Will US-China Trade Reform Put Technology at Risk?

China and the United States met recently in Washington DC for a meeting to discuss trade practices and make mutual pledges with regards to change commitments that are necessary to improve the status quo. The US-China Joint Commission on Commerce and Trade talks were initiated in 1983 when bilateral trade between the US and China was about $5 billion. Today that number has spiraled to $500 billion. In fact, the world's two largest economies are now each other's second largest trading partners.

For many years, software piracy and other intellectual property rights (IPR) have been major concerns for US software companies where there are more pirated copies than authorized and licensed versions in places like China and India. To address this issue, the Chinese Minister of Commerce Chen Deming pledged to step up the IPR law enforcement, including the software used by state-owned enterprises, banks, and government entities.

Microsoft Office immediately comes to mind as being the suite with an unprecedented number of illegal copies overseas. But where enterprise is concerned, many of the supply chain management tools used in logistics and manufacturing are also copied in spite of copy protection safeguards. These software applications and operating systems cost hundreds of millions of dollars, requiring thousands upon thousands of man-hours to develop but cost the bootleggers pennies to knock-off and distribute. So far China's ability to curb this illicit practice has not been effective.

China is going to lift the TTP requirement as a precondition for allowing market access. Both the US and China also pledged to fight policies of restraining trade through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically. In another major move, the US agreed to relax technology export controls. This is a cause of concern for US interests, but until those "controls" are articulated, we won't know how concerned we should really be.

In the past, when I have tried to send microprocessors overseas, I have had to look up the manufacturer's name and part number against the Federal Trade Commission's not-authorized for export list. If products like microprocessors, microcontrollers, and other advanced components are exported with reduced restrictions, then we may be inadvertently giving up some of our core technologies in terms of development and processing know-how.

Recently, Intel was able to double its transistor count per unit area by using a 22 nanometer technology design that stopped the gate current leakage problems previously encountered on reduced sizing efforts. This was a very costly development and effectively modified Moore's law for semiconductors. We already know we have a massive counterfeit problem with China's cloning and distributing semiconductor parts that have been falsely marked with US manufacturers' names and logos. Chinese foundries and factories can copy almost anything we can produce, and at lower cost. Given China's track record for counterfeiting products targeted to commercial, industrial, and military concerns, unless there are enforceable sanctions as a result of violations of codified trade agreements, I don't anticipate changes any time soon.

On a positive note, every agreement has to start with honest communication between or among parties, so in that light and with China's new leaders preaching "reform," I sincerely hope that they will be as good as their word.

We talk about jobs going overseas, but if we lighten up export restrictions too much, then we will need to talk about national security losses as well. Whatever is decided in these trade commission talks, there is no doubt that the Department of Homeland Security will be involved in every technology export modification proposal. I'm not as much concerned with airport security as I am with the tradeoff between export dollars and common sense.