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Saturday, April 17, 2021

Why Washington keeps complaining about China’s tech policies

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In the world of international trade, any competitive advantage is valuable — but every advantage can become a disadvantage. That’s one reason why complaints about Chinese practices have grown more voluble in recent months.

For starters, the number of complaints has ballooned to about a dozen. And for Washington, which considers economic statecraft in the national interest, these are becoming hard to ignore.

Earlier this week, U.S. Secretary of Commerce Wilbur Ross, Department of State Dennis Ross and Treasury Secretary Steven Mnuchin penned a letter to China’s commerce and finance ministers, saying they were considering steps that could include tariffs or a law change that would require the Commerce Department to file a complaint against China’s alleged misbehavior with the World Trade Organization. The top trade official for the tech industry, Acting U.S. Trade Representative Robert Lighthizer, was included in the group.

The drumbeat from Washington on the issue is intensifying. In March, the Office of the U.S. Trade Representative published a report that found that China engaged in unfair trade practices, including currency manipulation and forcing American technology and telecom companies to transfer their technology to Chinese companies. It further found that Beijing encouraged other countries to copy those practices. And on September 26, it mandated that China report back to the Trump administration by December 20 on the actions that are needed to address the risks. China was told that any on-the-ground action it takes must be voluntary.

Washington isn’t the only country with a problem with China’s practices. Twenty-four U.S. lawmakers have sent a letter to President Donald Trump urging him to take a harder line on China.

On Wednesday, the U.S. Treasury Department published a list of Chinese businesses it wants to focus on as sources of speculative demand for U.S. dollars, which could “unintentionally weaken the dollar.” In August, it warned that the U.S. may want to put pressure on Chinese banks to strengthen their yuan-denominated assets. And the U.S. Senate Finance Committee voted in June to penalize the Chinese search engine Baidu.

Much of the finger-pointing goes back to the 1990s, when state-owned companies such as China Telecom acquired telecom equipment company 3Com and invested more than $11 billion in related stock in an attempt to get a US patent on a wireless telephony system. Washington took China to court, winning and forcing China to return all of the money.

But a host of changes took place over the years. First, Chinese companies moved more of their investments to U.S. companies in private placements. Second, the country opened up its economy more, seeking the approval of overseas investors and easing restrictions on its domestic competitors in order to attract investment.

But that process continued long after the settlement. In the late 2000s, for example, rival telecom company Huawei started buying and investing in U.S. technology companies. Earlier this year, the Commerce Department found that Huawei violated a trade agreement, saying the Chinese company had provided substandard products to some of its biggest customers, the U.S. wireless carrier T-Mobile. The Justice Department is also looking into charges of bribery against Huawei, as well as charges of stealing trade secrets from partner companies that the Chinese company acquired.

There has been a slow-burning backlash against Beijing’s aggressive tech policy as many of these deals (including the 3Com/Alcatel merger) came to light over the years. The wave of complaints from Washington — though it is more an echo than a new trend — has renewed those calls, at a time when America’s leverage with China is under growing strain.

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