The US pried the textile and locomotives industries from the UK, check the history of Samuel Slater[1]. Same happened for Japan under Meiji restoration. India and Brazil do the same for pharmaceutical patents, because they're too poor to afford paying them.
Stealing IP will happen, no matter what treaties and governments try to do. For poor countries it is a path they just don't have the luxury of giving up.
Edit: over-patriotic Americans seem to think this is just about them and call my argument whataboutism. It isn't both. I am stressing the fact that protectionism and stealing IP is a path almost every industrialized nation took. Even the UK did protectionism against India textiles to help their beginning textile industry.
The industrialized countries are trying to close the gates they used to get into their rich garden. My point is that right or wrong, moral or not, it simply won't work.
> Stealing IP will happen, no matter what treaties and governments try to do. For poor countries it is a path they just don't have the luxury of giving up.
I feel like this misses the point. I don't expect people to complain much about IP being stolen by competitors - that feels like an security/internal problem.
The issue with China seems to be that they force partnerships with Chinese companies, resulting in western companies having to share their IP, and when that IP is used outside of the constraints of whatever contract was created and the western company complains, the Chinese government colludes with the Chinese company to stymie or exploit the western company as much as can be done without breaking the relationship.
I'm also not going to say whether this is right or wrong - just that the feeling I get from the whole thing (as someone who doesn't follow this stuff that closely) is that the government efforts go beyond what others have done in the past (which I understand to be more subsidizing industries to boot them up).
Can't the companies just not do business in China if they don't like the contract? Other countries have similar laws, like it forces companies to hire local people or spend part of the money locally.
If China can afford to not respect the IP laws then there is nothing what a company can do, eventually the secrets would be reversed engineered.
They do. This is part of why we have such a large trade deficit with China.
The real issue here is China's double-talk on trade. They talk about open free trade but in reality they practice intense nationalistic and protectionist trade tactics. They do everything possible to prevent foreign companies from selling anything in China, while at the same time doing everything they can to attract foreign labor outsourcing, capital, and of course IP.
I can't blame them too much. These kinds of trade policies are how nations build strong domestic economies. The US did the same thing during its industrialization phase. Nevertheless it's horrible for American workers and the American middle class.
It's literally the only thing I agree with Trump about -- that China needs to be taken to task for its extremely aggressive trade policies.
Might makes right, and you can only take someone to task if you have the power to do so. The US (or at least owners of equity in the US) are too dependent on the cheap labor and lax environmental rules of China, otherwise there is no reason for the most powerful country in the world to let another country take "advantage" of them.
China is equally dependent on foreign infusions of capital. The real issue I think is that labor arbitrage has been very good for upper income and wealthy Americans. Corporations and the rich have gotten much richer by shipping labor off to China and paying less for it and pocketing the difference. That's largely why there has been no political will to challenge this situation.
I find it funny that it's also the previous generations' middle class' 401(k)s and pensions that need the investment returns provided by cheap chinese labor and lax environmental rules, while at the same time ruining the future for their descendants.
To me, the lack of political will to change has been akin to the local business owner being afraid to tell the local mafia boss he no longer needs protection.
Have you considered maybe American companies simply aren't competitive enough compared to the local players. American products are often too expensive because the companies want high dollar profits to show their shareholders, even if the cost of production, which is often outsourced, doesn't justify the high market price.
Also, as time goes on the skills of the entire world population is being equalized. That is to say, the skilled labor market is becoming global. When that happens American workers and middle class simply can't keep enjoying the high wages that are currently prevalent.
Unless of course, you want to start a new era of imperialism and force developing economies to confine themselves to the lower end of the value chain.
You can. However 1 billion potential customers are dangerous to ignore. It isn't just that they don't buy from you, it is that they buy from your competition - which can include a brand new company they start locally - which gives your competition enough cash to design their next version better than yours.
Its not dangerous to ignore if it results in your entire IP portfolio getting expropriated and used to crush you.
Its a siren song that is enabled by increased quarterly profits, even knowing full well the risks, it will be another CEO and board before they come home to roost.
That's so called exchange the technology by the market. If you are in the condition of China, what will you do to avoid yourself always stay in the lower level manufacture status? Imagine that's you as a human being, are you willing to always do the low pay labor work, or learning the knowledge and experience from your colleague secretly as they not willing to share with you, then try to position yourself a better career path?
It helped the US become an industrialist behemoth, and as such I’d say it also helped the rest of the world (having more industrialized nations compared to fewer was a plus for human development, in the great scheme of things). As such I’d say that the eight-year old would be right.
It also happened over a hundred years ago. We are now in the 'modern era' and international trade is a much bigger part of any economy. The World Bank statistics only go back to 1960, but since that time the % of economy that is trade has gone from 25% to 50%. Much more significant to steal technology today.
https://data.worldbank.org/indicator/NE.TRD.GNFS.ZS
I’d say international trade was a bigger part of the world’s GDP back in the late Antiquity- going well into the Middle Ages, that is back when most of the know-how migrated from East to West (from water mills to the silk industry, gun powder etc). I think the world was a better place because the Europeans got to “steal” that know-how, I’m saying the world will be a better place if the Chinese (or the Indians) get to “steal” today’s latest know-how. Of course, if you’re a US citizen whose pension money was invested in US companies and their IP assets then I agree, the situation is less than ideal, but in the great scheme of things and for humanity as a whole I think that the pluses are bigger than the local minuses, so to speak.
I don't think they're saying that it's OK, just that IP theft is inevitable until China becomes rich enough to care about protecting their own IP. You can't judge a country for doing what any other country would do if they were poorer.
Except that this is not jumping from a bridge, it is the tried and tested way to develop a nation's industry. Moreover, it is very funny hearing this coming from Americans who are in one side accepting that this is wrong and then in the same breath denouncing it being done to themselves!
By whose standard? It’s awfully convenient for the United States to reap the benefits of “lower standards” and then shut the gates after they no longer need those lower standards.
Would you consider slavery acceptable in developing nations? After all, the US benefited from it while it was growing, why should we deny the economic benefits of slavery to other countries.
If the offer on the table for developing countries is either take the poison pill or never develop (where the poison pill is lax IP, lax environmental laws, child labor, exploiting other countries for resources), I think you'd be hard pressed to find a country which wouldn't make that sacrifice.
Depends how you define "developed country". The world bank seems to consider GDP as the main factor, if you disagree with the common metric then you'll have to define how you see it.
China has a lot of wealth on display but overall isn't so well developed if you remember the fact that so many people live there. If China were as developed as the US, we would expect it to be something like 3x the economic activity as the US.
GDP per capita:
USA: 57k
Canada: 42k
UK: 39k
...
Kazakhstan: 8k
China: 8k
Libya: 7k
In addition by some metrics, it could be exploiting even harder to achieve further industrialization. For instance, China is way behind the US in CO2 emissions per capita even today, and if you count total CO2 emissions, the US is still #1. If China had equal CO2 emissions as the US per capita (which might indicate a similar level of industrialization), that would be disastrous.
Global standards have improved since the 1800s. Lots of countries condemn things they once practiced. Slavery, genocide, pollution, and colonialism are all things that most prominent countries have participated in to some extent but now rightly condemn. This is the basic recipe for progress and it's a good thing.
Munroe redefines it to make it less stupid, but it's still stupid. Which is more likely, that you somehow are missing an entire bridge on fire or collapsing while on it, or that they are being dumb? Mass suicides are not, in fact, unheard of. In the case of 'if Jimmy jumped off a bridge, would you', it's even dumber because Jimmy is jumping off a bridge all the time - to commit suicide. The Golden Gate Bridge alone has had around 1600 suicides (https://en.wikipedia.org/wiki/Suicides_at_the_Golden_Gate_Br...), >20 annually, net of all the safety measures & attempts to talk people down; as far as I am aware, 0 of them were jumping to escape a fire or serious problem, and if they were, at a fatality rate of >98%, it's difficult to think of a real event on the Golden Gate where jumping was better than not jumping. A similar observation obtains for... quite a lot of bridges. (Humans aren't good at falling.)
Isn't this "whataboutism"? You shut down a conversation by trying to deflect about how others have also done something?
Like you said, two wrongs don't make a right. Just by pointing out this has happened elsewhere doesn't make the conversation about China doing it any less important or relevant. Why shut down this conversation?
There's two parts here. Yes, China's doing it, and we shouldn't ignore it, and we need to condemn it and figure out how to respond. That's on one level.
On another level, though, any country that has more to gain by stealing than to lose by being stolen from is going to be tempted to steal. Given what human nature is, you'd better expect it to happen.
It's like how in domestic society, on one level we expect people to obey the law. But on another level we expect at least some people not to, which is why we have police.
The fact that we did it to the UK doesn't mean it's good for us to let China do it too. I mean, we exterminated the native Americans and stole their land--if someone tried to do that to us, should we sit back and do nothing? "Oh well, cosmic balance and whatnot!"
It’s definitely in American interests to defend IP, but I wouldn’t try to make moralistic arguments, they just come off as hypocritical given the history.
The thing is, you can always dig up some hypocrisy if you go back far enough. Our ancestors doing something bad doesn't forever nullify arguments against other people doing that thing to us. You don't deserve karmic retribution because of what someone else did, even if you benefit from it.
I would discount the validity of advice to stay away from performance enhancing drugs from someone who uses them. I mean they're right, but I don't feel... inspired to do so.
There are other ways to convince people, like appealing to their interests or punishing with retribution.
I mean, regardless of whether we should expect a country to engage in this behavior or whether or not it is right, it’s worth noting that this is an area to plan around in trade agreements and concessions. Despite contracts with the companies in question, the IP was used for whatever purposes the Chinese government wanted.
So it’s worth noting that, as a western company, you cannot trust these agreements, whether or not the actions of the Chinese are justified. You should assume that any restrictions you negotiated are worthless, and if you want access to the Chinese market the price implicitly includes any IP the local partner can take.
I went to the Toyota factory in Japan and they talked about how they got started by importing Chrysler vehicles from the United States, taking them apart, and basically copying them to make the first Toyota cars.
But over the years they started developing in-house knowledge, and their own innovations.
Now Toyota is known for making reliable cars that are affordable. Is the world better off with Toyota making cars? I think so. But is Chrysler worse off? I also think so. So it’s a tough one. But at the same time I like the philosophy of software startups regarding ideas: sure, take these ideas for free, it’s all in the execution.
If Chrysler is worse off, that's its own damn fault. Anyone watching the management of American auto companies over the past 30 years can't be but gob smacked about how incompetent it has been.
Morality in business is a fool’s errand. Just that it puts recent actions into context: if stealing IP is amoral, then so are trade sanctions and other kinds of economic warfare. In the end, it’s only about our relationship, just like it was between the USA and the UK in the 1800s.
And this is bad for the future of citizens and corporations of the US, especially if it continues, because Chinese firms will use this to compete vigorously with the US firms that spent the time and money developed the tech. Much of the WSJ's readership has a vested interest in that not coming to pass. That's "so what".
In some ways, you can't blame China for trying. It's playing dirty, but that's how international relations go.
You can place a bit more blame on the US companies that let it happen. The people running them are short-sighted and unpatriotic.
The real problem is that the law allows companies to be in a race to the bottom that is ultimately self-destructive. Allowing non-citizens to get access to the IP should be illegal. If it were, then bringing that IP to a location controlled by China's contradictory law would be a violation.
You can't fully stop spies, but you sure can make it illegal to simply hand things over without a fight.
Samuel Slater is a fine example. He was a spy. He broke the law. The USA would have gotten the technology years earlier if the UK had simply handed it over. Picture that: the USA demands that textile factories be built in the USA, as joint partnerships with technology transfer. The UK wasn't that stupid.
> You can place a bit more blame on the US companies that let it happen.
This is one aspect of Chinese culture that I’ll never understand. For example, if you get cheated, it’s your fault for being lax/trusting/stupid enough to get cheated. The immorality is on the victim, which makes for some extremely paranoid business relationships when working in China.
How is that beneficial in the long term? Why doesn’t such a system just implode on itself? I guess this is where guanxi comes into play to counteract that, because I don’t see how it could work otherwise.
Does Chinese culture actually shift moral blame onto the victim? If not, then this sounds a bit like the "victim blaming" obsession of modern American culture, which misses the crucial point - there are two types of blame to be passed around here. The offender was evil - they cheated. The victim was stupid - they were aware of the danger and ignored it.
Its more like just by simply doing business in China the victim should have been aware of the danger. There is no negative karma for doing scams, cheating, or stealing IP, only for being scammed, cheated, or having IP stolen.
It isn't really victim blaming, more like your business partner comes back to you and says "Why did you let me cheat you? This is all your fault."
I've never heard of a "victim blaming" obsession of modern American culture, despite having grown up in it. Could you point me to some articles that elaborate?
The question of whether it is right or wrong is separate from the question of what we should do about it. The question we should worry about is whether it is in our best interest to turn the other cheek or to fight back.
In turn, we ought to acknowledge both the possibility that fighting back might hurt more than it helps and the possibility that we've been shooting ourselves in the foot by turning the other cheek.
I have seen tons of comments like this lately on HN. I believe personally patents should he entirely abolished, but if we are keeping them at this point it is a major disadvantage to have it stolen by the Chinese. I am shocked people on HN are so much more offended by Facebook or Google's minor misdeeds while outright theft by nation states is ongoing. I believe lots of these comments are placed here by PR companies paid by Russia and China.
It's hard for me to believe that all the smart, capable company executives involved in planning and execution of operations in and around China are oblivious to IP risks.
There is an obvious upside of operating in Asia, both cheap labor (though now decreasing) and strong work ethic coupled with access to a huge market.
It seems to me that execs understand and take a calculated risk when they choose to do business in various parts of the world. If they cannot make this calculation, they should not be running a company.
More than anything else, the attitude displayed in this article appears to me as an attempt to defer (or pass to the public) the consequences of the above calculated choices. If not directly, through a trade war that will hurt all Americans. All the while, these companies keep their financial gain private, in the pockets of execs and shareholders.
There is something to be said for protecting IP in the interest of a country's defense, but the technology that qualifies for this type of protection should be the subject of public debate, not a president's whim. Furthermore, unless the companies that own this IP are taken over by the state, company execs will always be free to make the decision re. operating in Asia and between the associated IP risks and capital gain.
Well said. It reminds me of Warren Buffet's statements about insurance companies and excessively low premiums.
The well-run insurers are always competing against the most poorly run, excessively risky insurers.
Some of these poorly run companies offer irrationally low premiums and gain lots of customers because of it -- but then go bankrupt. OTOH, well run insurers that used sound underwriting principles and charged rational premiums end up with fewer customers.
It sounds like you are advocating something like IP mercantilism which is even worse than the original mercantilism considering that IP is not a zero-sum commodity. It should be distributed as widely as possible.
And then what incentivizes a company to invest heavily in R&D if they will derive no disproportionate advantage from their discoveries? Wouldn't there be a bit of a tragedy of the commons situation where everyone tries to wait for everyone else to invest so that they can reap the reward while others bear the cost? If that comes to pass, everyone will be poorer as R&D spending slows down.
First mover advantage and brand building. The status quo even with strong IP protections is reverse engineering and making something that can be sold legally often with additional refinements. That sort of system can be argued as working as intended for everyone.
Apple for instance can be copied easily yet iPhone knockoffs don't command comparable prices due to lack of established trust and quality. Rivals compete openly with their own R&D.
Microsoft the behemoth failed to break in the phone market even with heavy supportive measures and willingness to take a loss like they did with xbox.
You know the HN line “your business model is not my problem” that’s trotted out when it’s the advertising industry or the media industry? Well, “your business model is not my problem”.
Part of the problem is expansion into China is a hot take for stockholders. It's difficult to stand in front of a board and say "no, we will never expand into China".
So now that US companies have entered China, can you name some examples of first entrants who have “seized the market”?
I think your entire premise is dubious. The first mover advantage cannot be great because the Chinese government will never allow a foreign company to have a dominant position in an important domestic Chinese market. Without significant change since in government those first entrant companies are simply very foolishly assuming the regulatory environment will be anything like it is in the United States or Europe.
> It seems to me that execs understand and take a calculated risk when they choose to do business in various parts of the world. If they cannot make this calculation, they should not be running a company.
There's an externality here, it's not just that one company, but all of its competitors that are losing out on these IP "appropriations". Then, let's say you're one of the companies that are able to "sell out", if you want to profit at all, you need to be the first to sell out. You can't rely on nobody selling out, therefore selling out isn't even bad management.
Excellent point. And not only that, but "execs understand and take a calculated risk when they choose to do business in various parts of the world" seems like a rather no-brainer question, but is actually incredibly complex. In this calculation, what variable(s) are being optimized for, and over what time frame? Transferring the majority of manufacturing overseas might be the best thing for everyone involved (which assumes we actually have the ability to accurately and honestly measure such a thing) in the short run, but maybe it isn't the best thing for everyone or even anyone in the medium to long term.
Answering such questions is very, very difficult, but rarely do I even see anyone asking such questions. "Free trade is shown to increase GDP of all participating countries", which is a fact as far as I can tell, seems to be the limit of how deeply we want to think about these things, and suggestions that the world just might be a bit more complex than that usually elicits passionate, seemingly non-negotiable disagreement.
Perhaps we should consider revoking patent and other IP protections for companies that knowingly or negligently allow IP to be transferred to jurisdictions that do not respect IP rights in pursuit of profit.
Otherwise it's a double whammy, your foreign competitors compete unbound while your domestic market competition is restricted.
It would also align the game theory to prevent companies from "selling out" to such jurisdictions.
Oh for sure, companies are aware but what can they do about it? For all that we talk about all powerful mega corps, they still have to bow down to actual governmental power. The only appropriate way for them to fight this is by requesting diplomatic intervention from their home state.
By the same logic, I'm aware there likely isn't a prince in Nigeria who will send me a boatload of money if I send them .1% of that money over the internet. We nonetheless, as a society, choose to shame and fight the action of the scammer, though many capable people fall for it.
What I mean to say is that just because I'm taking a calculated risk does not remove the other party of moral and legal liability for their theft of some kind.
In fact, the only argument I remember hearing (I think it was Marc Andreessen?) against the shaming of the scammer in the prince analogy is that they sometimes have no other option to feed their family. I doubt that justification applies to Chinese IP theft.
> In fact, the only argument I remember hearing (I think it was Marc Andreessen?) against the shaming of the scammer in the prince analogy is that they sometimes have no other option to feed their family. I doubt that justification applies to Chinese IP theft.
I do not necessarily agree with this argument, but it actually translates to China's situation pretty directly - you could argue that their attitude to IP is a necessary component of their attempt to quickly lift the whole country out of poverty.
Fair point! From an ethical perspective I would still choose to shame it, but that equivalence can definitely be justified; it's no different than the Nigerian scammer but on a country-wide level. I like it.
Another question would be whether the Chinese acquiring this IP would trickle down to help those in poverty, or whether the wealth would stay consolidated at the top.
> Another question would be whether the Chinese acquiring this IP would trickle down to help those in poverty, or whether the wealth would stay consolidated at the top.
>All the while, these companies keep their financial gain private, in the pockets of execs and shareholders.
I don't think the gain is as one-sided as you suggest here. The American consumer has had decades of inexpensive goods available. That is a real economic benefit.
> More than anything else, the attitude displayed in this article appears to me as an attempt to defer (or pass to the public) the consequences of the above calculated choices.
Say what you will, but "privatize profits and socialize losses"[1] is winning formula, even in a country that on its face rejects socialism.
What's interesting in light of your observation is that companies didn't stay away from China due to onerous demands - in that parallel universe, the executives would be lobbying for China to open its markets. What happened in our world goes to show what they value more: keeping their IP or access to the markets/manufacturing. Now they want to have their cake and eat it.
There's a gentlemen's agreement between nations that this is permissible for poor nations. China is no longer poor and now must act like a wealthy nation and accept IP laws.
Francis Cabot Lowell, who was instrumental behind the industrialization of the US, visited textile plants in the UK and committed their designs to memory, which were later introduced to the famed Lowell textile plants in Massachusetts.
At the time (1826), America's per capita GDP was $2,460, which is 68% of the UK's per capita GDP of $3,600. Today, China's per capita GDP is $16,000, or 29% of of the US's per capita GDP of $55,000.
Poland can't get away with violating IP laws, since they're part of the EU and benefit from that relationship. Russia is basically doing the same thing as China, but they don't export enough for it to really matter.
For all I know the numbers are totally made up, but they rate Russia at 17.29, China at 19.08, Poland at 26.56, Japan at 34.58, Germany at 36.54, France at 36.74 and the US at 37.98. Obviously the relationship to GDP per capita isn't monotonic, but some correlation appears to be there.
Is this GDP measured per free person in America or does it include slaves or is it the traditional American a slave counts a 3/5 person for the purposes of government? I recall reading somewhere James Madison bragging about his yearly investment in his slaves was $12 and his return was $250, and this is only about 10 years before the UK outlawed slavery in total across the empire.
When an authoritarian government enforces policies that lead to massive wealth inequality it becomes pointless to measure things on a per capita basis. If China had policies in place to lift the quality of life of the majority of the population it might be acceptable to measure stuff on a per capita basis.
Funny, I think of China as one of the most extreme experiments in raising the quality of living of people by direct executive order, which you seem to imply they just aren’t doing hard enough, or don’t really care about.
China is huge and I can’t imagine how hard it is to govern.
i can't tell if you're joking but there is no such thing as a 'gentlemen's agreement' in international relations. nations go as far as they can and do what they feel they can get away with to advance their interests. hence, you know, espionage.
There is no law at the international level. China can do whatever it wants. But, other countries can do whatever they want as well: they can stop trading with China.
But China's labor is so cheap. Exploitation is a sweet sweet drug for the west. So, it's complicated.
It isn't really a gentleman's agreement so much as a blood from a stone type thing. Forcing their "rights" would require expensive imperialism, appall others and breed insurgencies as local sentiment turns from 'screw the kleptocrat in charge' to 'get those foreign literal invaders out'. The occupying forces and home country get pissy about pointless wars and deaths to serve wealthy interests and it becomes clear the whole thing isn't worth it by the hundredth maiming.
Law propagation is done cynically via who benefits - either via influence and threats or mutual benefit. China would need to suffer from a lack of protection of their own to agree to the status quo which the west has become accustomed to. It is not a natrual state of being by any means.
Anyone who has suffered bullying and received a blind eye from society in return would know that despite the lofty claimed principles they never operate on equality, justice or other but power and what they can get away with.
China is already suffering from it. The golden age of them not giving a fuck about IP in hardware space are coming to an end, to detriment of the society at large.
There's a gentlemen's agreement between nations that this is permissible for poor nations. China is no longer poor and now must act like a wealthy nation and accept IP laws.
Also, China has grown an upper class whose interests most strongly align with strong IP laws.
The behavior they describe is exactly how every industrialized nation has become industrialized (except for UK). There is no way to develop a technologically advanced nation if you respect artificially imposed barriers such as patents, which by their very nature cannot be effectively enforced in foreign countries.
> The behavior they describe is exactly how every industrialized nation has become industrialized (except for UK).
Not even the UK is exempt- Robert Fortune stole tea production IP (and samples) from China(!) in a covert mission[1] for Britain[2]. Now tea is quintessentially british
There's a rather surprising attitude in this discussion that the IP belongs to a country (e.g. "Allowing non-citizens to get access to the IP should be illegal."), as if it were some sort of nationalised asset in common ownership. It's a privately owned asset for private benefit. It's not a form of property that pays property tax.
Keeping IP within the borders of a country, or within a group of countries with mutual patent agreements, is certainly in the interests of the patent holder. IP is only meaningful if enforced. So, containing IP within the countries that have agreed to respect the patent is a rational part of the institution of patents.
Yes and no. Nothing happens in a vacuum. If person X develops something that they could not have developed without certain institutional and social and physical infrastructure around them then it’s by no means as clear cut.
For example I think most people in the UK would say if the taxpayer has directly or indirectly underwritten something then it’s not unreasonable for a portion of the profit on that thing to be taxed and spend on the NHS, roads, education, whatever the inventor leveraged and benefitted from along the way. That’s not to say that the inventor can’t or shouldn’t get rich themselves, but it is only fair that they give something back.
> It's a privately owned asset for private benefit. It's not a form of property that pays property tax.
Philosophically, could one not make the same argument that there are strong similarities between these two items? Indeed, it isn't currently strongly codified in law, but you don't seem to be arguing from that perspective.
Well, at least the cat’s out of the bag and the media aren’t pretending it doesn’t exist or that people are exaggerating, etc.
Of course now people are going to normalize it and say it’s no big deal after years of saying it was an exaggeration.
But that’s what you get when you get blinded by the lure of 1-billion potential consumers... along with an unfavorable trade agreement wich allowed for assymetrical tariffs, etc.
> ...unfavorable trade agreement wich allowed for assymetrical tariffs, etc.
Assymmetrical tariffs are more favorable than symmetrical tariffs, something practically every economist agrees on. Also, why insist on exporting more valuable goods to China, when China remains perfectly content with green pieces of paper instead?
Would it be more accurate to say: "Assymmetrical tariffs are more favorable than symmetrical tariffs, something practically every economist agrees on, for certain situations"?
Does there ever come a point where they should be normalized? From most of what I've read in mainstream news coverage, this topic seems to be considered not valid for discussion, as if the answer is self-evident (despite very few of the reporters, or readers, having any serious depth in the subject).
> Does there ever come a point where they should be normalized?
The ideal situation is no tariffs on either side, which is normalized.
> for certain situations?
For any given economic scenario there's a practical intervention that would result in a better result than what the theory suggests is the best expected result. There's also an infinite number interventions that result in a worse outcome. The problem is, how do you know what the right intervention is? You don't.
> From most of what I've read in mainstream news coverage, this topic seems to be considered not valid for discussion, as if the answer is self-evident
It's not self-evident, the question just has remained settled for over a century. Economists disagree over all kinds of things, this isn't one of them.
> The ideal situation is no tariffs on either side, which is normalized.
Fine, but that's not the case now, correct?
> The problem is, how do you know what the right intervention is? You don't.
Do you or practically every economist know?
> It's not self-evident, the question just has remained settled for over a century.
I'm not sure what question you're referring to.
China became a member of the World Trade Organization on December 11, 2001, and was given developing nation status which comes with a variety of benefits. Should that status ever change?
So unfathomably China is against an inverse assymetrical tariff regime which on paper would benefit US but economists would insist actually would counterintuitively benefit China.
US companies go into China eyes wide open - they can extract a few quarters of profit from their products and services but that's it; the Chinese will then expect to do it themselves and keep all the profits to themselves.
To most its not a good deal. To US companies, that are driven by quarterly targets then it is very much a case of sacrificing the future for the present. And if they stay out of China then the odds are that hackers will either steal the info anyway or another western competitor will play ball.
There's just no way to stop this happening as I see it. The best non-US companies can do is negotiate an equity stake in their local partners and hope the government doesn't pass laws to take it away.
> To US companies, that are driven by quarterly targets then it is very much a case of sacrificing the future for the present.
This comment comes off as trite and naive. Multi-billion dollar companies like DuPont and AMD Inc do not only think a few quarters ahead. They think years or decades ahead.
In some ways they do, but to what degree do senior executives, often near retirement (or wanting to hit a magic number they hold in their minds), make decisions that maximize short term returns? How would we even answer this question, considering no one really knows for sure to what degree the subconscious mind affects our decisions?
China doesn't need the technology per se. China is now an advanced technological country in its own right, even if the fruits of that may still be unevenly distributed -- as, to be fair, they are in the rest of the world as well. The behaviors described are primarily about control and power over strategic industries at a macro level.
I think I'd rather technology be dispersed without regulatory impedance. There's still the problem of how to reward/incentivize innovation and development of new technology, but maybe the benefits outweigh the costs or there's ways we haven't thought about how to reward and incentivize innovation.
You can't, because the consumers are OK (either knowingly or unknowingly) with the costs resulting from allowing China to obtain the IP (and manufacturing facilities and knowledge, etc).
If you absolutely require lower wages to make a profit (your business plan has already failed, but let's go with it):
Go to any one of a number of other countries that don't expect you to partner with a communist dictatorship and give up IP in order to have goods produced there? Vietnam, Thailand, Malaysia, Mexico, India?
It seems like a pretty obvious "AVOID" signal for me, but I'm not running a multinational that's cut corners to keep profit margins high while exporting all of the manufacturing work.
The western markets has already peaked and is therefore "forced" to go to China. While from a western point of view it feels alarming to loose their edge. From a Chinese point of view, why would they let anyone share a piece of their growth with nothing in return.
A source of cheap labour, raw materials and a huge market, is something that people from ex-colonies are all too familiar with. One should also acknowledge the high tech cartels that exists.
In a way it is a free market, because people can not claim to not know what they were getting themselves into.
I've seen some recent pushes for "right to repair" legislation. I can see how this is great for consumers. I can also see how this forces companies to be more open about their components and interfaces, which weakens their ability to keep trade secrets. It also increases the attack surfaces for people and organizations attempting to compromise the device. I suspect the end result is more system on a chip design styles that are basically impossible to repair.
That is already the status quo really from other forces. Repairing usually doesn't scale, automation allows for very fine details to join cheaper faster and better like soldering instead of ribbom connectors. Security by obscurity isn't.
Trade secrets are bullshit as a doctrine. Why is the rest of society obligated to protect not advancing at their own expense for the sake of private greed? The proper response to breech of trade secrets in a court of law should be "You never registered it for any sort of protection in exchange for disclosure and chose to keep it secret. Go to hell."
AMD has to license their stuff to Hygon too. I think it’s great. IP laws are stifling innovation and the fact that there is an escape hatch in China is a good thing.
IP laws also support innovation. Nobody would invest millions into figuring out the right arrangement of atoms that cures some disease, if there wasn't a way to profit from that.
At the other end of the spectrum is protecting the "invention" of buying something with a single mouse click.
>Nobody would invest millions into figuring out the right arrangement of atoms that cures some disease
Sure they would. It's called public research, most of which is promptly handed to private companies to profit from. Pharmaceutical research is hugely taxpayer subsidized.[1]
Let me be clear: I think the funding is a good thing, but the privatization (read: theft) of subsequent profits is bad.
Obviously I'm talking about private investment, not public funding.
Of course these companies use information obtained through public research, they're supposed to, because there's a long process from research to an approved product, which is what the research institutions do not do. Public and private research goes hand in hand, just like in other industries. The study quotes a hundred billion in public funding over six years, compare that to private R&D budgets of well over 50 billion per year:
> Obviously I'm talking about private investment, not public funding.
Obviously both can "[figure] out the right arrangement of atoms that cures some disease." How does that not answer your question? Furthermore, how would 'obviousness' negate a counterexample? You're just moving the goalposts here.
>It's not "a scam", as that article wants you to believe. You should stop reading that website, it's making you more uneducated.
My apologies, your friendly suggestion is misguided. My "source" was the notoriously uneducated Noam Chomsky, but I knew you'd pooh-pooh that (can't stop you tho! :D) as appeal to authority. I confess I lazily Googled the citation.
> Obviously both can "[figure] out the right arrangement of atoms that cures some disease." How does that not answer your question?
I didn't ask a question.
> Furthermore, how would 'obviousness' negate a counterexample? You're just moving the goalposts here.
You are playing a semantic game. The obvious, honest interpretation of my words is that I'm talking about preserving private investment. I'm of course aware that governments can and do fund research. I didn't expect to be discussing with a person that has such poor debating skills as to resort to such nitpicking, otherwise I wouldn't have replied at all.
> My apologies, your friendly suggestion is misguided. My "source" was the notoriously uneducated Noam Chomsky, but I knew you'd pooh-pooh that (can't stop you tho! :D) as appeal to authority.
No I wouldn't, because Mr. Chomsky isn't considered an authority on that particular subject (or most any of the many subjects he has opinions on).
Again, I'm not denying the contributions of publicly funded universities. You're (apparently) denying the contribution of privately funded R&D. It's true that companies rely on public research, why shouldn't they? What else is supposed to happen?
Allow me to rephrase: that disproves your statement, "nobody would invest millions into figuring out the right arrangement of atoms that cures some disease, if there wasn't a way to profit from that."
> Allow me to rephrase: that disproves your statement, "nobody would invest millions into figuring out the right arrangement of atoms that cures some disease, if there wasn't a way to profit from that."
You really want to play that dumb semantic game? Fine, I'll play: I didn't specify financial profit. When publicly funded research leads to the cure for a disease, then the public profits.
> Everything else is noise.
No it isn't, "everything else" is the whole damn point that you fail to address.
If calling false statements false is a "semantics game," then yes I'm happy to play.
>Fine, I'll play: I didn't specify financial profit. When publicly funded research leads to the cure for a disease, then the public profits.
Your attempt to walk back isn't credible. Your immediately previous sentence that this backs up was "IP laws also support innovation." Tautologically, if your goal is public benefit then it belongs in the public domain, with no need for IP protection.
_Unless_ your purported goal of "public benefit" is just private enrichment in disguise: corporate R&D subsidies, wherein publicly-developed tech is handed over to private companies for "commercialization" (typically by licensing it 'for a song' compared to the taxpayer's risky R&D expenditure, with private companies cherry-picking 'winner' technologies to license while the public picks up the tab for the many inevitable losers that come from anything risky). This is very common, of course.
If your true goal is public profit then no IP is needed. Only if your goal is private profit (handing over an exclusive license to one's buddies) does IP come into play.
I'm not walking back on anything, you claim you "disproved" my statement as false, I "proved" it to not be false, even if one wanted to play a stupid semantic game. I'd prefer we didn't play that game in the first place.
> Your immediately previous sentence that this sentence back up was "IP laws also support innovation." Tautologically, if your goal is public benefit then it belongs in the public domain, with no need for IP protection.
Of course my goal isn't "public benefit". Like I originally said, the point behind the statement is maintaining private investment. But my statement, as written, isn't wrong as you tried to show. My intention is entirely orthogonal to the statement being false, you're raising a false dichotomy. You failed at your nitpicking, that's all. Did I even think about all that when writing the sentence? Of course not, I didn't expect to end up debating someone who would resort to such primitive tactics.
You've weaseled away from the issue since the beginning, namely that private investments far exceed public investments and that without a way to protect that investment (i.e. through intellectual property), that money would disappear. If you want to argue that everything would be surely better if the government researched, developed and marketed novel drugs, then do that. Make a good case for it. Don't go about nitpicking casually written sentences, it's intellectually embarrassing. It just shows you're a waste of time to talk to.
They've actually been supporting monopolies and oligopolies by large, barely-innovating companies or patent trolls seeking to maximize profit at everyone else's expense.
Reform is desperately needed. Further, most startups or software we see on HN didn't happen because someone was reading patent databases all day. They usually just make stuff out of a need or want, try to grow it with iterations and marketing, and make money off that. Most use patents defensively or just to increase money in acquisition/IPO's since buyers think patents are important. Why buy them if innovation already happened? To stop others via patent suits from innovating and stealing their market share. Patents hurt innovation.
I don't disagree, but it's not like there aren't any arguments for both sides. You can point to negative outcomes for any piece of regulation, it doesn't put the whole concept into question.
I think it wouldn’t be so bad if everyone forced their major contractors to share IP. Sure, it would be harder for a vendor to own a market for decades, but is that really a bad thing?
Every time you see a news post about a tech company "partnering" with a Chinese company, you should be thinking they were forced to do that. This has been going on for many years, but it became much more of a "rule" in China since a couple of years ago. It's when most of the large American tech companies started announcing "joint ventures" with Chinese firms almost in unison.
However, tech companies seem to be more than happy to give 50%+ of their business in China away, as well as 100% of the tech IP that will be stolen once the partnership happens. And then they whine about how restrictive the GDPR or a similar law in the US would be.
I understand that the scope and scale of the technology transfer agreements may be unreasonable, but surely these foreign companies aren't "forced" to oblige? I'm not sure if it's on China that many companies find it more profitable to have access to the Chinese market than to hold on to their IPs.
When China was admitted to the WTO, manufacturers in China gained access to other WTO member markets on better terms than they had before.
And, in theory, in exchange for that access, outside companies gained new access to the Chinese market - to investing in factories there and selling products and services there. That was supposed to be part of the WTO deal.
But, the requirement in China that state owned companies had to be partners, that IP had to be transferred to these state partners as an additional condition of doing business -- that's what is unusual, that's where the word "forced" enters the conversation.
Someone correct me if I'm wrong, but I don't think WTO rules reallly allow for that sort of required government involvement.
No WTO is about trade and it is fairly silent on investment. See https://www.wto.org/english/tratop_e/invest_e/invest_info_e.... "As an agreement that is based on existing GATT disciplines on trade in goods, the Agreement is not concerned with the regulation of foreign investment. The disciplines of the TRIMs Agreement focus on investment measures that infringe GATT Articles III and XI, in other words, that discriminate between imported and exported products and/or create import or export restrictions."
I think a recent EU complaint to the WTO about IP transfer rules in China does a better job of explaining the issue than I have. Bloomberg wrote about it in June:
In its complaint, the EU is targeting rules in China on the import and export of technologies and on Chinese-foreign equity joint ventures. Certain provisions “discriminate against non-Chinese companies and treat them worse than domestic ones,” violating WTO requirements that foreign businesses be put on an equal footing and that IP such as patents be protected ...
EU's complaints depend on the TRIPS agreement https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.... , which appears to be silent on investment as well. If EU obtains a favorable ruling it would likely require China to treat patents owned by foreign entities equally as those owned by the Chinese. However it is unlikely to say how China should regulate foreign investments. Indeed under WTO countries have no obligations to allow foreign investments at all. Plus TRIPS contains this as well: "More precisely, Article 7 (“Objectives”) states that the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations." https://www.wto.org/english/tratop_e/trips_e/techtransfer_e....
Ok. So, it's about equal IP protection and not investment. Thank you for the clarification.
Based on what you're saying, it sounds like the EU and other countries could impose a wide range of conditions or restrictions onto Chinese investments or purchases without running afoul of WTO rules. Interesting stuff.
Looks like I stand both corrected and downvoted. Gotta luv HN!
The theory has always been that countries would compete with each other for FDI, but the reality is a little more complicated. When Amazon put the location of its new headquarter out for bid many cities are willing to throw any concession at Amazon. However that does not mean cities like SF or NYC would do the same. Not every location has the same attractiveness for business. Similarly not all countries are the same in their attractiveness to business. You can't expect countries to not take advantage of the differentials and offer identical terms unless doing so is in their own interests.
On the other hand, as a thought experiment, what would have happened if China had been more open or fair to foreign investments? Then even more businesses would have invested in China and thus subject themselves to the influence of the Chinese government. For an example (not to imply any moral equivalence) see the tremendous power the US government wields over transactions conducted entirely between foreign entities.
Technology transfer is not coerced if a company enters into a a contract to transfer technology in exchange for a payment, income that's related to sales, or licensing fees.
Listen to what the Qualcomm CEO said when a CNBC reporter asked whether China was stealing its technology:
edit: If someone is using whataboutism (as the person I'm responding to is) there is no real argument to respond to.
Any modern day atrocity can be justified by saying that it was done in the past by a different nation. Saying that the US had done something in the past to justify a different countries' present day actions is intellectually lazy and dishonest and is meant to shut down discussion. I was just not trying to waste my time typing this entire statement out but apparently some of you don't understand why `whatabout x` isn't a real argument.
You assume that "IP" is a real thing. It is an invented concept. Those who insist on its reality do so for their own benefit. Those who deny it, do so for their own. How are disinterested parties to decide? Well, they might examine how genuine the two positions are...
There is a difference between "I can do this bad thing, because you have already done it" and "this thing is not bad, otherwise you wouldn't have done it". Tu quoque addresses the former situation, not the latter.
Whether or not IP is "real" is a red herring from hypocrisy being a valid defense for bad behavior. You can split hairs on the definition of IP, but the general consensus in economics is that you need to ensure coverage of the fixed creation costs of intellectual property to ensure robust investment in your society.
And no, tu quoque definitively intends to discredit the opponent's argument by asserting the opponent's failure to act consistently in accordance with its conclusion.
This applies to whataboutism, and exactly what we're talking about in this thread of deflecting back to the U.S.'s inconsistent behavior in the past.
Well I was never trying to defend against hypocrisy and no hypocrisy is present in the actions of the US considering these international norms were developed by the US more than a century after the supposed IP theft by the US took place.
Using the argument that some country did the same thing 100 or 200 years before is a child's argument and holds no weight. The Chinese government by taking advantage of the international order developed by the US has sown the seeds for the trade retaliation that is taking place today (to the detriment of everyone).
Actually piracy is a particular kind of theft. Piracy is robbery on the high seas. Robbery is a type of theft that takes place in conjunction with violence, force, and intimidation.
Nothing that happens on land is piracy, so I'm not sure why it comes up so often in these discussions.
I'm not one to agree with the right wing of US politics very often at all, but our country needs to sanction and tariff Chinese goods until US rightholders are reimbursed for their stolen technology AND the PRC greatly reforms its absymal human rights records.
People are literally living in a modern version of 1984, complete with re-education camps and stolen Western surveillance technology. No American can in good conscience send their technology to be stolen by a country that wants to imprison and torture entire states of its citizens.
If the PRC government merely didn't follow IP law, that would be a calculated risk. When the PRC steals our technology to power a global game of persecution, corruption, and espionage, it's morally wrong.
The US pried the textile and locomotives industries from the UK, check the history of Samuel Slater[1]. Same happened for Japan under Meiji restoration. India and Brazil do the same for pharmaceutical patents, because they're too poor to afford paying them.
Stealing IP will happen, no matter what treaties and governments try to do. For poor countries it is a path they just don't have the luxury of giving up.
[1] https://en.wikipedia.org/wiki/Samuel_Slater
Edit: over-patriotic Americans seem to think this is just about them and call my argument whataboutism. It isn't both. I am stressing the fact that protectionism and stealing IP is a path almost every industrialized nation took. Even the UK did protectionism against India textiles to help their beginning textile industry.
The industrialized countries are trying to close the gates they used to get into their rich garden. My point is that right or wrong, moral or not, it simply won't work.
I feel like this misses the point. I don't expect people to complain much about IP being stolen by competitors - that feels like an security/internal problem.
The issue with China seems to be that they force partnerships with Chinese companies, resulting in western companies having to share their IP, and when that IP is used outside of the constraints of whatever contract was created and the western company complains, the Chinese government colludes with the Chinese company to stymie or exploit the western company as much as can be done without breaking the relationship.
I'm also not going to say whether this is right or wrong - just that the feeling I get from the whole thing (as someone who doesn't follow this stuff that closely) is that the government efforts go beyond what others have done in the past (which I understand to be more subsidizing industries to boot them up).
If China can afford to not respect the IP laws then there is nothing what a company can do, eventually the secrets would be reversed engineered.
The real issue here is China's double-talk on trade. They talk about open free trade but in reality they practice intense nationalistic and protectionist trade tactics. They do everything possible to prevent foreign companies from selling anything in China, while at the same time doing everything they can to attract foreign labor outsourcing, capital, and of course IP.
I can't blame them too much. These kinds of trade policies are how nations build strong domestic economies. The US did the same thing during its industrialization phase. Nevertheless it's horrible for American workers and the American middle class.
It's literally the only thing I agree with Trump about -- that China needs to be taken to task for its extremely aggressive trade policies.
Also, as time goes on the skills of the entire world population is being equalized. That is to say, the skilled labor market is becoming global. When that happens American workers and middle class simply can't keep enjoying the high wages that are currently prevalent.
Unless of course, you want to start a new era of imperialism and force developing economies to confine themselves to the lower end of the value chain.
Its a siren song that is enabled by increased quarterly profits, even knowing full well the risks, it will be another CEO and board before they come home to roost.
This is the sort of argument that an eight-year-old makes to his mother, and the mother responds, "If Jimmy jumped off a bridge, would you?"
I don't know if you're an American or not, but there's an very common expression: Two wrongs don't make a right.
China has a lot of wealth on display but overall isn't so well developed if you remember the fact that so many people live there. If China were as developed as the US, we would expect it to be something like 3x the economic activity as the US.
GDP per capita:
USA: 57k
Canada: 42k
UK: 39k
...
Kazakhstan: 8k
China: 8k
Libya: 7k
In addition by some metrics, it could be exploiting even harder to achieve further industrialization. For instance, China is way behind the US in CO2 emissions per capita even today, and if you count total CO2 emissions, the US is still #1. If China had equal CO2 emissions as the US per capita (which might indicate a similar level of industrialization), that would be disastrous.
https://www.ucsusa.org/global-warming/science-and-impacts/sc...
https://xkcd.com/1170/
https://en.wikipedia.org/wiki/Tu_quoque
Of course?
This is one of the stupidest question in the world; I don't understand how parents worldwide are still repeating it.
Randall Munroe explains it best: https://xkcd.com/1170/.
Now there's an hypocrisy to complain about a rule when you broke it prior.
Like you said, two wrongs don't make a right. Just by pointing out this has happened elsewhere doesn't make the conversation about China doing it any less important or relevant. Why shut down this conversation?
In the US patent law doesn’t cover everything, there are alternate forms of IP like copyright which has let open source software and fashion thrive.
Then there’s the open hardware system in China called GongKai: https://www.techdirt.com/articles/20141230/09362929550/how-g...
[See my other comment for how to interpret "expect", though...]
On another level, though, any country that has more to gain by stealing than to lose by being stolen from is going to be tempted to steal. Given what human nature is, you'd better expect it to happen.
It's like how in domestic society, on one level we expect people to obey the law. But on another level we expect at least some people not to, which is why we have police.
There are other ways to convince people, like appealing to their interests or punishing with retribution.
So it’s worth noting that, as a western company, you cannot trust these agreements, whether or not the actions of the Chinese are justified. You should assume that any restrictions you negotiated are worthless, and if you want access to the Chinese market the price implicitly includes any IP the local partner can take.
That’s what I see as the takeaway.
But over the years they started developing in-house knowledge, and their own innovations.
Now Toyota is known for making reliable cars that are affordable. Is the world better off with Toyota making cars? I think so. But is Chrysler worse off? I also think so. So it’s a tough one. But at the same time I like the philosophy of software startups regarding ideas: sure, take these ideas for free, it’s all in the execution.
You can place a bit more blame on the US companies that let it happen. The people running them are short-sighted and unpatriotic.
The real problem is that the law allows companies to be in a race to the bottom that is ultimately self-destructive. Allowing non-citizens to get access to the IP should be illegal. If it were, then bringing that IP to a location controlled by China's contradictory law would be a violation.
You can't fully stop spies, but you sure can make it illegal to simply hand things over without a fight.
Samuel Slater is a fine example. He was a spy. He broke the law. The USA would have gotten the technology years earlier if the UK had simply handed it over. Picture that: the USA demands that textile factories be built in the USA, as joint partnerships with technology transfer. The UK wasn't that stupid.
This is one aspect of Chinese culture that I’ll never understand. For example, if you get cheated, it’s your fault for being lax/trusting/stupid enough to get cheated. The immorality is on the victim, which makes for some extremely paranoid business relationships when working in China.
How is that beneficial in the long term? Why doesn’t such a system just implode on itself? I guess this is where guanxi comes into play to counteract that, because I don’t see how it could work otherwise.
Does Chinese culture actually shift moral blame onto the victim? If not, then this sounds a bit like the "victim blaming" obsession of modern American culture, which misses the crucial point - there are two types of blame to be passed around here. The offender was evil - they cheated. The victim was stupid - they were aware of the danger and ignored it.
It isn't really victim blaming, more like your business partner comes back to you and says "Why did you let me cheat you? This is all your fault."
In turn, we ought to acknowledge both the possibility that fighting back might hurt more than it helps and the possibility that we've been shooting ourselves in the foot by turning the other cheek.
There is an obvious upside of operating in Asia, both cheap labor (though now decreasing) and strong work ethic coupled with access to a huge market.
It seems to me that execs understand and take a calculated risk when they choose to do business in various parts of the world. If they cannot make this calculation, they should not be running a company.
More than anything else, the attitude displayed in this article appears to me as an attempt to defer (or pass to the public) the consequences of the above calculated choices. If not directly, through a trade war that will hurt all Americans. All the while, these companies keep their financial gain private, in the pockets of execs and shareholders.
There is something to be said for protecting IP in the interest of a country's defense, but the technology that qualifies for this type of protection should be the subject of public debate, not a president's whim. Furthermore, unless the companies that own this IP are taken over by the state, company execs will always be free to make the decision re. operating in Asia and between the associated IP risks and capital gain.
Company executives may have short term incentives, and little interest in the long term health of their organizations.
Company executives have to compete with executives willing to compromise their company's long term health in the short term.
The well-run insurers are always competing against the most poorly run, excessively risky insurers.
Some of these poorly run companies offer irrationally low premiums and gain lots of customers because of it -- but then go bankrupt. OTOH, well run insurers that used sound underwriting principles and charged rational premiums end up with fewer customers.
Apple for instance can be copied easily yet iPhone knockoffs don't command comparable prices due to lack of established trust and quality. Rivals compete openly with their own R&D.
Microsoft the behemoth failed to break in the phone market even with heavy supportive measures and willingness to take a loss like they did with xbox.
https://www.youtube.com/watch?v=SGJ5cZnoodY
I think your entire premise is dubious. The first mover advantage cannot be great because the Chinese government will never allow a foreign company to have a dominant position in an important domestic Chinese market. Without significant change since in government those first entrant companies are simply very foolishly assuming the regulatory environment will be anything like it is in the United States or Europe.
Go to any department store in China and the first two floors (i.e. the prime spots) all feature foreign brands.
There's an externality here, it's not just that one company, but all of its competitors that are losing out on these IP "appropriations". Then, let's say you're one of the companies that are able to "sell out", if you want to profit at all, you need to be the first to sell out. You can't rely on nobody selling out, therefore selling out isn't even bad management.
Answering such questions is very, very difficult, but rarely do I even see anyone asking such questions. "Free trade is shown to increase GDP of all participating countries", which is a fact as far as I can tell, seems to be the limit of how deeply we want to think about these things, and suggestions that the world just might be a bit more complex than that usually elicits passionate, seemingly non-negotiable disagreement.
Otherwise it's a double whammy, your foreign competitors compete unbound while your domestic market competition is restricted.
It would also align the game theory to prevent companies from "selling out" to such jurisdictions.
What I mean to say is that just because I'm taking a calculated risk does not remove the other party of moral and legal liability for their theft of some kind.
In fact, the only argument I remember hearing (I think it was Marc Andreessen?) against the shaming of the scammer in the prince analogy is that they sometimes have no other option to feed their family. I doubt that justification applies to Chinese IP theft.
I do not necessarily agree with this argument, but it actually translates to China's situation pretty directly - you could argue that their attitude to IP is a necessary component of their attempt to quickly lift the whole country out of poverty.
Another question would be whether the Chinese acquiring this IP would trickle down to help those in poverty, or whether the wealth would stay consolidated at the top.
A good question. If hardware market is any good of an indicator, I'd be hopeful - https://www.bunniestudios.com/blog/?p=4297.
I don't think the gain is as one-sided as you suggest here. The American consumer has had decades of inexpensive goods available. That is a real economic benefit.
I don't think this naked materialism really improves quality of life for the average schmuck, it just adds a gilding.
Say what you will, but "privatize profits and socialize losses"[1] is winning formula, even in a country that on its face rejects socialism.
What's interesting in light of your observation is that companies didn't stay away from China due to onerous demands - in that parallel universe, the executives would be lobbying for China to open its markets. What happened in our world goes to show what they value more: keeping their IP or access to the markets/manufacturing. Now they want to have their cake and eat it.
1. corrected (had repeated 'profits') - thanks @greenleafjacob
At the time (1826), America's per capita GDP was $2,460, which is 68% of the UK's per capita GDP of $3,600. Today, China's per capita GDP is $16,000, or 29% of of the US's per capita GDP of $55,000.
Japan is about $39,000, Germany is $41,000, France is like $37,000.
But Poland which is part of the EU is $12,000 as well. Russia is like $9000 per capita.
For all I know the numbers are totally made up, but they rate Russia at 17.29, China at 19.08, Poland at 26.56, Japan at 34.58, Germany at 36.54, France at 36.74 and the US at 37.98. Obviously the relationship to GDP per capita isn't monotonic, but some correlation appears to be there.
[0]: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)...
But China's labor is so cheap. Exploitation is a sweet sweet drug for the west. So, it's complicated.
Law propagation is done cynically via who benefits - either via influence and threats or mutual benefit. China would need to suffer from a lack of protection of their own to agree to the status quo which the west has become accustomed to. It is not a natrual state of being by any means.
Anyone who has suffered bullying and received a blind eye from society in return would know that despite the lofty claimed principles they never operate on equality, justice or other but power and what they can get away with.
China is already suffering from it. The golden age of them not giving a fuck about IP in hardware space are coming to an end, to detriment of the society at large.
Also, China has grown an upper class whose interests most strongly align with strong IP laws.
Not even the UK is exempt- Robert Fortune stole tea production IP (and samples) from China(!) in a covert mission[1] for Britain[2]. Now tea is quintessentially british
1. https://www.smithsonianmag.com/history/the-great-british-tea...
2. I know Britain and the UK are not the same thing. Bear with me, NI.
For example I think most people in the UK would say if the taxpayer has directly or indirectly underwritten something then it’s not unreasonable for a portion of the profit on that thing to be taxed and spend on the NHS, roads, education, whatever the inventor leveraged and benefitted from along the way. That’s not to say that the inventor can’t or shouldn’t get rich themselves, but it is only fair that they give something back.
Philosophically, could one not make the same argument that there are strong similarities between these two items? Indeed, it isn't currently strongly codified in law, but you don't seem to be arguing from that perspective.
Of course now people are going to normalize it and say it’s no big deal after years of saying it was an exaggeration.
But that’s what you get when you get blinded by the lure of 1-billion potential consumers... along with an unfavorable trade agreement wich allowed for assymetrical tariffs, etc.
Assymmetrical tariffs are more favorable than symmetrical tariffs, something practically every economist agrees on. Also, why insist on exporting more valuable goods to China, when China remains perfectly content with green pieces of paper instead?
Does there ever come a point where they should be normalized? From most of what I've read in mainstream news coverage, this topic seems to be considered not valid for discussion, as if the answer is self-evident (despite very few of the reporters, or readers, having any serious depth in the subject).
The ideal situation is no tariffs on either side, which is normalized.
> for certain situations?
For any given economic scenario there's a practical intervention that would result in a better result than what the theory suggests is the best expected result. There's also an infinite number interventions that result in a worse outcome. The problem is, how do you know what the right intervention is? You don't.
> From most of what I've read in mainstream news coverage, this topic seems to be considered not valid for discussion, as if the answer is self-evident
It's not self-evident, the question just has remained settled for over a century. Economists disagree over all kinds of things, this isn't one of them.
Fine, but that's not the case now, correct?
> The problem is, how do you know what the right intervention is? You don't.
Do you or practically every economist know?
> It's not self-evident, the question just has remained settled for over a century.
I'm not sure what question you're referring to.
China became a member of the World Trade Organization on December 11, 2001, and was given developing nation status which comes with a variety of benefits. Should that status ever change?
To most its not a good deal. To US companies, that are driven by quarterly targets then it is very much a case of sacrificing the future for the present. And if they stay out of China then the odds are that hackers will either steal the info anyway or another western competitor will play ball.
There's just no way to stop this happening as I see it. The best non-US companies can do is negotiate an equity stake in their local partners and hope the government doesn't pass laws to take it away.
This comment comes off as trite and naive. Multi-billion dollar companies like DuPont and AMD Inc do not only think a few quarters ahead. They think years or decades ahead.
The lions share of course go to the likes of Google/Facebook but its not totally correct to say the country gets nothing.
Go to any one of a number of other countries that don't expect you to partner with a communist dictatorship and give up IP in order to have goods produced there? Vietnam, Thailand, Malaysia, Mexico, India?
It seems like a pretty obvious "AVOID" signal for me, but I'm not running a multinational that's cut corners to keep profit margins high while exporting all of the manufacturing work.
A source of cheap labour, raw materials and a huge market, is something that people from ex-colonies are all too familiar with. One should also acknowledge the high tech cartels that exists.
In a way it is a free market, because people can not claim to not know what they were getting themselves into.
Trade secrets are bullshit as a doctrine. Why is the rest of society obligated to protect not advancing at their own expense for the sake of private greed? The proper response to breech of trade secrets in a court of law should be "You never registered it for any sort of protection in exchange for disclosure and chose to keep it secret. Go to hell."
At the other end of the spectrum is protecting the "invention" of buying something with a single mouse click.
There should be a healthy middle somewhere.
Sure they would. It's called public research, most of which is promptly handed to private companies to profit from. Pharmaceutical research is hugely taxpayer subsidized.[1]
Let me be clear: I think the funding is a good thing, but the privatization (read: theft) of subsequent profits is bad.
[1] https://other98.com/taxpayers-fund-pharma-research-developme...
Of course these companies use information obtained through public research, they're supposed to, because there's a long process from research to an approved product, which is what the research institutions do not do. Public and private research goes hand in hand, just like in other industries. The study quotes a hundred billion in public funding over six years, compare that to private R&D budgets of well over 50 billion per year:
https://en.wikipedia.org/wiki/Pharmaceutical_industry#The_co...
It's not "a scam", as that article wants you to believe. You should stop reading that website, it's making you more uneducated.
Obviously both can "[figure] out the right arrangement of atoms that cures some disease." How does that not answer your question? Furthermore, how would 'obviousness' negate a counterexample? You're just moving the goalposts here.
>It's not "a scam", as that article wants you to believe. You should stop reading that website, it's making you more uneducated.
My apologies, your friendly suggestion is misguided. My "source" was the notoriously uneducated Noam Chomsky, but I knew you'd pooh-pooh that (can't stop you tho! :D) as appeal to authority. I confess I lazily Googled the citation.
Direct link to the timecode of Chomsky's comments: https://www.youtube.com/watch?v=szIGZVrSAyc&t=11m18s (~4m long)
I didn't ask a question.
> Furthermore, how would 'obviousness' negate a counterexample? You're just moving the goalposts here.
You are playing a semantic game. The obvious, honest interpretation of my words is that I'm talking about preserving private investment. I'm of course aware that governments can and do fund research. I didn't expect to be discussing with a person that has such poor debating skills as to resort to such nitpicking, otherwise I wouldn't have replied at all.
> My apologies, your friendly suggestion is misguided. My "source" was the notoriously uneducated Noam Chomsky, but I knew you'd pooh-pooh that (can't stop you tho! :D) as appeal to authority.
No I wouldn't, because Mr. Chomsky isn't considered an authority on that particular subject (or most any of the many subjects he has opinions on).
Again, I'm not denying the contributions of publicly funded universities. You're (apparently) denying the contribution of privately funded R&D. It's true that companies rely on public research, why shouldn't they? What else is supposed to happen?
Allow me to rephrase: that disproves your statement, "nobody would invest millions into figuring out the right arrangement of atoms that cures some disease, if there wasn't a way to profit from that."
Everything else is noise.
You really want to play that dumb semantic game? Fine, I'll play: I didn't specify financial profit. When publicly funded research leads to the cure for a disease, then the public profits.
> Everything else is noise.
No it isn't, "everything else" is the whole damn point that you fail to address.
>Fine, I'll play: I didn't specify financial profit. When publicly funded research leads to the cure for a disease, then the public profits.
Your attempt to walk back isn't credible. Your immediately previous sentence that this backs up was "IP laws also support innovation." Tautologically, if your goal is public benefit then it belongs in the public domain, with no need for IP protection.
_Unless_ your purported goal of "public benefit" is just private enrichment in disguise: corporate R&D subsidies, wherein publicly-developed tech is handed over to private companies for "commercialization" (typically by licensing it 'for a song' compared to the taxpayer's risky R&D expenditure, with private companies cherry-picking 'winner' technologies to license while the public picks up the tab for the many inevitable losers that come from anything risky). This is very common, of course.
If your true goal is public profit then no IP is needed. Only if your goal is private profit (handing over an exclusive license to one's buddies) does IP come into play.
I'm not walking back on anything, you claim you "disproved" my statement as false, I "proved" it to not be false, even if one wanted to play a stupid semantic game. I'd prefer we didn't play that game in the first place.
> Your immediately previous sentence that this sentence back up was "IP laws also support innovation." Tautologically, if your goal is public benefit then it belongs in the public domain, with no need for IP protection.
Of course my goal isn't "public benefit". Like I originally said, the point behind the statement is maintaining private investment. But my statement, as written, isn't wrong as you tried to show. My intention is entirely orthogonal to the statement being false, you're raising a false dichotomy. You failed at your nitpicking, that's all. Did I even think about all that when writing the sentence? Of course not, I didn't expect to end up debating someone who would resort to such primitive tactics.
You've weaseled away from the issue since the beginning, namely that private investments far exceed public investments and that without a way to protect that investment (i.e. through intellectual property), that money would disappear. If you want to argue that everything would be surely better if the government researched, developed and marketed novel drugs, then do that. Make a good case for it. Don't go about nitpicking casually written sentences, it's intellectually embarrassing. It just shows you're a waste of time to talk to.
Nope, sorry. Public investment just fell below 50%... for the first time since WWII. https://www.sciencemag.org/news/2017/03/data-check-us-govern...
>It just shows you're a waste of time to talk to.
haha, you're a peach.
Attack the messenger to your heart's content. Game, set, match.
https://www.eff.org/issues/patents
Reform is desperately needed. Further, most startups or software we see on HN didn't happen because someone was reading patent databases all day. They usually just make stuff out of a need or want, try to grow it with iterations and marketing, and make money off that. Most use patents defensively or just to increase money in acquisition/IPO's since buyers think patents are important. Why buy them if innovation already happened? To stop others via patent suits from innovating and stealing their market share. Patents hurt innovation.
I don't disagree, but it's not like there aren't any arguments for both sides. You can point to negative outcomes for any piece of regulation, it doesn't put the whole concept into question.
I wonder if China only remade pharmaceutical IP while India remade technological, the reports would be different?
Or is it because China is a rival?
However, tech companies seem to be more than happy to give 50%+ of their business in China away, as well as 100% of the tech IP that will be stolen once the partnership happens. And then they whine about how restrictive the GDPR or a similar law in the US would be.
And, in theory, in exchange for that access, outside companies gained new access to the Chinese market - to investing in factories there and selling products and services there. That was supposed to be part of the WTO deal.
But, the requirement in China that state owned companies had to be partners, that IP had to be transferred to these state partners as an additional condition of doing business -- that's what is unusual, that's where the word "forced" enters the conversation.
Someone correct me if I'm wrong, but I don't think WTO rules reallly allow for that sort of required government involvement.
I think a recent EU complaint to the WTO about IP transfer rules in China does a better job of explaining the issue than I have. Bloomberg wrote about it in June:
In its complaint, the EU is targeting rules in China on the import and export of technologies and on Chinese-foreign equity joint ventures. Certain provisions “discriminate against non-Chinese companies and treat them worse than domestic ones,” violating WTO requirements that foreign businesses be put on an equal footing and that IP such as patents be protected ...
From
https://www.bloomberg.com/news/articles/2018-06-01/europe-ta...
or
https://www.bloombergquint.com/global-economics/2018/06/01/e...
Based on what you're saying, it sounds like the EU and other countries could impose a wide range of conditions or restrictions onto Chinese investments or purchases without running afoul of WTO rules. Interesting stuff.
Looks like I stand both corrected and downvoted. Gotta luv HN!
On the other hand, as a thought experiment, what would have happened if China had been more open or fair to foreign investments? Then even more businesses would have invested in China and thus subject themselves to the influence of the Chinese government. For an example (not to imply any moral equivalence) see the tremendous power the US government wields over transactions conducted entirely between foreign entities.
https://www.npr.org/2018/09/26/651689220/u-s-army-reservist-...
Listen to what the Qualcomm CEO said when a CNBC reporter asked whether China was stealing its technology:
https://youtu.be/rAV2y23jHaM?t=2m20s
A) give up some of your property to an entirely unrelated person
B) not do that
Choose wisely!
edit: If someone is using whataboutism (as the person I'm responding to is) there is no real argument to respond to.
Any modern day atrocity can be justified by saying that it was done in the past by a different nation. Saying that the US had done something in the past to justify a different countries' present day actions is intellectually lazy and dishonest and is meant to shut down discussion. I was just not trying to waste my time typing this entire statement out but apparently some of you don't understand why `whatabout x` isn't a real argument.
Stealing IP without contributing to creation costs is bad behavior on several levels.
[1] https://en.wikipedia.org/wiki/Tu_quoque#The_fallacy
There is a difference between "I can do this bad thing, because you have already done it" and "this thing is not bad, otherwise you wouldn't have done it". Tu quoque addresses the former situation, not the latter.
And no, tu quoque definitively intends to discredit the opponent's argument by asserting the opponent's failure to act consistently in accordance with its conclusion.
This applies to whataboutism, and exactly what we're talking about in this thread of deflecting back to the U.S.'s inconsistent behavior in the past.
Using the argument that some country did the same thing 100 or 200 years before is a child's argument and holds no weight. The Chinese government by taking advantage of the international order developed by the US has sown the seeds for the trade retaliation that is taking place today (to the detriment of everyone).
Nothing that happens on land is piracy, so I'm not sure why it comes up so often in these discussions.
People are literally living in a modern version of 1984, complete with re-education camps and stolen Western surveillance technology. No American can in good conscience send their technology to be stolen by a country that wants to imprison and torture entire states of its citizens.
If the PRC government merely didn't follow IP law, that would be a calculated risk. When the PRC steals our technology to power a global game of persecution, corruption, and espionage, it's morally wrong.