Does Mitt Romney Know the Difference Between Currency Manipulation and IP Infringement?

September 26, 2012

The old adage about beating a dead horse comes to mind at this point, but since the ad was just released yesterday, we might as well talk about it. I also feel compelled to comment since it deals, in part, with China intellectual property enforcement.

Here’s a link to the ad on YouTube.

The point of the ad is to hit Obama on his China policy, essentially faulting the administration for being too “soft” on China. The relevant text is this:

China is stealing American ideas and technology — everything from computers to fighter jets. Seven times Obama could have taken action. Seven times he has said no. His policies cost us 2 million jobs.

Factcheck.org has taken a look at the ad and done a decent job pointing out its faults. The main problem here is that the ad mixes up two different issues. The “seven times” language is a reference to the U.S. Treasury Department’s semi-annual report on currency manipulation. The Obama Administration has had seven opportunities, in issuing those reports, to label China a currency manipulator, and it has failed to do so, something that Romney says he would do if elected president.

On the other hand, the “stealing American ideas and technology” language refers to intellectual property rights infringement. The statistics cited in the advertisement on job losses are numbers from the International Trade Commission’s analysis of intellectual property infringement.

Obviously the currency issue is completely different from IP, and Romney’s conflation of the two is dishonest. It’s the old George Will trick — just throw out a statistic from a reputable source to establish credibility, but then misuse the number. Most readers won’t get past the credible source, assuming that the number means what you say it does.

There are many problems with the ad, including a lot of nonsense related to the currency issue, and I’ve certainly talked about that before. A keyword search at China Hearsay for “currency,” “RMB,” “Treasury Department,” or even “Chuck Schumer” will probably get you more than enough analysis on that topic.

Moreover, I’m not going to even bother questioning that ITC report on IP infringement-related job numbers. I wasn’t too thrilled when several Senators asked for the report and was skeptical as to its usefulness, but when it was issued, I did admit that having more economic data on IP was a positive.

More relevant was my post back in June of last year, which was a response to an Op/Ed written by Tuck School professor Matthew Slaughter, who argued, based on the ITC report, that U.S. pressure on China to better enforce IP law could result in as much as 2.1 million new American jobs. For a variety of reasons, I found Slaughter’s analysis to be wanting:

One of [the ITC's] 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[.]

Let’s forget for the moment that Romney is purposefully mixing up the currency and IP issues and assume that he is suggesting a more forceful stance on IP enforcement by Obama would have led to significant job creation. Even so, Romney’s use of the ITC numbers runs into the same problems as Slaughter’s argument.

First, suggesting that China can somehow magically transform its IP enforcement system to be on par with the U.S. regime is ridiculous. If I had any reason to believe that the Romney campaign had enough of its shit together to even be making that point overtly, I’d say that they were woefully ignorant of the IP situation over here. In reality, it’s more of an inference I’m making from the “logic” of the advertisement.

Second, a much more overt suggestion in the ad is that Obama has been asleep at the switch when it comes to IP. As I’ve said many, many times over the years, IP has been, and will continue to be, among the top three U.S.-China issues. EVERY SINGLE TIME the U.S. and China sit down and talk about the bilateral relationship, IP plays a prominent role in that discussion and subsequent negotiations. Without even getting into actual disputes, WTO actions, and other ad hoc efforts, I can tell you that Romney’s implication here is absolutely without merit. If you don’t believe me, ask the folks at the Motion Picture Association, the Business Software Alliance, or Phrma if the U.S. government cares about IP.

One last issue. In addition to conflating IP and currency valuation, the Romney ad also groups together traditional, private sector IP infringement with hacking and espionage. The ad states that China is stealing everything from “computers to fighter jets.” This general statement may be true, but if you’re then going to back it up by using those ITC job loss numbers, then we’re once again in bullshit territory.

This is not rocket science. If a Chinese company makes a widget based on patented technology owned by a U.S. company and then sells that product, then one can make the case that the U.S. company has suffered economic losses. However, if Beijing engages in espionage, stealing technology necessary to construct an advanced jet fighter, this is not a private sector loss but a national security issue. Whether China builds a fighter jet or not, it certainly won’t be giving the contract to Lockheed Martin. (Real problems do exist with IP and components used in the defense industry, but that wasn’t discussed in the ad.)

From top to bottom, this latest China ad from the Gang that Can’t Shoot Straight is extraordinarily weak. It conflates currency matters with IP, using statistics from one area to somehow justify a policy in another. Moreover, even if we give Romney the benefit of the doubt and assume that he actually is talking about IP-related job losses, we encounter more conflation, confusion and obfuscation.

FUBAR

One thought on “Does Mitt Romney Know the Difference Between Currency Manipulation and IP Infringement?

  1. Steve

    I agree that Romney’s China policy is ignorant and a big cause for concern. However, maybe you should start a separate blog so you can more openly express your disdain for Mitt Romney. It seems that your post’s regarding Romney reflect how his stance on China affects his (in)ability to be president rather than how his stance does/will affect China. I enjoy reading your blog because of your background in IP Law and experience in China. I can go elsewhere for the quality of each political campaign. Posts like this are a stretch on how they affect US-China Relations.