IN THIS ISSUE:

1. Overview – China’s Rampant Cyber Theft

2. China Trade Deal Must Address Digital Theft

3. China’s Government is Behind Cyber Theft

4. America’s Future Depends in Large Part on China

Overview – China’s Rampant Cyber Theft

Chinese negotiators recently offered to buy enough American products to reduce the huge bilateral trade deficit to zero by 2024. Yet US negotiators rejected that offer to end the dispute. The problem is the proposed deal with China does little to address the more important issue which is China’s continued theft of US “intellectual property.”

Specifically, the US wants China to stop requiring American firms that seek to do business in China to have a Chinese partner and to share their technology with that partner. That policy is explicitly forbidden by World Trade Organization rules, which China has ignored since they joined the WTO in 2001.

The US also wants China to stop using cyber espionage to steal technology and other industrial secrets from American companies. Chinese President Xi Jinping agreed to end such digital theft of US industrial technology after he met with President Obama in 2015. Unfortunately, that agreement was very narrow and referred only to theft by “both governments.”

Although the agreement did lead to a temporary reduction in cyber theft of industrial technology, cyber attacks on US companies by Chinese state-owned industries have increased again in recent years, which President Xi denies.

The US Trade Representative, Richard Lighthizer, recently estimated that China’s technology theft is costing the US economy $225-$600 billion a year. And the FBI has warned that China’s cyber theft of American technology is the “most severe threat” to US national security.

So, US negotiators are demanding that any new trade deal with China must include strong penalties and significantly stronger sanctions if the Chinese don’t stop the theft. The deadline for the current negotiation is March 1, at which time stronger sanctions are set to go into place. That’s what we’ll look into today.