Forced Technology Transfer Research Articles

Forced technology transfer and China

AbstractInnovation is the most important competitive advantage of the United States. However, the infringement of intellectual property and the forcing of US firms to transfer technology to foreign firms have become increasingly important issues in recent years. This article discusses the implications of China's forced technology transfer regime.

Forced Technology Transfer and the US-China Trade War: Implications for International Economic Law

Forced technology transfer has emerged from the US-China trade war as a new issue of systemic importance. The United States, the European Union and Japan have jointly condemned forced technology transfer as a practice undermining the proper function of international trade and called for new WTO rules to discipline the practice. This article examines the issue in the broad context of international economic law. It seeks to address the following questions: What does “forced technology transfer” mean? Where did this practice come from? Why is there insufficient international regulation on the issue? What exactly are the problems inherent in such practice? And what can be done to improve the relevant international regulation?

US–Japan Trade Frictions: The Past, the Present, and Implications for the US–China Trade War

The United States and Japan have been involved in trade frictions over a number of products including textiles, steel, automobiles, semi‐conductors, and agricultural products over the last 50 years. US–Japan trade frictions have taken basically two forms: (i) the United States attempting to restrict Japan's exports to the United States; and (ii) the United States attempting to increase its exports to Japan by “opening” the Japanese market. By putting pressure on Japan to adopt necessary measures, the United States sought to achieve two main objectives: (i) to reduce its trade deficit vis‐à‐vis Japan; and (ii) to protect and/or promote US industries. The United States failed to achieve the first objective, while some success was achieved for the second objective. The United States triggered a trade war against China with the objectives of: (i) reducing the bilateral trade deficit; and (ii) stopping unfair trade practices by Chinese firms such as violations of intellectual property rights and forced technology transfer. Based on the experiences from the US–Japan trade frictions, the United States may achieve some success for the second objective, but not for the first. The chances of achieving the second objective would increase if the United States cooperates with countries such as Japan and the European Union, which are faced with similar problems.

Power of discourse in free trade agreement negotiation

AbstractThis article illustrates the power of discourse in free trade agreement (FTA) negotiation, elucidating the concept from the perspective of a country’s abilities of rule control, rule assimilation and rule contestation. To enhance rule control, the G2 (the US and EU) have chosen their FTA partners, designed the FTA rules, and offered offensive-defensive exchange strategically. They have approached weak or trade-dependent parties first in FTA negotiation, innovated new rules to accelerate FTA negotiation, skillfully constructed intentional ambiguity and exemptions to remove rule discrepancies and made offensive-defensive exchange with their negotiating parties. Some of these strategies have been copied by China although in a different way. Further, a template approach for negotiating an FTA and exporting domestic laws and normative values to others contributes to the G2’s rule assimilation. A de facto FTA template has also been established by China recently, but its legal culture and political stance have led it to sign incomplete contracts and tolerate rule differences with its negotiating parties instead of transposition of domestic law. In facing the rival rules adopted by their competitors, the G2 have incorporated counteractive rules in their FTAs with their competitors’ close trading nations. China has also contested rules treating China as a non-market economy in its FTAs, but its stance toward state-owned enterprises (SOE) disciplines and rules forbidding forced technology transfer is milder due to its lack of experience in dealing with unfavourable rules.

Understanding the U.S.-China Trade War

ABSTRACTThree major concerns drove the U.S. into initiating the trade war, and they are (a) the concern that China’s chronically large trade surplus was depressing job creation in the U.S. (b) the concern that China was using illegal and unfair methods to acquire U.S. technology at an effectively discounted price; and (c) the concern that China seeks to weaken U.S. national security and its international standing. On the dispute over China’s exchange rate and trade imbalance, the first conclusion is that it was marked by analytical confusion over the meaning of the term ‘equilibrium exchange rate’. The second conclusion is that China’s trade imbalance reflects the economic conditions in both China and U.S., and that the efficient and fair solution of the problem requires policy changes in both countries. On the industrial policy dispute, the first conclusion is that the issue of forced technology transfer is largely a dispute about China using its market power to benefit itself at the expense of its trade partners. The second conclusion is that China’s use of market power can last only until the other large countries could unite and retaliate as a group. The inevitability of retaliation means that China should replace the joint-venture (JV) mechanism for technological diffusion with other ways to strengthen its technological capability. On the U.S. concern about whether China trade weakens its national security, the first conclusion is that the notion of national security that is commonly adopted in the U.S. trade policy debate is ignorant about the primary determinants of U.S. capability in innovation. By focusing instead mainly on how to hold down China technologically, the long-run outcome will be a technologically weaker U.S. and hence, a more vulnerable U.S. The second conclusion is that the U.S. must identify a clear, short list of critical technologies and critical infrastructure for the recently reformed Committee for Foreign Investment in the United States (CFIUS) to cover, and update this list constantly. Otherwise, the broad and changing nature of notions about national security would allow the bureaucratically driven phenomenon of mission-creep to steadily expand the coverage of the CFIUS process, thereby steadily rendering CFIUS to be operationally capricious. Our principal policy suggestion to China is that, because China’s economy in 2018 is very different from that in 1978 (e.g. many parts of China now look like Singapore and China is Africa’s biggest donor), there should be more reciprocity in China’s trade and investment relations with the advanced economies despite China’s status as a developing economy under WTO rules. Our principal policy suggestion to President Trump is to stop equating strategic competition with economic competition. Strategic competition is normally a zero-sum game. While fair economic competition is usually a zero-sum game in the short run, it generally creates a win-win outcome in the long run.

“Forced technology transfer” policies: Workings in China and strategic implications

This paper evaluates the ability of “forced technology transfer” (FTT) policies – i.e., policies meant to increase foreign-domestic technology transfer that simultaneously weaken appropriability of foreign innovations – to contribute to technology transfer. We focus on transfer of frontier technology in China's newly designated “strategic emerging industries” (SEIs). Drawing on a survey of foreign firms, extensive interviews with foreign firms, and case studies of Chinese firms, we identify three categories of FTT policies in SEIs: “lose the market”, “no choice”, and “violate the law” policies. Our thematic analysis finds that FTT policies likely exert the most leverage over (i.e., force) frontier technology transfer when accompanied by seven conditions: (1) strong state support for industrial growth, (2) oligopoly competition, (3) other policies closely complementing FTT policies, (4) high technological uncertainty, (5) policy mode of operation offering basic appropriability and tailored to industrial structure, (6) reform avoidance by the state, and (7) stringent policy compliance mechanisms. We develop a Strategy & Risk Matrix to forecast the overall leverage of individual FTT policies. We conclude that Chinese FTT policies may enable domestic acquisition of frontier foreign technology if all seven conditions determining policy leverage are fully exploited by the state. However, if this is not the case, the policies have weaker leverage and may even discourage technology transfer.

Global prospects of unconventional oil in the turbulent market: a long term outlook to 2040

Unconventional oils have taken the global oil industry by storm and have secured an 8% share in the global liquid fuels production in under 20 years. And it is without a doubt that these resources will continue to play an important role in the future. Cost analysis of unconventional oil types has shown that Light Tight Oil (LTO) or shale oil still holds potential for technological and economical improvement, however, the revolutionary stage in development has probably already been passed in the US. For the rest of the world, the issue of kick starting LTO production lies as much in the fields of adapting the existing technologies, as overcoming economic, legislative and environmental barriers. The same cannot be said for heavy oil and bitumen production, as open pit mining is demonstrating cost escalation and resource base depletion, whilein situproduction approach has reached the limit of technological progress and production costs are mostly determined by external factors. Oil price fluctuation and the emergence of more economically viable unconventional oil sources have shifted attention away from kerogen oil and substantially halted production technologies development. The forecast of unconventional oil was conducted along two scenarios: Baseline (a business-as-usual scenario) and Technological (scenario of forced technology development and transfer). The share of unconventional oil in global crude production will increase to 17–21%, depending on scenario. The main difference between scenarios is the rate of kerogen production, which benefits from the favorable conditions of the Technological scenario. Large-scale LTO production will remain a local North American phenomenon in both scenarios. More important than geological or technological factors is the unique business environment, characteristic for the USA, which would be impossible to replicate in any other country. Expansion of unconventional oil production as stimulated competition on the liquid fuels market. Conventional oil producers have mostly adapted to the new environment and will continue to dominate in the forecast period. The greatest pressure is put on the more costly alternative supply sources: biofuels, coal-to-liquid and gas-to-liquid; which have the least promising prospects in the current market.

Designing a Global Trading System to Maximize Innovation

‘Innovation mercantilism’ is on the rise with the result: less global innovation. Policy makers should: create an Innovation Trade Agreement whereby tariffs on all innovation products are eliminated; make development aid contingent upon nations renouncing innovation mercantilist policies; empower multinational firms to fight back by providing antitrust exemptions for cooperation to resist forced technology transfer requirements; develop new multilateral own trade agreements with real measures to stop innovation mercantilism; and develop cooperative international agreements to better support innovation and R&D.