Policy wonks and pundits have been nearly unanimous in their condemnations of Donald Trump’s trade war and his primary weapon of tariffs. Tariffs are a tax increase on US consumers, raising the price of imports and the domestically produced goods with which they compete.
Retaliation by other countries will reduce US exports, costing jobs in other sectors. This is not likely to lead to good outcomes, especially when the basis for Trump’s complaints is vague, constantly shifting and often at odds with reality.
The one exception is with patents and copyrights. There is widespread agreement with Trump that China, our largest competitor, is stealing “our” intellectual property. They agree that Trump should be prepared to take steps to stop this theft and crackdown on China’s practices.
The so-called theft takes two forms. On the one hand, the complaint is that China does not adequately protect patents and copyrights internally. As a result, massive amounts of software, recorded music and video material, and other copyright protected items are sold without authorization.
The other form of theft is through requirements that companies looking to set up operations in China partner with Chinese firms and thereby share their technology. For example, Boeing is required to partner with Chinese manufacturers in its operations there, which then gives the Chinese manufacturers the ability to be competitors in future years.
While the elites don’t like these practices by China, there is little reason for the rest of us to be troubled by them. Most of us don’t own lots of stock in Microsoft, Disney or Boeing, so why should we be bothered if China doesn’t respect these companies’ claims to patents, copyrights and other forms of intellectual property?
After all, these are forms of protectionism, and we know that protectionism raises prices and reduces economic growth. Patents and copyrights are in fact incredibly costly forms of protectionism. Instead of raising prices by 10 or…