Friday, August 17, 2018

When Thomas Jefferson Engaged in Industrial Espionage

Thomas Jefferson
Some fascinating history via Dr. John Gong:
Once upon a time, in the early to mid-1700s, America voraciously tried to seek British textile technologies.

The cunning Brits were of course ardently trying to safeguard their trade secret, embodied in the "living" or "dead instruments of trade," as Adam Smith used to call them.

The colonial-era  Americans were very creative in circumventing the overbearing Brits. For example,
one person named Coxe, sitting on the Pennsylvania Society for the Encouragement of Manufactures in Philadelphia proposed a precise technique for procuring foreign technology, by asking people to search for Brits with such knowledge on every ship coming to the country and try to buy them off.

Coxe also reportedly contracted an English mechanic residing in Philadelphia to return to Britain and secure brass models of Arkwright machinery, which at the time, was state-of-the-art in terms of spinning design, and forwarded these to the American Minister in Paris Thomas Jefferson.

English customs officials somehow detected the subterfuge and stopped it. Trump must be ignorant about the fact that Thomas Jefferson was once engaged in industrial espionage!
Gong, of course, is trying to position this as historical whataboutism against the Trump administration charge that China is stealing intellectual property.

But his argument is stronger when he writes:
In 2011, Peter Navarro published a book entitled "Death by China," along with a documentary with the same name. In it, Navarro makes some pretty serious accusations about China.

Seven years later, Navarro became one of US President Donald Trump’s top trade advisers, playing music to his ears, again accusing China of acquiring US technology through "forced technology transfer."

But I am wondering how a technology transfer can be forced in a society of rule of law.

What do you mean by "forced," and by whom? Is someone from the government holding a gun to the head of a company executive, or is he held in some secret hotel room until he "transfers" technology?
As David Stockman has commented:
For instance, Navarro's paper whines about "reverse engineering" as if this staple of business life from time immemorial were some insidious new trick invented by the Chicoms: ".....reverse engineering in China is widespread and entails the process of disassembling (products).... for the purpose of cloning something similar without authorization from the rights holder.....(which) is illegal when the unauthorized production is of technology under patent or other protection." 
Goodness me. Illegal patent infringement is exactly why more than 7,000 patent cases are filed in the US court system each year. Under the rules of honest capitalism, it is the job of the patent owner to protect his property rights in court----not some Trade Nanny in Washington. 
Similarly, the Navarro screed complains that China forces US companies doing business there to share their technologies and that getting a government license or regulatory approval can often require the same: A long-standing feature of China's industrial policy is that foreign companies are often pushed to transfer technology as the price of market entry.. (Also) the Chinese government uses its administrative licensing and approvals processes to force technology transfer in exchange for the numerous approvals needed to establish and operate a business in China. So what? Exactly no one mandated US companies to do business in China. 
If the Red Suzerains of Beijing are stupid enough to enforce a "no tickee, no washee" policy on foreign capital, it's their loss, not the business of the US government. As investors have long understood, capital goes where it is appreciated and treated nicely or at least fairly. If China wants to be hostile to foreign capital by imposing unreasonable conditions, capitalists should take the cue and go elsewhere----not run to Washington seeking redress. Stated differently, corporate America wants to have its cake and eat it too. For crying out loud, China is a communist country, not Texas! So, of course, the government will impose onerous conditions on business----foreign and domestic, too, because that's what statist regimes do. And that's why Navarro's whole screed against China's supposed "economic aggression" is actually a giant "so what!" in substance and a dangerous policy misdirection in practice. 


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