A re-run of the Know Nothing Party?

We had all rather assumed that the Know Nothing Party was just an historical episode in US politics, not something we were about to see a re-run of. But with this latest threat from Trump, to impose trade tariffs upon China over intellectual property rights, seems to be reviving the idea of a second go over. It’s entirely possible, of course it is, that Chinese companies are stealing American intellectual property. But it’s still also true that making Americans poorer isn’t the solution to this problem.

One part of the error here is the very idea of including IP in trade talks. This is known as the TRIPs process and it’s just not a good thing to be doing in the first place. Poor places which cannot afford to pay for IP won’t pay for it because they’re poor. Yet lives will be made better there if that IP is ripped off. There is no loss to Microsoft of a ripped off copy of Windows if the user would never have bought Windows anyway. So, let poor people rip off such IP.

Don’t forget, there is no natural right to IP. It’s a purely invented property right done on purely practical grounds. We note that more people will invent things, produce IP, if they’ve a manner of earning money out of having done so. If the people stealing it never would pay for the IP then there’s no change in incentives to produce IP from the ripping off. It just makes no difference. We invent IP for practical reasons, poor people stealing it doesn’t violate of change those reasons, therefore it’s not a problem.

Sure, that’s not quite what is being complained about here with China but there’s another solution to that too:

The Trump administration is preparing to impose some $50 billion worth of tariffs on Chinese imports, in a major escalation of the president’s “America First” trade policy. President Trump is also calling for new limits on Chinese investment in U.S. technology, in an effort to protect what the administration calls America’s “economic seed corn.”

The tariffs are a response to longstanding complaints that China unfairly requires U.S. companies to share their technology as a cost of doing business in that country. The administration is also concerned that China is strategically acquiring innovative technologies through investments in the United States.

Even if you share those concerns tariffs still aren’t the solution:

The White House said an investigation of Chinese policies ordered by Mr Trump in August found a range of “unfair” practices, including using restrictions on foreign ownership that pressure companies into transferring technology.

The US also found evidence that China imposes unfair terms on US companies; steers investments in the US to strategic industries; and conducts and supports cyber attacks.

The White House says it has prepared a list of more than 1,000 products that could be targeted by tariffs. Businesses will have the opportunity to comment before the final list goes into effect.

One very useful definition of a rich economy is that it’s one which creates intellectual property. It’s almost definitional in fact, once you get to a certain level of sophistication, for which read level of wealth or GDP, you must be inventing things. Because that’s how you get to a certain level of wealth or GDP, by having invented things. Thus we’ve an extension to our point above. There I said that poor people should be left alone as they rip off IP because it doesn’t make any difference if they do. But richer people, sure that makes a difference. But then richer countries must, by definition, be producing IP. The correct answer to our IP being ripped off is therefore to rip off their IP. If China doesn’t protect US IP then the US should just not protect Chinese. No patents, no copyrights, not even trademarks. We’ll respect your IP to the extent that you do ours.

OK, maybe you don’t like that idea but even then it still doesn’t mean that tariffs are the solution. For tariffs on 1,000 Chinese products make all US buyers of those 1,000 products poorer. So, our solution to the Chinese stealing our stuff is going to be making Americans poorer, is it?

Well, quite, it’s obvious lunacy and I’m being polite by only describing it as a silly idea. Whatever the problems with, whatever the varied possible solutions to, Chinese theft of US intellectual property making American consumers poorer as a retaliation is a silly, even stupid, idea.

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17 COMMENTS

  1. At least these tariffs are about something, a specific nation violating specific rules, rules that they signed up to obey, by doing things like reverse-engineering every labor-saving tool we send over there; rather than a worldwide ban on every nation with people who want to sell us metal “too inexpensively” (something that not only benefits the purchaser but a criterion hugely influenced by entities that failed to make the sale).

    I do not accept the notion that we are all better off when theft occurs. Not even the Greatest Good for the Greatest Number, which calls for enslaving the highest-achieving. We created the notion of patents after observing that people are most inventive when permitted exclusive control of their brainchild for a limited term of years. Mexicans might be better-fed if we did not punish theft of corn either. That copies can be made of Windows makes it seem as though no one is harmed; Gates might have invented MS-DOS in the garage but Microsoft would not have gone on to make it user-friendly if it knew the US would make it easier for it to turn up in bazaar stalls abroad, from which everyone would get it without paying Microsoft’s price.

    Trump’s action might have the sole effect of extinguishing transactions, twice the anticipated number given China’s obligatory retaliation to save face. It could also change behavior. It could also be another loud bark not followed by a real bite.

    • Microsoft licensed their Basic to IBM for their new PC. IBM asked Gates if he could build an OS: “talk to Gary Kildall” was the reply. But Gary (or his lawyers) refused to sign IBM’s NDA, so they came back to Microsoft and Bill bought a cheap knock-off of DR-DOS from a local Seattle company, whose name no-one remembers. The rest, as they say, is history.

      Sadly, Gary Kildall, despite making tens of millions from Intergalactic Digital Research, topped himself because he couldn’t deal with the fact that he could have been Bill Gates, if he’d played his cards better.

      Read Bob Cringely’s excellent “Accidental Empires” for the full SP.

  2. To be honest, paying $0 for a copy of Windows seems a fair price for the value.
    It’s what Linux costs. And MacOS…
    So mebbe Microsoft should pay us?

    As to “IP”, folk often conflate ‘neat invention’, ‘patent’, and ‘detailed design for something’. Most US patents issued in the last 20-40 years (**most**) are derivative obvious bumwipe (I speak of the domain with which I’m familiar – computer-y things), and the money made by blackmailing alleged infringers is ummmm quite amazing. Luckily, it’s all calmed down somewhat recently, and it even looks like what you’re likely to get if you successfully sue for infringement will be based on your *actual* loss. Which will be kinda minimal if you’re not practicing the invention (that is, if it’s just one of your patents, rather than being built-in to real products). Hopefully the professional swine trolls will die out financially.

    • That “It is a lousy product” and “I wouldn’t – and don’t have to – pay money for it” are very different assertions from “They ought not own it.”

      Firefox, VLC, and IrfanView are useful software products largely engineered by volunteers. The supply of labor was not always as ample, back in the days when each computer vendor devised its own processor and needed its own experts and operating system. As Rhoda mentions below, you might get the OS “for free” after overpaying for the iron.

  3. It was a while before I paid anything for a PC OS. One just did not do so. Still don’t except where it’s OEM on the PC you buy so it looks like you haven’t paid. Either way let the tariff/IP thing play out, it’s all negotiation at this time.

    And, poor people shouldn’t be given free stuff just cxos they’re poor. It takes the whole point out of poverty, which is nature’s way of telling you to do different.

    • I’ll let it play out, but Wall Street apparently won’t. Though Wall Street has recovered once this week, after swooning on the realization (our ninth or tenth) that interest rates are going to have to keep rising to make it worthwhile to save again.

  4. The US consumers won’t necessarily lose if the tariffs are not imposed on similar economies. Vietnam and Bangladesh will be happy to pick up the slack for sweatshops. India will take a lot of the higher level stuff.

    If they target only China the damage may be minor.

  5. James Watt managed to persuade Parliament to extend his IP period and spent all of time enforcing it. He didn’t make any serious money until the IP ran out and he had to start innovating.

    Charles Dickens was incensed that he couldn’t enforce copy right in the US and that his books were being badly printed and sold cheaply. He made his fortiune a few years later on the speaker circuit because everyone had heard of him.

    I’m sure Microsoft make a big noise about poor countries allowing their IP to be ripped off but I’ll be most of it is for effect. As soon as that country starts getting rich they have a workforce that is comfortable with MS products and then they can start enforcing their licences and get paid. The early rip off should be treated as a marketing expense to keep their rivals out. If the country doesn’t get rich they get nowt anyway, so they might as well take the punt.

    • Well spoken. It’s a pity this page doesn’t have reaction buttons. Even ASI allows you to Like.

      You make me wonder what would happen if the English language, or any other language, were regarded as intellectual property and licence fees were charged for its use. That’s a weak analogy, I admit, but if you wanted your language to take over the world, you’d drop the user fees.

    • I’m sure Microsoft make a big noise about poor countries allowing their IP to be ripped off but I’ll be most of it is for effect. As soon as that country starts getting rich they have a workforce that is comfortable with MS products and then they can start enforcing their licences and get paid.

      Exactly. That’s why educational users could get MS-Office for free for a while.

  6. I’ve never quite believed that Trump is a protectionist. Of course I don’t know, but I would bet the noise is for voters in the rust belt, while the objective is mutually fair trading conditions. Chine is horrendously protectionist, the EU much less so, but still woefully inward-looking.

    One point over-looked: which Chinese really profit from Chinese trade chicanery? The ruling class may own chunks of the West, however the masses are surely being kept poorer as a result (because they have severely limited access to imports).

    • Trump is not a protectionist but a negotiator. In his former life, he has bought foreign goods just as readily as he paid campaign contributions to Democrats. Trump is also, famously, a “winner.” Not that I endorse winning for its own sake, but at the end of the day, he does not want to choke off international trade but achieve something he can portray as a win. So the tariffs are not for the sake of tariffs but a move to elicit a counter-move.

      Trump’s new chief economic adviser, Larry Kudlow, believes that tariffs are taxes, has written recently that they undercut Trump’s signature corporate tax cut, and believes in the free flow of goods and even labor (though in the last year has stated there is a security reason for tighter border control). If he loses the argument, he will be on radio and TV faithfully explaining Trump’s decision – but he will make the argument (rather than threaten to quit).