The thesis of the article, entitled “China, Patents, and U.S. Jobs,” is essentially that fixing China’s IP problems would result in lots of U.S. jobs.
Is he right? Well, sure, the basic point is a solid argument. Slaughter uses the numbers from a recent U.S. government report:
Last month the U.S. government issued a remarkable report that details how one policy change could eventually create up to 2.1 million U.S. jobs. Oh, and it wouldn’t cost taxpayers a dime in new government spending. Thanks to higher payroll tax receipts it would probably help close, not expand, America’s massive fiscal deficit.
The report? “China: Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U.S. Economy,” by the U.S. International Trade Commission (ITC). And the policy change? Getting China to better protect the intellectual-property rights of American companies.
I don’t know whether I’d characterize the ITC report as “remarkable,” although it certainly is welcome. Unlike similar reports that merely point out incidence of IP infringement around the world, the ITC report expanded on the issue, including the economic effects on U.S. companies and individuals.
Good stuff. We can quibble with those job numbers (is 2.1 million accurate, or is this inflated?) and certainly the economic losses claimed by industry (always highly suspect), but the general approach towards addressing IP infringement as something that is not merely a legal issue, but an important economic problem, makes a great deal of sense.
But back to Professor Slaughter’s Op/Ed and why I find it odd. While his general conclusions sound reasonable, keep in mind how the U.S. gets from zero to 2.1 million jobs:
And thanks to supplier linkages, expansion by IP-intensive firms would boost sales and hiring in dozens of U.S. industries. ITC economists calculate that up to 2.1 million new U.S. jobs could be created in total if China raised its intellectual-property protection to U.S. levels. [my emphasis]
Excuse me? U.S. levels? I’m not sure if Slaughter understands what this means.
Let me first point out that the ITC was asked to produce this report by members of the U.S. Congress. They asked for specific information, and a certain type of analysis, and the ITC did so. One of their assumptions here was U.S. levels of IP enforcement, and as an assumption to an economic analysis, that’s entirely acceptable.
However, for Slaughter to run with that and assume that getting to that level is somehow a realistic goal, well, that’s very poor policy advice. I’m not sure how China’s intellectual property system, which is only a few decades old, is supposed to transform itself overnight in that fashion. As we say here on the South side of Beijing, he can dream about it (but it won’t make it so).
Slaughter also seems to suggest that protecting IP is something that has until now slipped the mind of the folks in charge:
China will not become a global leader in innovation if its government does not safeguard the fruits of its research and development.
Uh, no shit, Sherlock. That’s why the central government has been flogging domestic innovation and the creation of a knowledge economy for the past decade. While falling short of a lot of expectations, part of that overall plan has been strengthening IP protection, and enormous strides have been taken thus far.
According to Slaughter, not only has China been mysteriously ignoring IP protection, but the U.S. has for some reason forgotten to include this in bilateral negotiations:
The broader message for Washington is that something needs to replace monetary and fiscal stimulus if we are going to have real growth. Unprecedented monetary easing and fiscal deficits will, sooner rather than later, need to be withdrawn and reduced. We need to replace them with imaginative policies that spark private-sector hiring and related investment.
American businesses competing in the global marketplace often worry less about exchange rates than issues like market access and intellectual-property protection. U.S. policy makers have spent far too long hectoring our largest foreign creditor over its monetary policy. They should instead work with China on issues like strengthening intellectual-property rights that will clearly benefit workers and create prosperity in both countries. [my emphasis]
First of all, why can’t U.S. negotiators discuss both the RMB and IP enforcement? They’ve been doing so for almost ten years now, and I don’t recall hearing the Chinese side tell them “One or the other! Pick an issue!”
But OK, perhaps Slaughter is just saying that IP should be given more emphasis by negotiators? If that’s his argument, though, it’s a very weak one indeed.
IP enforcement has been one of the top issues for discussion at every single important bilateral meeting between the U.S. and China for well over a decade. Slaughter has apparently not taken a look at the agendas of past meetings of the U.S. -China Joint Commission on Commerce and Trade (JCCT) and/or the more recent Strategic and Economic Dialogue (S&ED), at which IP enforcement was always a key item. Saying that IP has taken a back seat for too long is simply bizarre.
Slaughter just seems out of touch on this issue and succumbs to the usual temptation of Op/Ed page hyperbole. Would the U.S. like to see better enforcement here? Of course. Would that create more U.S. jobs? Absolutely true. U.S. negotiators have been toiling for over a decade to improve the situation, and things have improved dramatically during that time.
However, we can’t wave a magic wand and make China’s IP infrastructure equal to that of the U.S. That’s not the “easy fix” to the U.S. unemployment problem.