Biden Seems No More Able Than His Predecessors To Stop Beijing’s Technology Thefts

America and China have long had a contentious trade relationship. Aside from ever-present trade imbalances, a major source of tension emerges from China’s continuous efforts to acquire American technology and trade secrets, sometimes with bullying, sometimes in more illicit ways. For decades American business has complained to Washington about this, and every president since Ronald Reagan has made efforts to change Beijing’s practices. These efforts have all failed. The Biden administration seems set to follow in this pattern. Indeed, this White House has made little effort at all to remedy things.

Every nation, every business tries to get the trade secrets and technological edge of its competitors. That is why governments and international agreements enforce patents and copyrights as well as recognized trademarks. Because Beijing has largely ignored these international norms and laws, business has turned to Washington for help instead of to courts and international agencies.

Beijing’s most visible means of acquiring technologies and secrets is its insistence that any foreign firm operating in any China must have a Chinese partner to which it must transfer its trade secrets and technology. Though not strictly illegal, Beijing’s insistence does fly in the face of international norms. Still more objectionable to American business is the tendency for those secrets and techniques to leak out of their partners so that other Chinese firms, including state-owned entities as well as the designated partner, often use those secrets and techniques to outcompete the original American innovator.

The U.S. Trade Representative has documented how Chinese firms will buy high-tech American equipment and, despite patent protections, reproduce it for use in China and elsewhere outside the United States. Over the years, incidents of cyber theft have supplemented these practices. In 2010, for example, Google described a “highly sophisticated and targeted attack on its corporate infrastructure.” That attack, called Operation Aurora, went beyond the theft of technologies to invade the Gmail accounts of Chinese human rights advocates. Since, at least 34 American firms have reported similar attacks, including Yahoo, Adobe, Northrup Grumman, Dow Chemical, and McAfee. In 2014, evidence emerged that for years hackers from China’s Ministry of State Security had managed a cyber-theft operation called Cloudhopper. It compromised IBM and Hewlett Packard among others, and through them their clients, including the federal bureaucracy. Other Chinese operations targeted the AFL-CIO.

Beijing has also enticed or coerced Chinese nationals working and studying in the United States into more old-fashioned espionage efforts. The Bureau of Immigration and Naturalization records numerous instances of Chinese living to the United States as students when in fact they hold commissions in the Peoples Liberation Army and have been tasked with spying on academic research, especially when it supports industry and defense. Other Chinese nationals legitimately working in this country have been coerced or enticed to spy on their employers. China’s “Thousand Talents Plan” uses all sorts of incentives to induce people of any nationality to turn over to Beijing technologies and other valuable pieces of intellectual property, sometimes even when these people are working on U.S. government grants. The most famous example is the case of Harvard Professor Charles Lieber who was convicted of just this sort of activity in 2021.

Arrests by the FBI and indictments by the Department of Justice (DOJ) document that the array of reports and complaints coming out of business are neither fabricated nor exaggerated. The DOJ has stated bluntly that some 80% of all its economic espionage prosecutions connect to China. Only a few months ago, FBI Director Christopher Wray reveled in a speech at the Ronald Reagan Presidential Library that his bureau has more than 2000 open cases of Chinese espionage and opens a new case every 12 hours. He stated bluntly: “There is just no country that presents a broader threat to our ideas, our innovation, and our economic security than China.” Effectively putting a figure on the damage to which Director Wray alludes, Michael Orlando, the acting director of the National Counterintelligence and Security Center (NCSC), estimates that China’s theft of technology and other intellectual property costs American business a minimum of $200 billion a year. That is just the market value of what is lost. When adding the sales losses involved, the Center’s estimate rises to $600 billion a year.

As already indicated, this is an old story. Every president for almost 40 years has responded to complaints by business and tried to get Beijing to change its ways. The record over the decades shows that none have had much success. Reagan made the first attempt in 1986. His efforts to stop Chinese theft of patents and copyrights came under the auspices of the World Trade Organization (WTO) and yielded the so-called Trading-Related Aspects of Intellectual Property Rights agreement (TRIPS). Though praised at the time, the arrangement clearly failed to change Beijing because less than ten years later in 1995, the Clinton White House had to revisit the issue. Its efforts supposedly strengthened WTO arrangements. Testifying to Clinton’s lack of success, however, was the need for George W. Bush to revisit the matter in 2006.

The Bush White House tried a different tack. Bush initiated with Chinese President Hu Jintao what was called the “Strategic Economic Dialogue.” The White House claimed that regular meetings between the two national leaders would halt the theft of intellectual property. But the theft and coercion of business partners continued, forcing Barack Obama to revisit the matter in 2015, when he and Chinese President Xi Jinping agreed to rename the arrangement the U.S.-China Strategic and Economic Dialogue. That action added five syllables to the name but changed nothing. Only a few months after the two presidents made their respective announcements, the first signs of the extensive Cloudhopper campaign revealed how widespread Chinese hacking had been.

Trump responded differently to continued evidence of Chinese bullying and outright theft. His White House invoked a Section 301 inquiry into the matter. This section of the U.S. Trade Act gives the USTR authority to investigate and take action to enforce U.S. rights under trade agreements but also on other trade violations. This was the basis on which the Trump White House in 2019 imposed a broad array of tariffs on Chinese imports. Under the so-called “Phase 1” of the ensuing agreement between Washington and Beijing, China promised among other things to streamline procedures for Americans to protect their patent rights from Chinese infringements.

By the time Joe Biden took office, it was again clear that despite the Phase 1 agreement China had continued as it had for years. Deputy U.S. Trade Representative Sarah Bianchi stated bluntly that China has failed to fulfil the promise it made in the Phase 1 agreement. That fact, she said, is “clear,” and for that reason, she announced that the Trump tariffs would remain in force. But at the same time, she stated that the USTR and the Biden White House had no desire to “escalate” the dispute.

Since she made these points earlier this year, no new efforts to stop the theft of technology and intellectual property have emerged. Nothing appears on either the White House or the USTR website, where any initiative certainly would have appeared. Far from new efforts to stop the theft, the Department of Justice has recently decided to close its so-called “China initiative” that aimed specifically at combating Chinese espionage and cyber threats. More recently, the White House has floated the idea of lifting the tariffs on Chinese goods. The action aims at easing inflationary pressures, but it also would remove any pressure of Beijing to comply with American demands. Possibly in response to the tariff matter and the DOJ decision, a Chinese court recently declared that no Chinese firm can be held libel for the theft of technology anywhere in the world. The White House is yet even to comment on this new defiance of international norms and the clear threat is makes to the interests of American business.

After so many years of bipartisan failure in this matter, it was never realistic to expect much from any new administration. What is strange, given this history of continuous, if ineffective effort, is how this White House seems unwilling even to try to affect Beijing. Congress has lost patience and advanced legislation, but this bill would only keep American industry from harm by limiting its ability to interact with China. That approach can only help at the margin if it can help at all. When new evidence of theft arrives – perhaps from some of the thousands of cases to which Director Wray alluded – the president may deflect blame by pointing to the failures of his predecessors. It would be a fair point, but one would think that the White House would at least try to stop the loss of billions.

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