Under the Radar: Reflections on ‘Forced’ Technology Transfer and the Erosion of Developmental Sovereignty

Abstract

Ongoing trade tensions between China and the United States have focused on alleged Chinese misappropriation of US-owned intellectual property (IP) and ‘forced technology transfer’ from US direct investors in the Chinese market. US government rhetoric regarding technology transfer portrays alleged Chinese demands on prospective investors to provide technology to local Chinese enterprises as some form of ‘wrongful act’.1 Recognizing limitations of the international legal regime that might characterize China’s rules and practices as ‘unlawful’, the United States labels China’s regime as ‘unreasonable’.2 This commentary is directed toward addressing concession by developing country foreign direct investment (FDI) hosts of a potentially important tool for accelerating technological development – a tool that may become more important as the prospects for developmental assistance are otherwise diminishing. Governments at all levels of development have a substantial interest in promoting inward technology transfer in a way that benefits locally-based enterprises. Governments, through legislation and/or regulatory measures, can improve the terms of trade for local businesses by setting ground rules that improve the capacity, i.e. bargaining power, of local enterprises in negotiating the terms of FDI.3