Carl Levin: We Need to Stop China’s Intellectual Property Theft

Published 12:10 am Monday, October 18, 2010

In September, I testified at a hearing of the Congressional-Executive Commission on China, which Congress established in 2000 to monitor human rights and the development of the rule of law in China. The hearing examined China’s respect, or lack of respect, for intellectual property law. That’s the area of law that protects inventions and patents, and it’s especially important to Michigan manufacturers.

China’s record in this area is deeply worrisome. Despite nearly 10 years as a member of the World Trade Organization, China continues to engage in unfair trade practices. I asked the commission to look into China’s actions in two areas: steps it has taken to favor domestic producers of renewable energy technology, and counterfeiting of auto parts.

We should all be alarmed by China’s attempts to dominate the renewable energy industry through measures that discriminate against foreign manufacturers. China does this by requiring the use of domestic suppliers and production for green and renewable technology.

China also requires a significant percentage of these products be exported, in order to guarantee that its domestic companies will dominate this important sector. We can’t let these jobs – the jobs of the future – go without a fight.

China is trying to have it both ways: protecting its home market while exporting most of its production. The New York Times reported that China protects its domestic producers by requiring that 80 percent of the equipment used in Chinese solar power plants be made in China. At the same time, over 95 percent of China’s solar panel production is exported to the United States and Europe.

China also has designs to dominate clean car technology. According to the Wall Street Journal, China is preparing a 10-year plan to turn China into the world’s leader in developing and producing battery-powered cars and hybrids. The draft plan suggests that China could compel foreign auto makers who want to produce electric vehicles in China to transfer critical technology by requiring those companies to enter into joint ventures where the foreign auto maker would be limited to a minority stake. In other words, in order to get access to the Chinese market, automakers will have to turn over their hard-won technological advances to Chinese companies.

I am also concerned about the counterfeiting of auto parts, concerns that extend beyond monetary losses to U.S. firms and directly impact human health and safety. A counterfeit auto part could be the wheel or the brakes on your car. Since counterfeit parts are often substandard and produced with inferior materials, they put lives at risk.

In addition to the safety issues, American companies’ investments in innovation and technology development are at risk. The auto parts industry’s losses due to counterfeiting are enormous. An industry group conservatively estimates that counterfeit goods cost motor vehicle suppliers up to $12 billion globally in lost sales every year. In 2007 Ford Motor Co. stated that counterfeit auto parts cost it nearly $1 billion a year. We cannot continue to allow these types of American investments and innovations to be stolen by foreign competitors.
For almost 20 years the United States has been aggressively pressing China to improve its intellectual property protection regime. Yet China continues to be the number one source for counterfeit and pirated goods seized at our border, accounting for 79 percent of the total value seized in 2009. The Chinese government itself estimates that counterfeits constitute between 15 and 20 percent of all products made in China and are equivalent to about eight percent of China’s annual gross domestic product.

These practices hurt American companies and American workers, and I strongly favor strong action by U.S. trade officials to rein them in.

Carl Levin is the senior U.S. senator from Michigan.