IP Commission Thinks YOU Should Pay For China's Infringement

from the alternatively,-it-could-just-deduct-$1,000-a-year-from-your-paychecks dept

Thu, May 30th 2013 11:06am — Tim Cushing

As Mike discussed in a previous post, the IP Commission's report on "theft of American IP" points a finger almost exclusively at China. And, as was pointed out in another post, the report is also loaded with some genuinely terrible ideas (protect IP with malware, anyone?). Here's another one: starting a trade war with China over intellectual property. This recommendation, taken from the final pages of the document, is both a broadside against China and a genuinely terrible idea.

Generally speaking, instigating a trade war is a bad idea, even when you have the upper hand. Instigating a trade war over something as poorly defined (especially in this report) as "IP theft" is a worse idea. Instigating a trade war with a country that already has you staring down the barrel of a steep trade deficit is just asking for trouble. The US has tried this sort of thing before (to protect the American steel industry) and found itself facing retaliatory tariffs from European nations as well as having its tariffs declared illegal by the World Trade Organization.

No one truly "wins" in a trade war, but there's no shortage of losers -- mainly the consumers caught in the crossfire. But despite the enormous potential downside and the shortsightedness of this move, the commission seems to feel protecting the US from "IP theft" is worth the sacrifice. (It helps that the entire sacrifice will be borne by others.) The commission's recommendation bases itself on the claim that China alone is responsible for around 70% of the "$300 billion" it claims the US is losing every year. And it aims to make China pay... by making Americans pay. In the "Potential Future Measures" section (Chapter 14), the commission makes this suggestion:

Recommend that Congress and the administration impose a tariff on all Chinese-origin imports, designed to raise 150% of all U.S. losses from Chinese IP theft in the previous year, as estimated by the secretary of commerce. This tariff would be subject to modification by the president on national security grounds.

The argument for this proposal is that only by seriously limiting the U.S. market for Chinese goods and services will sufficient incentive be created for Chinese authorities to systematically reduce IP theft. The method proposed to accomplish that goal is to impose the calibrated tariff just described.

While such action would allow retaliation, the huge Chinese trade surplus with the United States could cause the retaliation to be ineffective. Chinese exports to the United States are between three and four times the dollar value of U.S. exports to China.

The Commission is not prepared to make such a recommendation now because of the difficulty of estimating the value of stolen IP, the difficulty of identifying the appropriate imports, and the many legal questions raised by such an action under the United States’ WTO obligations. If major IP theft continues or increases, however, the proposal should be further refined and considered.

Wonderful. Despite the fact the commission openly admits it can't accurately estimate the value of "stolen IP," and despite the fact this plan could possibly be illegal, it proposes that, in the middle of an economic downturn, the government should artificially raise the price of consumer goods in order to ensure the fiscal well-being of the MPAA, RIAA and the BSA. This would add $450 billion in tariffs onto the cost of imported goods. This works out to roughly $1,000 per person annually, or $4,000 for a family of four. China's manufacturers aren't simply going to eat the tariff. They'll either raise prices or stop shipping to the US. Costs of goods will rise in the US no matter which path they take. Kicking a major competitor out of the market tends to have that effect, especially when the competitor prices aggressively.

Now, these industries will make assurances that the money they're receiving (as part of an international "you must be a pirate" tax) will be shoved right back into the economy, either through job creation or additional investments. But those assurances won't mean much to Americans being stretched even thinner by rising prices, especially when they notice this plan basically transfers money out of their pockets and into the accounts of select US companies.

The commission feels that by artificially limiting China's exports, it can force the country to respect US intellectual property. The reward for China would be a decrease in the tariff, provided the "theft" numbers drop. But if I know anything about industries and subsidies (which this essentially is), those benefitting from this "deal" will soon be hooked on the new revenue stream and will have zero incentive to officially recognize any sort of downturn in Chinese infringement.

And if I know this, then you'd better believe China knows this. Instead of being rewarded for making efforts to curtail infringement, it will more likely see the tariff increase or hold steady, rather than decline by any appreciable amount. There's little incentive for China to improve its IP record and next to no incentive for IP industries to wean themselves off the tariff. All this will do is inch us closer to the frontlines of a trade war with the largest exporter in the world -- a war we can't hope to win and one that puts the American consumer right in the line of fire.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: china, commission the theft of american intellectual property, dennis blair, henry jackson, intellectual property, ip, ip commission, ip theft, john huntsman, trade war
Companies: national bureau of asian research

47 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

BentFranklin (profile), 30 May 2013 @ 10:00am

Remember in the 1980s, when we put a tariff on Japanese import cars? The US auto makers didn't take the market share that would have afforded them, they just raised their prices by $500 too. Any tariff proposal should include provisions to prevent that from happening again.
[ link to this | view in thread ]
pixelpusher220 (profile), 30 May 2013 @ 11:09am

Re:
I was going to say that the one possible upside to something like this is more purchasing of US goods. But great example that shows what likely ends up happening instead.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 11:17am

Re:
Insanity: doing the same thing over and over again and expecting different results. -Albert Einstein

You have just proven that the US is insane.
[ link to this | view in thread ]
Ima Fish (profile), 30 May 2013 @ 11:19am

Re:
"Any tariff proposal should include provisions to prevent that from happening again."

Actually, that's exactly why there should be no such tariff. Government should not be dictating what foreign and domestic prices should be. Get the government out of it.

If a domestic corporation has its IP infringed, let it work out the matter in court or mediation after presenting evidence on both sides.

The government should never be arbitrarily putting a dollar amount on mere allegations of IP theft and demanding payment from anyone to cover such allegations. That's just an open door to widespread government/corporate corruption.
[ link to this | view in thread ]
Zakida Paul (profile), 30 May 2013 @ 11:23am

Makes sense. We are already paying for the greed and corruption of the world's banks. What's one more?
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 11:29am

Re: Re:
"If a domestic corporation has its IP infringed, let it work out the matter in court or mediation after presenting evidence on both sides."

It's arguements like this that make understand how we, as Americans, think we should be able to enforce (IP) laws worldwide. Personally, I think that's a completely bogus concept.

Currently there really isn't a world-wide court who's rulings are truely followed by every country. Hell there (almost is, but) isn't even a body who has enough regulation to pass a law which becomes world-wide law, so how could there even be a court?

In other words, America is trying to create something and say no one else in the world has the right to do that. I'm sorry, but that's the real stupidity here as people have been reverse-engineering things and spreading knowledge for ages. Simply creating laws that prevent other Americans (or those who operate in our country) from doing something doesn't prevent the concepts or ideas from going to other countries and being implemented there.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 11:38am

you know what actually matters in the grand scheme of things? the environment. Make countries pay the world back for the damage they do to the environment.
Racist, stupid, IP-related tariff? This is the most retarded BS that humanity has ever come up with.
[ link to this | view in thread ]
This comment has been flagged by the community. Click here to show it

out_of_the_blue, 30 May 2013 @ 11:39am

China's prices are artificially LOWERED by slave labor.
That of course isn't mentioned by minion. Tariffs serve a useful purpose in promoting domestic manufacturing over importers of foreign goods. That's a known and obvious consideration. The US should have had HIGH tariffs to protect our industries from unfair competition. But whether tariffs NOW would be good in the current state of US decline is debatable. I'd say so, be good to prop up US manufacturing to any degree. However, a full solution to decline would include locking up most of Wall Street, as those parasites don't care which group of laborers they're stealing from, have no loyalty to the nation, and are making matters worse by the day -- along with the Federal Reserve, of course, another and larger complexity beyond the grasp of Mike and minions. -- In short, this would probably be a wash because the fundamentals of US production have been intentionally wrecked.

Those however, are not why the minion is against it: he's just a rabid narrow-minded consumerist, interested only in re-distributed wealth, NOT manufacturing; he doesn't care about Chinese labor either, let alone US property rights. But the decline of consumerism is DIRECTLY related to loss of US manufacturing: you can't BUY if you don't MAKE, and eventually the Chinese will stop sending gadgets to the US.
[ link to this | view in thread ]
crade (profile), 30 May 2013 @ 11:44am

Re: China's prices are artificially LOWERED by slave labor.
Not artificially lowered, just plain lowered, there isn't anything artificial about it. Certainly China's methods of lowering their prices this is something that any and all consumers are free to take this into consideration when deciding their purchases.
[ link to this | view in thread ]
RyanNerd (profile), 30 May 2013 @ 11:44am

Tarriffs do not work
Didn't you pay attention to the teacher in the movie Ferris Buellers Day Off?

http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_Act
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 11:45am

Remember the days when the US was the primary consumers of goods and oil? Well, those days are gone. Anything we don't buy India and the middle East and other developing nations will be happy to buy. And when China retaliates buy not buying US Treasury Bills, who will lend us money?
We are no longer THE world power, in terms of consumption, military might, or money.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 11:45am

This would add $450 billion in tariffs onto the cost of imported goods.
Interesting... considering that the US only imports $37 billion from China, that would mean a tenfold increase on the cost of imported consumer goods.

So.. that $25 pair of jeans? Now costs $250 - with $225 of that price going to hollywood.

That $79 lawn mower at Home Depot? That's gonna cost you $800. So that the record label executives can have more money to waste on hookers and blow.

Yeah, I can see people *really* getting behind this.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 11:51am

Re: China's prices are artificially LOWERED by slave labor.
"That's a known and obvious consideration. The US should have had HIGH tariffs to protect our industries from unfair competition."

Yeah, that evil foreign Apple flooding our markets with crap made in China.

Oh wait.
[ link to this | view in thread ]
This comment has been flagged by the community. Click here to show it

out_of_the_blue, 30 May 2013 @ 11:53am

Re: "Remember in the 1980s,"
@ "BentFranklin

Remember in the 1980s, when we put a tariff on Japanese import cars?"

Remember in the 1980s when it was said that GM, Ford, and Chrysler couldn't compete by making great big giant gas-guzzling clunkers? BUT THEY STILL ARE! Those dinosaurs just go on guzzling dinosaur juice! The market changed to where idiots exult in giant cartoon vehicles, 4-wheel drives, SUVs, and pickups, pretending they're off-roading and taking supplies home to the ranch, I guess. -- And the Japanese eventually imitated American cars and trucks in going to stoopid excess, NOT the other way round!

And your cause is basically incomplete, as "free trade" was put in place soon after. And now US manufacturing is DOWN, with the results becoming obvious, future worse. The Rich got richer from "free trade", and the poor get poorer when good jobs in factories go to cheap foreign labor, without tariffs in place. The gov't should definitely not favor importers over manufacturers, but that's been done.
[ link to this | view in thread ]
Kirion, 30 May 2013 @ 11:56am

Re: China's prices are artificially LOWERED by slave labor.
US prices were lowered by slave labor for a century.
[ link to this | view in thread ]
This comment has been flagged by the community. Click here to show it

out_of_the_blue, 30 May 2013 @ 11:58am

Re: Re: China's prices are artificially LOWERED by slave labor.
@ "crade"

You forget -- or are ignorant of -- that Chinese currency is tied to the dollar, so their prices automatically lower; the US can't compete. It's sheer FIAT currency manipulation that doesn't take into account objective values, let alone US interest in maintaining a manufacturing base. -- The Rich don't care: they're international, can just leave the US when it collapses.

Also, MUCH of Chinese manufacturing is literally owned by Communists, their military, and LITERALLY slave labor with the poor people forced to make those nice shiny Apple products jumping out of buildings to commit suicide. THAT is the real cost of US consumerism.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 12:01pm

Re: China's prices are artificially LOWERED by slave labor.
I just took a world history course at the University of Florida. The only thing Tariffs did was keep prices artificially high or kept certain tech locked out of a country. Either way the consumers suffered.

I agree that China's labor force is abused but there is nothing that can be done about it unless their government is changed. Also, any tariffs that are enacted will not bring jobs back into the US. At most it will just move them out of China or will end up using robots to do the work. Either way US citizens will not be doing the work.
[ link to this | view in thread ]
This comment has been flagged by the community. Click here to show it

out_of_the_blue, 30 May 2013 @ 12:07pm

Re: AC FLATLY WRONG: "US only imports $37 billion from China"
http://www.census.gov/foreign-trade/balance/c5700.html

2012 : U.S. trade in goods with China
Month Exports Imports Balance (BILLIONS)
TOTAL 2012 110,590.1 425,643.6 -315,053.5

Man, with such a stupid and uninformed statement, so easily proven WRONG, it's no wonder you stay anonymous.
[ link to this | view in thread ]
G Thompson (profile), 30 May 2013 @ 12:10pm

Re: Re:
One question though: What exactly does the USA actually manufacture anymore that is any good?
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 12:13pm

Re: Re: AC FLATLY WRONG: "US only imports $37 billion from China"
Whoops, looks like I looked at the monthly amount, rather than the year, thank you for pointing out my mistake.

with such a stupid and uninformed statement, so easily proven WRONG, it's no wonder you stay anonymous.
With such a stupid, arrogant, and insulting statement, it's no wonder you do the same.
[ link to this | view in thread ]
crade (profile), 30 May 2013 @ 12:22pm

Re: Re: Re: China's prices are artificially LOWERED by slave labor.
I'm aware. It just isn't relevent to your statement about slave labor above.

In terms of currency manipulation, thats a different issue and there could be some artificial price manipulation there, but there's still no magic there, China has to be able to make the stuff and still make a profit on it. You can play with numbers all you like, it's not going to bend hard reality.

In terms of China's internal politics, to put it bluntly, that is the chinese people's problem. It's not your decision to make for them but they have shown time and again they are perfectly capable of overthrowing it and replacing it with something else if they decide that the government there is not serving their needs.
[ link to this | view in thread ]
crade (profile), 30 May 2013 @ 12:25pm

Re: Re: Re: China's prices are artificially LOWERED by slave labor.
btw, that wasn't me that flagged your comment.. I thought it was actually pretty on topic and decent this time. :)
[ link to this | view in thread ]
madasahatter (profile), 30 May 2013 @ 12:29pm

Stupidity
Recently Canonical and China announced the default OS for the Chinese government will be a variant of Ubuntu - UbuntuKylin. It is available like all other Ubuntu versions as a free download on Ubuntu.com (http://www.ubuntu.com/download/desktop/zh-CN). Apparently Bejing wishes to avoid problems with these types of accusations by using FOSS software.

My question for the dimbulbs "writing" this report is using Ubuntu IP theft? If it is then most Linux desktop users are by definition IP pirates eventhough the distro gave the IP away for free.
[ link to this | view in thread ]
Richard (profile), 30 May 2013 @ 12:38pm

I assume
I assume that the US will be hwppy with a UK measure designed to recover (with interest) all the 19th century US IP theft (from when the US was much like China is today)....
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 12:40pm

Re: Stupidity
Of course it's theft. Anyone who isn't paying them money is stealing potential profit from them. And as the **AAs have repeatedly proven, stealing potential profits is just as big a crime as stealing tangible assets.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 12:43pm

Re: Re: Re: AC FLATLY WRONG: "US only imports $37 billion from China"
That is why nearly all of Blue's comments are reported. They all insult in some way. Even the very few that he presents a logical argument.
[ link to this | view in thread ]
weneedhelp (profile), 30 May 2013 @ 12:45pm

Re: Re: AC FLATLY WRONG: "US only imports $37 billion from China"
Ha ha ha OOTB thought he "got" someone... Someone thanks him gracefully for pointing out his mistake... Makes OOTB look like the ass that he is.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 12:52pm

Re: Re: Re:
Bullshit and doublespeak.

I hear it's also doing well in the manufacture of paradox crumple-zones.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 12:58pm

Re: Re: AC FLATLY WRONG: "US only imports $37 billion from China"
Thats still more then 4 times less the amount of money this would clammily bring in.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 1:07pm

Re: Re: Re: AC FLATLY WRONG: "US only imports $37 billion from China"
Scratch that, that amount of money made from Chinese export is about reativly close to $450 billion ($425 billion), tho this still seem like overkill since not all Chinese product infringing for example, not in China is making infringing rice or infringing blank CDs.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 1:10pm

Re: Re: Re: AC FLATLY WRONG: "US only imports $37 billion from China"
Scratch that, that amount of money made from Chinese export is about reativly close to $450 billion ($425 billion), tho this still seem like overkill since not all Chinese product infringing for example, no one in China is making infringing rice or infringing blank CDs.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 1:15pm

Re: Re: Re:
Guitars. Note I didn't say better than anyone else, just that the ones made here are good.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 1:19pm

this is the obvious way for them to go. they know full well that even if they had rock solid, 100% proof to convict China, they would be told to fuck off (in a slightly more polite way, of course!)
as they know what the outcome here would be, that never even enters the frame. because the poor old joe public have no chance to fight back, no money to fight back and no one to fight for them, that is taken any notice of, it becomes a no contest. blame and charge the public to just keep on bailing out an industry that wants everything but gives nothing! that thinks the future only advances when it gives permission! how stuck up their own arse are these morons!
[ link to this | view in thread ]
madasahatter (profile), 30 May 2013 @ 2:51pm

Re: Re: Stupidity
Ah yes, the Linux distro was stolen because no money changed hands eventhough the distro makes it impossible to pay for the download. Got to love the **AA's logic on that one.
[ link to this | view in thread ]
Edward Teach, 30 May 2013 @ 3:03pm

Re:
"We are no longer THE world power, in terms of ... military might ..."

Strictly speaking that's not even close to true: http://www.economist.com/blogs/graphicdetail/2013/04/daily-chart-9

I agree that money spent isn't an exact proxy for military might, but I submit that it's pretty darn close.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 3:31pm

Re: China's prices are artificially LOWERED by slave labor.
So? I'm sure you love slave labor.
[ link to this | view in thread ]
John Fenderson (profile), 30 May 2013 @ 3:54pm

Re:
And when China retaliates buy not buying US Treasury Bills, who will lend us money?

You know who buys the most T-Bills (and so lends us the most money)? We do.

China is the biggest foreign purchaser, but only barely ($1.15 trillion worth). The second biggest purchaser is Japan ($1.12 trillion).

China is clearly an important lender, but not the most important one.
[ link to this | view in thread ]
Forest_GS, 30 May 2013 @ 4:07pm

Re: Re: Re:
The internet-quality fiber. Most high-grade glass is still made in america.
[ link to this | view in thread ]
Capitalist Lion Tamer (profile), 30 May 2013 @ 4:26pm

Re: Tarriffs do not work
I was out sick that day.
[ link to this | view in thread ]
Anonymous Coward, 30 May 2013 @ 7:48pm

Re: Re: Re: Re: China's prices are artificially LOWERED by slave labor.
I agree about Out_of_the_Blue's comment, it did not deserve to be reported, as it is faily on topic and ad-hom free.

I think people having been taking a leaf out of Out_of_the_Blue's book, just report anything he says without reading the comment. Like Out_of_the_Blue does on this site.

Just ready the heading
[ link to this | view in thread ]
Person, 30 May 2013 @ 10:47pm

Re: BentFranklin
What's going to happen? All the American Makers of little trinkets will go up by a few bucks?
[ link to this | view in thread ]
techflaws (profile), 30 May 2013 @ 10:55pm

This tariff would be subject to modification by the president on national security grounds.

National security, they just can't do without this gem, can they?
[ link to this | view in thread ]
Anonymouse, 31 May 2013 @ 4:21am

what!!!!
Hopefully governments around the world realise that the cost of having a monopoly in copyright is just too big and get rid of it completely.
America is basically stuck with no power to force China to do anything, but China could very easily use this attempt at theft to pass a law that copyright is no longer allowed to be used on non physical goods. And force the entertainment industry into a business model of the governments choosing. If they don't want to innovate and work with technological advancements then maybe China is the first place that could force them to create a fair and open business model that can be used around the world.
[ link to this | view in thread ]
anonymouse, 31 May 2013 @ 4:29am

Re: Re: China's prices are artificially LOWERED by slave labor.
There are countries where America is seen as slaves to their country, where Americans pay well over the odds for goods, that are for sale at a 10th of the price Americans pay. Where American wages are seen as slave pay.

Just becasue china has a lower cost of living and wages are lower does not mean they are slaves, we are all slaves to the system and there will always be those that are much better off than us.

If you want to talk about slave wages what about America now where the minimum wage is not enough to live a health life.
[ link to this | view in thread ]
Pragmatic, 31 May 2013 @ 6:04am

Re: Re: Re: Re: Re: China's prices are artificially LOWERED by slave labor.
That's Blue 3, the left-wing one who bashes "the thieving rich."

Ad homs and reportable content include Socialist propaganda ranting and calling Tim a minion (of the 1%). Since all he/she/it does is bash and whine, I'm inclined to agree with reporting him/her/it.
[ link to this | view in thread ]
mikiem, 5 Jun 2013 @ 9:07am

COmmission report = smoke & mirrors
Simply reacting, giving over your control is never a great idea, & that's effectively what the report would do. The best threats are those you never have to make -- those shouted loudly also shout weakness, & will either be ignored or gone around.

If the IP Commission actually talked to security pros they'd focus on IT dept.s actually doing their job, they'd focus on limiting users ability to do stupid things, & they'd focus on better educating users [e.g. you want porn, there's a store down the street butthead].

But that's assuming anyone was serious at the IP Commission, rather than following orders to create the largest straw man possible. The real goal IMHO is in those unfortunate sections about going on the offense, with you & I as the target -- Stuxnet proved that if the gov wants to go on the offense towards another country they already are, & certainly don't need this report or any new laws to enable what they're already doing. Again IMHO, this is about campaign donations in the run-up to next year's elections.
[ link to this | view in thread ]
Anonymous Coward, 5 Jun 2013 @ 1:25pm

Re: Re:
The difficulty here is the lack of constitutional governance in China, as well as the hesitance on the part of Chinese courts to award equitable judgments to companies who are able to prove infringement. While our courts here in the US are much more willing to take this route, their effectiveness is irrelevant given that many of the companies stealing IP do not operate within the US.
[ link to this | view in thread ]