by From Dean Baker The Washington Post repeated a standard theme in reporting on Trump’s trade war with China, that our main concern is not the trade deficit but rather China’s alleged theft of our intellectual property. I have written about this issue before, but there is an important aspect that seems to have gone largely unmentioned, China is likely to have more at risk in this story than the United States. Using the purchasing power parity measure (clearly the appropriate one for this issue), China’s economy is already 20 percent larger than the U.S. economy. In a decade it will be twice the size of the U.S. economy. Given these facts, it is almost certain that China will be spending far more on research and creative work than the United States. This means that it will have far more
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from Dean Baker
The Washington Post repeated a standard theme in reporting on Trump’s trade war with China, that our main concern is not the trade deficit but rather China’s alleged theft of our intellectual property. I have written about this issue before, but there is an important aspect that seems to have gone largely unmentioned, China is likely to have more at risk in this story than the United States.
Using the purchasing power parity measure (clearly the appropriate one for this issue), China’s economy is already 20 percent larger than the U.S. economy. In a decade it will be twice the size of the U.S. economy. Given these facts, it is almost certain that China will be spending far more on research and creative work than the United States. This means that it will have far more to lose than the United States if there is no internationally agreed upon mechanism for sharing the cost.
This doesn’t mean stronger and longer copyright protection as our policy makers would insist. That is a great way to redistribute income upward, which has been a major goal of economic policy over the last four decades, but not a very efficient way to support innovation and creative work in the 21st century.
We can and should be looking to more modern mechanisms than these relics from the feudal guild system. (I have some ideas in chapter 5 of my [free] book Rigged.) However, the point is that China actually has more interest in a workable mechanism for sharing costs than the United States does. Anyone looking to benefit the U.S. economy as a whole would be noting this point and the enormous leverage it gives us. On the other hand, if the goal is simpler to make Microsoft, Pfizer, and Disney richer, and then wring our hands over inequality, the current focus of policy makes sense.