By John R. Kasich and Marc L. Busch for CNN Business Perspectives on the best way to achieve commercial peace with China.
Despite President Donald Trump’s move on Friday to increase tariffs on $200 billion of China’s exports, the end to the US-China trade war may soon be within reach. If and when that happens, the question will be whether the United States can achieve lasting commercial “peace” with China.
President Trump is not the first to express frustration with China, but his on-the-fly tariff strategy is not the answer. On the contrary, his tariffs have cost American consumers and businesses and cut off our ranchers and farmers from selling to China. The president’s tariff strategy has also put Washington at odds with allies, whose help we need in dealing with China and keeping the global economy open.
Looking to get out of this mess, President Trump wants China to make concessions on market access, government subsidies and intellectual property. All three are worth the fight, but mostly via multilateral efforts, and not just with the means the president is proposing.
US exporters of goods and services need a predictable path into China’s market. And American firms shouldn’t have to compete with subsidized Chinese vendors, especially not state-owned enterprises. But these issues can’t be resolved on a two-nation basis. They require multilateral attention, either at the World Trade Organization or through engagement in trade deals like the Trans-Pacific Partnership.
There is, however, one bilateral initiative that the United States should pursue with China: an investment treaty to protect intellectual property rights. Our trade negotiations have not gone far enough in curbing Beijing’s forced technology transfer requirements, a practice that forces American firms to share their ideas with Chinese rivals in order to sell to — or invest in — China. These “ideas” come in all forms of American-bred intellectual property, the very backbone of our ideas-based economy: our designs, innovations, medical advances and creative products.
The West wants access to the Chinese market, matched with the ability to protect our intellectual property. This requires protection on both fronts — trade and investment — because both are critically important. The final US-China trade agreement meant to protect intellectual property will need strong enforcement teeth. Otherwise, we will lose the peace.
The benefit of having an investment treaty is that it gives owners of intellectual property another way to protect their ideas. That’s because the 2012 US “model” treaty — the template Washington uses for such agreements — covers ideas as an investment; expressly prohibits forced technology transfer; and, in terms of enforcement, gives investors the ability to seek compensation for Chinese misconduct through investor-state dispute settlement, including in a neutral venue like the World Bank.
The United States has more than 40 investment treaties already in place with partners across the globe. Since at least 2008, Washington has been mulling over investment treaties with China and India. Politics on all sides have brought both sets of negotiations to a standstill. It’s time to ask Beijing, and India, to return to the table.
In fact, the benefit of signing an investment treaty with China is so evident that we can only ask why the Trump White House hasn’t demanded one all along. During the president’s negotiations over the US-Mexico-Canada agreement, President Trump largely did away with investor rights, likely knowing that it would discourage American investors from investing abroad over their fear of not being protected from intellectual property theft and other misconduct. This tells us that President Trump realizes investment treaties work. So to help America’s innovative industries, let’s add investment tools to the trade tools already in hand.
The trade war with China has caused our country tremendous economic and political damage and has torn the fabric of the global economy. We hope that, in the end, we can access the Chinese market while also protecting intellectual property. The world would be a better place, a safer place and a more united place if this could be done.
Signing a US-China investment treaty should be part of winning the peace.
For more on commercial peace with China View the op-ed on CNN (here)
Editor’s Note: John R. Kasich is the former governor of Ohio, serving from 2011 to 2019. A Republican, he was previously a member of the House of Representatives. He is the author of “Two Paths: America Divided or United.” Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Edmund A. Walsh School of Foreign Service at Georgetown University. The opinions expressed in this commentary are their own.
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