In this special episode, we sat down with Robert Atkinson, president of the Information Technology and Innovation Foundation. He looks at how nations compare in terms of global market share in the Hamilton Index: Assessing National Performance in the Competition for Advanced Industries. How has the Chinese regime gained so much over the past quarter-century, and how is that impacting America?
Atkinson explains how the Chinese regime has gotten ahead: “A simple way to put it for China would be that they decided to engage in a whole set of unfair practices—massive subsidies, manipulation of their currency to keep the price down, forcing foreign companies to transfer technology that then goes to the domestic Chinese companies. So a whole suite of things that gave them an unfair leg up. For the United States, the answer is that we just didn’t do anything. Too many economists in the United States like to say, agree with the phrase ‘potato chips, computer chips, what’s the difference?’ In other words, doesn’t really make any difference whether we have a strong semiconductor industry or a strong machine tool industry, it doesn’t matter. And because so many people—so many economists in particular, and policymakers who listen to them—believe that it doesn’t matter, we’ve lost global market share there. China, it matters to China. They’ve set their sights on dominating these industries by the year 2025.”
In the second half, we sat down with Jon Pelson, author of “Wireless Wars: China’s Dangerous Domination of 5G and How We’re Fighting Back.” He touches on how free trade ties into geopolitics, and how this could play out going forward.
As for how to stem the threat from China, Pelson said: “They have to bring the hammer down on the intellectual property theft. The way it’s been done is companies are allowed to kind of step back from China. I saw that with Lucent, where there were three spies who stole the software, really the crown jewels for a switch that Lucent was making. I talk about this in the book, the CEO of Lucent said, ‘We could have pressed for these three low-level people to go to jail. But China said to us, if you cooperate in this prosecution, you won’t be able to sell to China for a year,’ which would have been a billion-dollar loss to a company that was just hanging on. I think what we have to do is have the government step in and say, ‘Forget that. You guys were stealing this IP. Your company in China is banned, and all the companies in the free world will not do business with you.’ It has to be much firmer saying if you get caught … They stole from Cisco, Cisco alleged, and they found that the same wording in the manual, they found the same software in the servers that Cisco was making as in the Huawei servers. Chairman Ren Zhengfei was confronted by this—literally the same typos in the product manual—and he said it’s a coincidence. They settled. Cisco settled with them because they said, “We still want access to the Chinese market, we still got to do business in this world.’ And China ended up wiping out Cisco’s market share with that product in that market. I think the government has to say, “We’re not going to even let you settle, we’re not going to let you have that kind of easy-going way because this is a matter of national security. And we have to bring the hammer down on intellectual property theft from China’ and on hacking. We keep finding their advanced persistent threat teams doing incredible damage here. And there seem to be almost no consequences.”
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