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Against Monopoly

defending the right to innovate

IP and Protectionism

Monopoly corrupts. Absolute monopoly corrupts absolutely.





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The Times thinks piracy is our big trade problem!!

The New York Times David Leonhart drinks the IP piracy Kool Aid when he writes that our most important economic problem with China is its piracy of our intellectual property link here.

Instead, he says "The No. 1 US problem with China's economy is probably intellectual property theft. Technology companies, for example, continue to notice Chinese government agencies downloading software updates for programs they have never bought, at least not legally."

He then goes on to add, "Next on the list, say people who work in China or do business there, is the myriad protectionist barriers China has put up. These barriers make this country's recent efforts at 'buy American' protectionism look minor league. In some cases, Beijing has insisted that products sold in China must not only be made there but be conceived and designed there. The policy goes by the name "indigenous innovation."

Such trade policies don't guarantee an export surplus however. Instead, the yuan still has to be relatively cheap.

Leonhardt is right that the exchange rate isn't the only trade problem. But he ignores the full effect of the rate. When the rate is right, the US not only exports to China but becomes more competitive making import substitutes for Chinese exports to markets in the US and around the world.

Finally he totally ignores the effect of China's intervention to weaken its currency, in leading other big Asian exporters to keep their currencies low. The list of such countries includes Japan, Korea, Taiwan, Singapore and Malaysia, all of which add to the US trade deficit.

The response to a drop in foreign currencies will not be instantaneous, because it will take time for US producers to expand output. Thus, it is unlikely to have a rapid impact on current unemployment, but our exchange rate is important in our current large job losses and in worsening our income distribution.


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China is going to stop its great economic rise soon with all of these measures. Of course, I'm fine with them breaking IP ideals, but the manipulation of the currency and protectionism will bite them hard in the end.

http://teconom.blogspot.com/


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