U.S.-China Economic Relations: Present and Future

By Richard H. Holton; Wang Xi et al. | Go to book overview

for relaxed quotas to continue, and we can expect the American resistance to relaxed quotas to continue as well.

The second source of contention of interest has been the American stance on the transfer of technology to China. Here we witness the consequence of markedly contrasting views of the nature of technical knowledge. The Chinese long considered technical information to be a public good, freely available to all, with no restrictions. Thus technical information moved readily from one unit to another as technical advances that had been developed in one unit were shared with others. In the United States, on the other hand, technical information is considered to be the property of the party developing that information, if it meets certain tests and is therefore patentable. So the American talks of "intellectual property" as a valuable resource. New technology developed by a private firm's research and development staff has been developed at a cost, mostly the cost of the personnel in the R&D activity. Furthermore, typically much of the R&D effort in most firms is wasted, in the sense that many projects have to be abandoned because they are not leading to the results initially expected. Since in the long run the "winners" must pay for the "losers," the cost of developing a winner must include the cost of the losers.

Given that the American firm wants to continue with its R&D efforts and to maximize the wealth of its shareholders, it will guard its intellectual property, using it to maximize the firm's total value. Consequently, it will not readily share it with other parties, either at home or abroad. While Chinese firms often see themselves as not receiving the latest technology from their American joint venture partners, for example, the American firm sees itself as protecting a valuable resource; consequently, the Chinese units can expect to find a continuing reluctance, on the American side, to share technology. This is especially true if the American side fears that sharing technology means that the Chinese partner, once the knowledge is internalized, will abandon the partnership and become a new competitor.

Some transfer of technology is inhibited because of public rather than private policy. The government of the United States does not want advanced technology that might have military applications to get into the hands of governments that are, or might become, "unfriendly." Controlling exports, however, is fraught with definitional and conceptual difficulties. Many American firms that might otherwise export technologically advanced equipment to China are frustrated by their own government's restrictions and consider them to be unwise and unnecessary. This set of problems can be particularly troublesome in the case of products subject to both civilian and military use. Thus electronic air traffic control equipment might be restricted because of its potential military applications. Although the list of restricted items is now considerably shorter than

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