China's Ally in Stealing Western IP: The United States

This commentary was originally published in RealClearPolicy on October 13, 2022.

The director of the FBI and the head of Britain's MI5 security service recently made an unprecedented joint appearance to warn the world of a singular danger.

Speaking to business leaders in London, they warned that the Chinese government poses the biggest long-term threat to the economic and national security of the United States, Great Britain, and their allies.

FBI director Christopher Wray described a lawless, stop-at-nothing Chinese government agenda to steal competitors' intellectual property (IP), and using these to dominate global markets. MI5 chief Ken McCallum called China’s threat "game-changing." That may sound surprising. But in June, the Biden administration supported a World Trade Organization (WTO) decision that will hand over IP to the Chinese government. The Office of the U.S. Trade Representative, which is tasked with negotiating trade deals, joined other WTO members to pass a measure that will waive patent rights related to Covid-19 vaccines.

This decision allows developing countries to ignore their obligations under the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)—and seize IP without the rights holder's consent.

Under WTO rules, China counts as a "developing country." An early draft of the agreement would have barred China from taking advantage of the waiver, based on its enormous vaccine exports. But during debate leading up to the WTO decision, the Chinese government lobbied member countries to remove language that would have excluded it. In the final version, China is simply "encouraged" not to avail itself of the waiver.

In short, the world has been asked to trust Beijing regarding vaccine IP. But as Wray and McCallum made clear, it isn't a trustworthy partner. The Chinese government has repeatedly courted and invested in foreign businesses for the purpose of stealing intellectual property, Wray observed.

And China's good fortune doesn't stop there. WTO member countries are considering extending the IP waiver from vaccines to Covid-19 diagnostic tools and treatments, a decision they will make by mid-December.

All of this stems from an initial fear that patent rights would stand in the way of global vaccination. Back in 2020, India and South Africa petitioned the WTO to waive IP protections for this reason. But their concern proved unwarranted: The world now has a surplus of vaccine doses, and while vaccine hesitancy and logistical challenges have slowed global inoculations, IP protections have not. Even India's main negotiator at the WTO admitted this, observing in June that "There is no demand for vaccines anymore."

WTO members didn't get the memo, though, and seem to have opted for the appearance of doing something virtuous—instead of fulfilling the organization's raison d'être of protecting global trade rules.

U.S. officials gave U.S. IP away in the purposeful handoff at the WTO in June. There will be no limits on what China can do with access to the mRNA technology behind the leading Covid-19 vaccines, technology that took U.S.-based scientists decades to develop, and cost Western companies enormous sums to research, manufacture, and deliver to the world.

Expanding the waiver further will only expedite China's plans to undercut U.S. and European companies, control supply chains, and dominate the biopharmaceutical industry.

It's critical that WTO member countries wake up to China's not-so-secret plan. As Wray warned in London, "It may be a lot cheaper to preserve your intellectual property now than to lose your competitive advantage and have to build one down the road."

The United States has already lost its competitive advantages in technology and manufacturing for many product categories, including cutting-edge vanadium redox flow batteries. China is now the world's largest manufacturer of these high-performance batteries, using technology developed at U.S. national laboratories.

As NPR recently reported, this major loss was due in part to the Department of Energy "violating its own licensing rules while failing to intervene on behalf of U.S. workers in multiple instances."

Director Wray was speaking to private-sector businesses, but his message is just as relevant for leaders of democratic countries. China's nefarious tactics are easy to see; the last thing we should do is willingly hand Beijing the keys to our castles. Protecting IP is about more than profitability—our innovations, economic competitiveness, and national security are at stake.

They both made clear that Beijing aims to undercut and usurp the world's leading companies in strategic technology sectors—among them aerospace, biotech, and artificial intelligence. Wray further stated that the threat’s source is the Chinese government and the Chinese Communist Party—"not the Chinese people, and certainly not Chinese immigrants in our countries—who are themselves frequently victims of the Chinese government’s lawless aggression.”

For Western companies in high-tech industries, it was reassuring to know that two leading law enforcement agencies are focused on protecting their intellectual property.

But unfortunately, as the FBI works to counter this threat, it's up against not just China, but the U.S. government itself.

Walter G. Copan is a senior adviser (non-resident) with the Renewing American Innovation Project at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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Walter G. Copan
Senior Adviser (Non-resident), Renewing American Innovation Project