There’s a manifesto of sorts from an organization called the “Information Technology & Innovation Foundation” intended to allow the U. S. to address Chinese “innovation mercantilism”. In my opinion even if all of its prescriptions were adopted in toto they would have little effect on what is an actual problem.
I only have two remarks. First, Chinese “innovation mercantilism” is not new. Informed individuals were aware of it decades ago. When the company for which I worked wanted me to go to China as the chief technical officer of their forming operations there, as I turned them down I made them aware of three things, each of which seemed to come as a bolt from the blue:
- They would be required to take a Chinese partner.
- The Chinese wanted to and would raid their technology.
- Since the Chinese currency was not convertible they would never be able to get their money out of the country.
Second, there are a number of ways we could respond to Chinese mercantilism. We could just tolerate it as our economy is hollowed out, one sector at a time. That is by far the most likely. We could stop trading with China. That could be accomplished in a variety of ways, the easiest being to impose tariffs that would make goods manufactured in China uncompetitive.
If we were really sincere about the idea of “intellectual property”, we would reciprocate for Chinese non-enforcement of theft of American intellectual property by China by not enforcing the taking of Chinese real property by Americans. Just a thought. Some 15 years ago when U. S. trade with China was significantly smaller than it is now, the value of Chinese appropriation of American intellectual property was thought to be roughly equivalent to our trade deficit with China.
Free-trade with China (among many others) is not Ricardian. It is Keynesian. It is a monetary, not production, phenomenon. It is only possible through the use of a credit backed currency.
Because the staggering amount of ‘debt’ (credit) needed to support it cannot be sustained, doing nothing will eventually fix itself.
If the trade-deficit dollars were invested in the production of goods and services, it could be sustained, but it is mostly invested in the production of credit. The problem is that the additional goods and services produced need to be purchased by somebody, and that would decrease the trade deficit.
With its staggering amount of ‘debt’ (credit), China’s financial system may be about to collapse, but their system of government may be the actual support for their monetary/financial system.