Forced technology transfer is one of those U.S.-China economic issues that’s chronically neglected by the U.S. government and the mainstream media – primarily because the leading short-term victims fear the consequences of voicing major complaints. So for decades, American and other foreign multinational corporations generally have agreed to transfer critical knowhow to Chinese partners (almost always meaning “the Chinese government’). In return, Beijing has allowed them to do business in a China market they consider actually or potentially “TBTI” (too big to ignore).
Washington’s decision to follow the companies’ lead has created major longer-term risks for the future of America’s productive economy – due to the wholly unnecessary and non-market-related fostering of foreign rivals to key domestic industries. But with the multinationals and their half-a-loaf perspective calling the shots, American leaders have been content to secure Chinese promises to end the practice, and then blithely watch Beijing’s extortion continue. Other foreign governments have often turned blind eyes as well.
Now, however, it looks like the longer term is arriving for the companies themselves. An eye-opening new article in Japan’s Nikkei Asian Review describes how forced technology transfer – along with equally shortsighted genuinely voluntary transactions – is already starting to boomerang on U.S. and other foreign multinationals and their domestic economies.
For example, China’s State Nuclear Power Technology Corp. has used knowhow developed by Westinghouse to build state-of-the-art competitor reactors that are already being sold in China and that reportedly are being readied for foreign markets. China is also now selling small passenger jets to foreign customers, thanks to technology extorted from Boeing and Airbus. The current U.S.-Europe duopoly will surely control the immense global market for wide-body passenger jets for the foreseeable future, but China is planning to start delivering a larger, narrow-body jet in three years, and is working with Russia to enter the wide-body business. And although the Nikkei piece didn’t mention it, foreign automakers like General Motors have been victimized by forced technology transfers as well.
Literally for decades, America’s approach to China has pretended that serving corporate interests ipso facto serves the domestic economy’s interests. With these policies now backfiring on its offshoring multinationals as well, the case for staying the China course looks weaker than ever.