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China Must Be Held Responsible For The Theft Of U.S. Technologies

November 15, 2018

China Must Be Held Responsible For The Theft Of U.S. Technologies

The U.S. and China, the two largest economies in the world, share much in common. They both have aggressive economic growth agendas and have cadres of successful entrepreneurs willing to start new businesses and expand existing ones. Such similarities among countries are bound to give rise to competition and they have. Starting far behind the U.S. in personal income, GDP and other measures of economic success, China has made significant progress in the past 20 years and is on track to equal or surpass the U.S. Much is made of the fact that China has a trade surplus with the U.S. There is no better evidence than the imposition of tariffs on Chinese goods. But China has traditionally had wage rates that are significantly lower than those in the U.S. and hence its goods are much less expensive to produce. Trade deficits with low-cost producers are not that important. Tariffs only raise the price of products and general price increases can cause inflation. Instead U.S. companies should be making more sophisticated products, focusing upon higher value goods in which Americans has a comparative advantage. Even China is experiencing trade deficits with lower-labor-cost countries in Asia and elsewhere. The real competition between China and the U.S. should not be measured in net exports, but rather in technology and technology adoption. This fact was driven home to me during a recent trip to China and by several new books on the subject. It is nowhere better illustrated than in the development and adaptation of Artificial Intelligence (AI) in the workplace. AI is the creation of computer systems to perform tasks normally requiring human intelligence. AI can revolutionize how businesses influence consumer decision making. Algorithm-based AI has the potential, according to Kai-Fu Lee in his recent book “AI Superpower: China, Silicon Valley and The New World Order,” to create immense economic value on the one hand and the potential to destroy many jobs on the other. AI-based business models can quickly calculate which borrowers represent the best risk for a bank loan, or which candidate is most qualified for a job. AI makes rapid choices about a multitude of business decisions. Using massive data bases AI can not only help companies determine what kind of products should be marketed to which consumers, it can also facilitate direct payments expediting delivery and cutting costs. This is the key to the success of Alibaba, China’s answer to Amazon. Alibaba skipped the era of credit cards and went immediately to direct payment by debiting a customer’s bank account. AI also facilitates facial and speech recognition which will soon allow instantaneous translation of languages. Finally, AI is a key factor in autonomous vehicles. It takes only a small amount of imagination to see how the country of 1.3 billion people can use AI to generate significant economic advantages. On the downside AI will displace workers. What is interesting, if not disheartening, is that the jobs that are most at-risk will not be those on the assembly line. That is because building robots with manual dexterity is much more difficult than creating algorithm-based business models. As a result, workers who will lose their jobs to AI will be middle-income employees: bankers, financial managers, marketing directors, long-distance truck drivers and many other middle-class employees who are the bread and butter of the American economy. To engage in competition with China using broad tariffs is like using a hammer to fix a watch. Instead every ounce of our negotiation skills, efforts and pressure should be placed upon halting rampant intellectual property theft by the Chinese of our AI and other technologies. In his book “The Hundred Year Marathon,” Michael Pillsbury, considered one of American’s foremost Chinese authorities, identifies China’s implicit plan to surpass the U.S. economically by 2049, the 100th anniversary of the Chinese Revolution. We must react. The Chinese signed an agreement in 2015 saying they would not steal American intellectual property. Recent indictments of Chinese business executives and scientists suggest they have not delivered on their promise. Today the stakes are too great for the U.S. to demur in any way. In an era where AI and technology advantage hold sway, China must be called out and held responsible for the theft of U.S. technologies. MICHAEL A. MACDOWELL is managing director of the Calvin K. Kazanjian Foundation and president emeritus of Misericordia University.

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