Featured News

U.S. Tariffs Won’t Keep China From Stealing Trade Secrets, Experts Say

Accountant checking financial data. Accounting concept.

The Trump administration’s tariff war with China may be boosting the U.S. steel industry, but it isn’t keeping China from stealing trade secrets. According to USA Today, the U.S. loses up to $225 billion to $600 billion a year to intellectual property theft.

“You can’t find a company that hasn’t been assaulted,” said Richard Ellings, the executive director of the Commission on the Theft of American Intellectual Property, “and half of them don’t even know it. [It’s] an assault the likes of which the world has never seen.”

The Trump administration’s tariffs were partly to give leverage to the U.S. steel industry but were also intended to punish China for stealing intellectual property.

One of the more recent cases of China’s attempts to steal intellectual property from the U.S. took place in October. Federal prosecutors charged a deputy division director for the Chinese ministry of state security, Yanjun Xu, with economic espionage and attempting to steal trade secrets from U.S. aerospace and aviation companies.

Federal prosecutors have accused Xu of recruiting leaders in the aviation field to travel to China to deliver university presentations. Xu and others allegedly paid the experts’ travel costs and provided stipends while stealing sensitive technology from the aviation companies.

A recent report by the U.S. Trade Representative’s Office shows that Xu’s alleged theft isn’t an isolated incident. Cyber-enabled theft and commercial network intrusion of U.S. companies have increased over the course of the last year. In fact, the number of U.S. trade secret case filings have jumped from 860 a year to 1,134 cases filed in 2017.

The U.S. Trade Representative’s Office report says that the theft of U.S. intellectual property provides the Chinese government with unauthorized access to confidential business information, negotiating positions, technical data, and sensitive and proprietary international business communications.

Erin Ennis, the senior vice president of the U.S.-China Business Council, says that the theft of trade secrets is a major dilemma for U.S. companies that want to do business in China.

U.S. companies who do business in China are required to form a joint venture with Chinese firms and to share their technology secrets with their partner company.

“It’s an existential choice for them: Do they want to be in the market or not?” Ennis said. “And they are being given a choice that makes that very difficult for them to decide. Companies shouldn’t have to make that kind of a choice.”

The U.S. Department of Justice has recently unveiled a new economic espionage initiative to file formal charges against potential thieves.

While business groups agree that the Trump administration is right about trade secret issues with China, they don’t believe the tariffs on Chinese imports are the right way to fix the problem.

“[The tariffs-only approach] does not create meaningful solutions and policy change in China to fully address the problems,” said Ryan Ong, the director of international business policy at the National Association of Manufacturers.

Jeremie Waterman, the vice president for Greater China at the U.S. Chamber of Commerce, says that the tariffs are also counterproductive. Although they do hurt China, they also harm U.S. businesses, farmers, and other workers.

For instance, job site trailer manufacturers who may not be able to pay the additional costs of using U.S. steel may use thin wood and vinyl building materials instead, which dramatically reduces the lifespan of the trailer to five years at most.

“We are doing more harm to ourselves than we are actually addressing the problem of coerced technology transfer,” said Waterman.