The U.S.-China Economic Relationship
This is the seventh in our series “Americans Speak” on issues relevant to President Xi Jinping’s visit. Today, Deborah Wince-Smith, who is president of the Council on Competitiveness and a member of the Commission on the Theft of American Intellectual Property (the IP Commission), writes on both barriers to economic cooperation and areas with great potential for bilateral collaboration.
The U.S. and Chinese economies are ever more intertwined, yet there remains untapped economic potential for both nations through increased bilateral commerce. However, we cannot fulfill this potential without continued reforms in China’s policies and practices that are needed to bring about a more open, transparent, and nondiscriminatory environment for trade and investment.
U.S. firms that seek to do business in China face an opaque regulatory thicket, state-sanctioned protections and subsidies that protect and build domestic industrial champions, forced technology transfers for market access, threats to data privacy, and currency manipulation.
Other practices represent a direct competitive threat to U.S. firms. For example, a recent U.S. Department of Commerce study identified 75 intellectual property–intensive U.S. industries and found that they support 40 million U.S. jobs and account for $5 trillion in value-added, 35% of U.S. GDP, and 60% of U.S. merchandise exports. The intellectual property of these industries is under unprecedented threat from patent infringement, trade secret theft, copyright violations, and counterfeits. Cyber-enabled industrial espionage is a significant threat, and collectors are especially interested in technologies vital to U.S. competitiveness, such as information technology, aerospace and aeronautics, clean energy technologies, pharmaceuticals, and nanotechnology.
China is the global epicenter for intellectual property theft, accounting for roughly 70%. Chinese actors are also the world’s most active perpetrators of network exploitation and economic espionage. Chinese piracy of U.S. copyrighted materials remains rampant. In a recent study, about three-quarters of PC software installed in China was unlicensed, representing piracy with an estimated market value of $8.7 billion. China’s global manufacturing capacity extends to all phases of the production and global distribution of counterfeit goods. The unprecedented scale of cyber intrusions and the theft of intellectual property and data threaten to undermine global commerce and consumer confidence in a global economy that is growing more digitized every day.
And yet, while China needs to reform, there is tremendous opportunity for U.S.-China collaboration in solving global challenges at the nexus of water, food, and energy security. All of these resources are under stress from the rapidly growing and industrializing world population. The United States and China are the world’s largest investors in R&D development, with combined spending of almost $800 billion annually. These two nations have the power to shape the future of the planet, and these global challenges are an ideal platform for U.S.-China cooperation in advancing innovative solutions. In particular, two areas for joint cooperation stand out: agriculture and renewable energy.
Farming is on the cusp of profound technological revolution. Biotechnology is poised to deliver pest- and disease-resistant crops that will increase yields, foods with more nutrition, and drought- and flood-tolerant crops that could increase yields and establish agriculture where we cannot now.
The convergence of sensors, big data, and the Internet of Things has profound implications for agriculture and will enable increased yields and more optimal use of seed, fertilizer, and water. We will develop the ability to optimize the entire farming life cycle and make large improvements in crop management and production at scales never dreamed of, from square-meter farming to better management of agriculture on a regional level. We can drive a productivity and production revolution in agriculture, all with greater sustainability.
The world is in the midst of a historic shift to sustainable and renewable energy. The United States and China can drive innovation ranging from utility-scale clean energy to smaller-scale solutions that bring energy to those in “energy poverty”: nations in need of reliable sources of power for producing food, cleaning water, or making industrial advancements. The potential for innovation includes small wind and biomass systems, small-scale PV, geothermal, and water-power technologies. We need a range of new clean-water technologies for utilities, homes, and personal uses. Nanotechnology holds tremendous potential to revolutionize water purification and treatment.
U.S.-China cooperation in these areas is already bearing fruit. For example, a skyscraping symbol of China’s economic rise, the new Shanghai Tower is the world’s second-tallest building and one of the greenest. Thanks in large part to technologies from U.S. companies, approaches used in the tower reduce energy use by 21%, reduce water consumption by 40%, and reduce the building’s carbon footprint by 34,000 metric tons per year, equivalent to taking more than 7,000 cars off the road (compared to conventional technologies).
Much could be accomplished through increased mutually beneficial investment and research collaboration between the United States and China. However, China needs to create a better environment for such partnerships in areas such as intellectual property protection.
Finally, U.S. universities and colleges open their doors to more than 270,000 students from China. More than 40% of these Chinese students study science, technology, engineering, or mathematics. Yet, only about 14,400 U.S. college students are studying in China. Student exchanges lay groundwork for collaboration in innovation. I urge China to establish a scholarship program that will enable more U.S. students to study in China, modeled after the prestigious Fulbright program, the U.S. government’s flagship international exchange program.
This 21st-century era of economic transition and technological transformation offers a historic opportunity for the United States and China to shape a brighter future and to do global good, while doing well. We should seize this moment.