The U.S. Chamber of Commerce isn’t afraid to pick a fight with any attempt at government regulation or taxes, but it moved into less familiar territory this week with a report criticizing Chinese trade policies. It especially faults the so-called indigenous innovation rules that aim to corner certain key global industries and force foreign companies to transfer advanced technologies to Chinese firms.
“For many multinationals – especially tech companies — the policies appear to signal that the pretense of goodwill is gone.” the report states. “The belief by foreign companies that large financial investments, the sharing of expertise and significant technology transfers would lead to an ever opening China market is being replaced by boardroom banter that win-win in China means China wins twice.”
Indigenous innovation rules have been blasted by some American executives and are of quiet concern to the Obama administration, but this is one of the highest-profile American critiques yet.
Currency manipulation charges get most of the publicity. But “II” rules pose perhaps even more significant dangers to China’s trading relationships, as well as to American jobs. The report:
As political tensions rise over indigenous innovation, the Obama administration and Congress should understand this is not just another run-of-the-mill China policy dispute that can be addressed through new rounds of bilateral diplomatic discussions and bombastic legislative initiatives. In the aftermath of the global financial crisis and in light of the Chinese government funding much of the American budget deficit, there is a power shift underway– at least China firmly believes that.
No matter whether or not the US agrees with that view, the indigenous innovation campaign and surrounding web of industrial policies represent the beginning of a new era in not only the US-China economic and political relationship but in China’s relationship with international business and the developed world.
The irony for Chamber critics won’t be lost. The organization claims to speak for American Main Street, but is heavily supportive of policies to give transnational companies maximum latitude to operate globally, including offshoring of American jobs. China has a more nationalist view of its economy.
Today’s Econ Haiku:
GDP slowed down
You think we need a report
To hear the screeching