Still think it’s a level playing field?

We’ve discussed the idea of free trade here many times and we all seem to agree that free trade is a good thing. I’ve argued a number of times that US-Sino trade is definitely not free, however. I emphasis that a tilted playing field does not deliver the same benefits and can instead be harmful. The primary culprits tilting the field are the artificial exchange rate and the lax environmental laws which greatly reduce overhead for industry.  Another is the “voluntary” transfer of technology to China, which is a requirement that U.S. firms “transfer” technological know-how to China as a condition of doing business there. This often takes the form of establishing R&D facilities in China and/or a joint venture with a Chinese firm where the U.S. firm contributes the technology and the Chinese firm contributes cheap labor. While such ventures look like voluntary actions, they are prerequisites of doing business there. But this post is about a field un-leveler that we don’t hear or see much about.

The WSJ had an interesting article about Chinese (and Russian) “economic espionage”. Let me share a few passages from that piece, as they speak for themselves (emphasis is mine except for the article headline):

“China Singled Out for Cyberspying: U.S. Intelligence Report Labels Chinese ‘Most Active’ in  Economic Espionage; Russia Also Named
The U.S. government accused the Chinese of being the world’s “most active and  persistent” perpetrators of economic spying”

…

” ‘The nations of China and Russia, through their intelligence services and  through their corporations, are attacking our research and development,’ said  U.S. counterespionage chief Robert Bryant.”

…

“The U.S. is a prime target of economic espionage by countries like China and  Russia that seek to build up their domestic industries with stolen technology  and intellectual property from more advanced U.S. firms, officials say.”

…

Thursday’s report was unusual because it called out China and Russia by name  as the top perpetrators of economic espionage, which is something U.S. officials  have been reluctant to do for fear of harming diplomatic relations.

“When you hide these things, nobody does anything about them,”

…

Economic espionage is condoned by both China and Russia and is part of each  country’s national economic development policy, the official said. The Chinese government is believed to have been behind a number of recent  high-profile cyber attacks, including multiple hacks of Google Inc. and the EMC  Corp.’s RSA unit

The U.S. intelligence agencies do not steal industrial secrets for our businesses. To me, this is still more evidence that the trade relationship with China is anything but “free” trade on a level playing field. What say you?