WASHINGTON - The Information Technology and Innovation Foundation today released a major report, "Enough is Enough: Confronting Chinese Innovation Mercantilism," which details China's increasing use of dubious trade practices to acquire global competitive advantage in nearly all industrial sectors.
"In the last five years, China's aggressive use of standards manipulation, forced tech transfer, IP theft and other practices have come to pose a serious threat to the rules-based trading system," said ITIF President Robert D. Atkinson, who authored the report. "The time of complacency must end. The United States needs to not only ramp up its own efforts but also to rally its trading partners in pushing changes in Chinese practices. We should not forget that China needs us more than we need China. The United States and other countries need a China that aims to compete, not destroy."
In the report, Atkinson takes on camps in the economic establishment who have long cautioned against meaningful measures to check China's use of what he calls "innovation mercantilism."
The report makes clear the United States should expand and improve trade ties with China but lays out how China is going beyond traditional competition and unabashedly seeking an absolute advantage not only in traditional manufacturing but also in a wide range of innovation-intensive industries. This has and will further reduce U.S. global competitiveness and stymie job creation at home. In addition, other countries have begun to mimic China's unfair and often illegal policies. This will ultimately choke off international trade's potential to benefit all countries and lead to more hunkering down for non-productive confrontations."
The report comes one day after the World Bank along with the Development Research Center of China's State Council released a report, "China 2030: Building a Modern, Harmonious, and Creative High-Income Society," which recommends internal reforms for China to undertake for its sustainable economic growth and a more constructive international role.
"While the World Bank's report urges China to undertake needed reforms, it ignores China's widespread violations of its multilateral trade commitments and actually encourages even more export-led growth through enhancing its technology sectors," said Atkinson. "In other words, it focuses too much on what China should do instead of what it should not do."
In the meantime, the Obama Administration, which is taking more assertive steps to roll back China's innovation mercantilism, is expected today to formally create the Inter-agency Trade Enforcement Center, which is aimed at better coordinating government enforcement activities.
While Atkinson welcomed this development, he urged a number of specific and more comprehensive steps in the new ITIF report, such as empowering the Office of the U.S. Trade Representative to self-initiate cases when private-sector firms fear Chinese retaliation.
"However much we better coordinate internal policies, we must also seek additional tools through the World Trade Organization and a more unified approach among like-minded trading partners," he said. "Even if the United States is able to win more battles, we all know that these victories too often come only after the real damage has already been done to a sector. A "whack-a-mole" strategy ultimately will be unsuccessful going forward because the Chinese government has shown that it can erect new mercantilist policies faster than the United States can get it to remove old ones."