinese firms. Sometimes, the Chinese government acts more subtly, such as requiring American firms to give Chinese companies below-market licensing terms to use American technology.

It is not just an economic problem but a national security threat, the adviser said.

The adviser said it would be premature to predict what specific actions the U.S. trade representative might take at the end of his investigation.

"The big picture here is that China is stealing our intellectual property and forcing the intellectual property transfer through a variety of means as a matter of their industrial policy," he said. "And today the president is fighting back."

Kearns said the United States lacks a comprehensive industrial policy like what its chief competitors have. He said a trade investigation is underwhelming.

"It's piecemeal," he said. "It's good as far as it goes. It just doesn't go far enough."

Kearns said complaints in the World Trade Organization and other legal actions move too slowly to make a significant dent.

"You need a much bolder vision," he said. "That's what happens when you put trade lawyers in charge of trade policy. All they know how to do is file trade lawsuits."

Alan Tonelson, an economic policy analyst who writes the RealityChek blog, said there is no question China is a bad actor when it comes to coercing companies into giving up trade secrets and technology. It promised to end that practice as a condition for joining the World Trade Organization, he said, and it is clear the country broke that promise.

"There are any number of signs that they have been engaging in it with greater relish recently," he said.

Tonelson said the details of Monday's order by the president will matter.

"We've seen the administration and the president walk up to these lines before and back away," he said. "If the final product closely resembles what previously have been identified, this step could be very significant."

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