China’s Intellectual Property Theft Must Stop

Workers at a factory in Huaibei, Anhui province, using microscopes to assemble micro motors for phones. Credit Wan Sc/European Pressphoto Agency

President Trump on Monday instructed the office of the United States Trade Representative to consider an investigation into China’s sustained and widespread attacks on America’s intellectual property. This investigation will provide the evidence for holding China accountable for a decades-long assault on the intellectual property of the United States and its allies.

For too long, the United States has treated China as a developing nation to be coaxed and lectured, while tolerating its bad behavior as merely growing pains. There has been an expectation that as China’s economy matures, it will of its own accord adopt international standards in commerce, including protection for intellectual property. There has also been a tendency to excuse mercantilist behavior, including industrial espionage, as a passing phase, and to justify inaction as necessary to secure Chinese cooperation on other, supposedly more important, issues.

Chinese companies, with the encouragement of official Chinese policy and often the active participation of government personnel, have been pillaging the intellectual property of American companies. All together, intellectual-property theft costs America up to $600 billion a year, the greatest transfer of wealth in history. China accounts for most of that loss.

Intellectual-property theft covers a wide spectrum: counterfeiting American fashion designs, pirating movies and video games, patent infringement and stealing proprietary technology and software. This assault saps economic growth, costs Americans jobs, weakens our military capability and undercuts a key American competitive advantage — innovation.

Chinese companies have stolen trade secrets from virtually every sector of the American economy: automobiles, auto tires, aviation, chemicals, consumer electronics, electronic trading, industrial software, biotech and pharmaceuticals. Last year U.S. Steel accused Chinese hackers of stealing trade secrets related to the production of lightweight steel, then turning them over to Chinese steel makers.

Perhaps most concerning, China has targeted the American defense industrial base. Chinese spies have gone after private defense contractors and subcontractors, national laboratories, public research universities, think tanks and the American government itself. Chinese agents have gone after the United States’ most significant weapons, such as the F-35 Lightning, the Aegis Combat System and the Patriot missile system; illegally exported unmanned underwater vehicles and thermal-imaging cameras; and stolen documents related to the B-52 bomber, the Delta IV rocket, the F-15 fighter and even the Space Shuttle.

President Trump’s action on Monday acknowledges the broad scope of the challenge. Central to Chinese cybersecurity law is the “secure and controllable” standard, which, in the name of protecting software and data, forces companies operating in China to disclose critical intellectual property to the government and requires that they store data locally. Even before this Chinese legislation, some three-quarters of Chinese imported software was pirated. Now, despite the law, American companies may be even more vulnerable.

For decades, successive American administrations have concluded that some level of exposure to China’s depredations against our intellectual property is simply the cost of doing business with the world’s now second-largest economy. This is not acceptable. Although China is an important trading partner with the United States, it is imperative to establish a fair and level trading environment.

Driving down intellectual-property theft by China and other countries is vital for America’s economic well-being and national security. We urge American companies, as well as our allies abroad, who share these interests, to work with the administration through this process.

There is intellectual-property protection on the books in China, and some American companies have been successful bringing cases in Chinese courts. The time may come when China applies the same efforts to protecting intellectual property that it now does to stealing it. However, for now, the United States and other developed countries must look to their own laws and actions to protect their companies from loss and ruin.

President Trump’s action on Monday is a major step in the right direction. If the investigation proves extensive Chinese government support for intellectual-property theft, it could trigger retaliatory action by the American government, based on the Economic Espionage Act, Section 5 of the Federal Trade Commission Act and the National Defense Authorization Act.

The government should lead in this effort, but it can’t go it alone. A broad, sustained campaign bringing together the government, the private sector and our allies is the only way to halt this hemorrhaging of America’s economic life blood.

Dennis C. Blair is a former director of national intelligence and a former commander in chief of the United States Pacific Command. Keith Alexander is a former commander of the United States Cyber Command and a former director of the National Security Agency.

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