Could China Jump Start Our Economy by Enforcing IP Protection?
Matthew Slaughter's piece in the WSJ offers the possibility of 2.1 million new jobs for antsy Americans. He argues that this growth would occur if China protects our intellectual property which is being bought "cheaply" right now in China.
Here is a quote from his article;
"The ITC surveyed 5,051 U.S. companies in industries such as high-tech manufacturing, publishing and software to gauge the incidence and extent of infringement of their copyright, trademark and other intellectual-property rights in China. Firms say infringement there is widespread, and it affects not just large multinational firms but many small and medium-sized U.S. companies as well. Extrapolating from survey responses, ITC estimates that all U.S. IP-intensive firms lost at least $48.2 billion in 2009 alone—perhaps even as much as $90.5 billion—from foregone sales, royalties and license fees."
If these companies earn more revenue, then they would hire more people and through multiplier effects the nerds have estimated that 2.1 million more jobs would exist. Wow!
Now, no nation is that altruistic. Does China have any incentive to enforce IP and hence raise prices to their own consumers? They would have a greater incentive to do so if their innovators are upset about losing intellectual property and not being rewarded for past work. As China's innovators make progress (their Universities are getting much better), they will represent a strong interest group lobbying for IP protection. Thus, I predict that there will be IP legal convergence over time just as we have seen local air pollution regulation convergence between Beijing and U.S major cities. (in English, they are adopting our laws).
A bundling issue will arise -- will the Chinese government discriminate and enforce Chinese grown IP protection while allowing consumers there to grab U.S IP? If this is the case, then U.S companies will need to make deals with Chinese firms to act as the "public face" for the product that is being "sold" in China.
Flipping things around, what are the general equilibrium effects induced by making China pay for our IP? We love cheap Chinese products, how much more expensive would they be if China had to pay for IP use?
The Slaughter article implicitly assumes that IP is an input in creating final consumer products (sold in China) rather than the case that it is an input in producing products that China exports back to the U.S. Is he right?
So, will inflation rise here if China enforces IP protection?
Here is a quote from his article;
"The ITC surveyed 5,051 U.S. companies in industries such as high-tech manufacturing, publishing and software to gauge the incidence and extent of infringement of their copyright, trademark and other intellectual-property rights in China. Firms say infringement there is widespread, and it affects not just large multinational firms but many small and medium-sized U.S. companies as well. Extrapolating from survey responses, ITC estimates that all U.S. IP-intensive firms lost at least $48.2 billion in 2009 alone—perhaps even as much as $90.5 billion—from foregone sales, royalties and license fees."
If these companies earn more revenue, then they would hire more people and through multiplier effects the nerds have estimated that 2.1 million more jobs would exist. Wow!
Now, no nation is that altruistic. Does China have any incentive to enforce IP and hence raise prices to their own consumers? They would have a greater incentive to do so if their innovators are upset about losing intellectual property and not being rewarded for past work. As China's innovators make progress (their Universities are getting much better), they will represent a strong interest group lobbying for IP protection. Thus, I predict that there will be IP legal convergence over time just as we have seen local air pollution regulation convergence between Beijing and U.S major cities. (in English, they are adopting our laws).
A bundling issue will arise -- will the Chinese government discriminate and enforce Chinese grown IP protection while allowing consumers there to grab U.S IP? If this is the case, then U.S companies will need to make deals with Chinese firms to act as the "public face" for the product that is being "sold" in China.
Flipping things around, what are the general equilibrium effects induced by making China pay for our IP? We love cheap Chinese products, how much more expensive would they be if China had to pay for IP use?
The Slaughter article implicitly assumes that IP is an input in creating final consumer products (sold in China) rather than the case that it is an input in producing products that China exports back to the U.S. Is he right?
So, will inflation rise here if China enforces IP protection?
posted by Matthew Kahn at 11:40 AM
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