June 02, 2018
There has been a repeated refrain in the media that Trump has been on the wrong track with China by worrying about our trade in manufactured goods. The argument is that he instead should be focused on China’s alleged taking of our intellectual property.
While most news coverage assumes this concern about China’s behavior makes sense, it’s worth asking if that is true. Specifically, what is the downside of China taking advantage of technologies developed in the United States without paying what our companies think they should?
The basic story in this analysis is that China gets the jump on the United States in producing a variety of goods and services. In other words, we will be able to get cheaper and/or better quality products than would be the case if we could keep China from “stealing” our intellectual property. (The reason for the quotes is that the boundaries of intellectual property are not well-defined. Unlike property in land and other physical objects, it is inherently non-exclusive. By England’s definition of intellectual property, the first steam mills in the United States also depended on theft.)
So if China doesn’t properly compensate us for our intellectual property (according to our definitions) then we will be able to get items like solar panels and electric cars much cheaper than would otherwise be the case. With solar panels, we lose some relatively good-paying jobs in manufacturing, but we are likely to get more jobs in the installation of the panels.
China is well ahead of the United States in the production of affordable electric cars. If they start exporting these cars to the United States should we be upset? There will be some loss of manufacturing jobs in the industry, but it’s entirely possible that they would end up building most of their cars here, just as many other foreign producers have.
Obviously, Elon Musk and Tesla would be big losers, but is there any reason we should care? Rising inequality is supposedly a big problem. Getting low-cost, high-tech items from China is both a gain for workers (lower prices raise real wages) and reduces inequality. What’s not to like?
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