Time to Stand Up, Protect American Invention from So-Called ‘Trading Partners’

James Edwards | June 30, 2017 | 10:52am EDT
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South Korean President Moon Jae-in at his inauguration. (Wikimedia Commons Photo)

For too long, foreign competitors (sometimes called “trading partners”) have taken advantage of American officials’ hesitation to stand up for U.S. companies, despite competitors’ deliberate engagement in what amount to unfair trade practices, including assault on U.S. companies’ intellectual property.

Leading American companies, such as Qualcomm in mobile and wireless communications technology, medical innovation giant Johnson & Johnson and automobile maker Chrysler, have suffered what one commentator for Bloomberg has called “an inquisition against foreign companies” by the Communist Chinese government.

China, as well as South Korea and other countries, have claimed these and other  businesses headquartered outside their nations — and competing with favored domestic firms such as Chinese favorites Lenovo and Hauwei and South Korea’s domestic pet Samsung — have used “anticompetitive” practices.  Now, that’s the pot calling the kettle black!

In truth, these foreign competitors’ governments intervene relentlessly in the marketplace on their domestic companies’ behalf, aggressively apply antitrust laws against U.S. firms and manipulate legal process and procedure to appropriate or devalue American companies’ patented technologies.  Their laws become strong-arm tactics to advantage domestic favorites and harm U.S. companies.

For example, South Korea outright ignored the terms of the Korea-U.S. Free Trade Agreement.  South Korea promised in this bilateral agreement to afford U.S. firms intellectual property protection and due process.  But KORUS lacks enforcement teeth for wronged American businesses when targeted by Korean cronies in government and industry.

Under KORUS, South Korea must, for example, provide access to evidence and allow American companies to cross-examine witnesses.  Yet, this “trading partner” has denied American firms such basic due process protections, as the recent U.S. Chamber of Commerce International Competition Policy Expert Group report confirms.

Adding insult to injury, Korean authorities have ordered U.S. companies to change their licensing and pricing policies — not through free-market negotiation, but under government dictate.  And this foreign government dictating anti-American, anti-intellectual property, anti-market remedies demands that such changes apply worldwide, not just within South Korea’s or China’s borders!  This encroaches not only on private property rights, but on the national sovereignty of the United States.

President Trump stands with his wife and Chinese President Xi Jinping and his wife at Mar-a-Lago. (Wikimedia Commons Photo)

The stakes are high.  What if the U.S. cedes to Asia leadership in technical standards for 5G wireless technology?  That could make everyone with a smartphone more susceptible to hacking and raises national security threats.  There’s also the loss of an estimated $719 billion in U.S. economic output and 3.5 million jobs here that 5G patented technology would create.

Or what if a company like Samsung, which is 20 percent of South Korea’s economy and recently announced its intention to produce the most biopharmaceuticals, unfairly gains market share and displaces American biologics firms through IP theft, antitrust abuse or other government favoritism?  Having a favored company (whose cell phones and clothes driers literally caught fire) in a nation with a socialized medical system that expropriates and devalues American IP could slow medical innovation in an area that’s key to achieving personalized medicine.

The problem here arises from misplaced trust.  The United States enters into a trade deal or other accord and then expects South Korea and other nations to abide by the terms of the agreement.  The agreements are premised on all parties making good-faith efforts to live up to the terms.

Dispute resolution is supposed to be needed only occasionally, but some countries routinely ignore the rules and overwhelm these adjudicatory bodies and proceedings.  Just look at how many times China has sparked World Trade Organization and U.S. International Trade Commission cases against it.

Such competitor countries don’t believe in the fundamental things that ensure both free enterprise economies and political freedom:  private property rights and the rule of law.  The central role of our government is to secure property rights and ensure the protections the rule of law affords.  This has enabled the United States particularly and Western nations generally to thrive.

It should be clear by now that too many foreign competitors have no intention of honoring their commitments.  Do we need “better trade deals” or rather to treat recidivist cheaters as the bad actors they are?  The U.S. government should stand up for American businesses’ fundamental rights.

James Edwards, patent policy advisor to Eagle Forum Education & Legal Defense Fund, consults on intellectual property and health policy.  The views expressed here are his own.


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