U.S. must address loss of intellectual property

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Listening to the American political conversation recently, one would conclude that the foremost threats to the U.S. economy are the purchase by foreigners of our “critical infrastructure” and an insufficient supply of unskilled labor to pick our lettuce. These two nonissues have been part of the red-hot debates over the (since jettisoned) Dubai ports deal and illegal immigration.

As is so often the case, where there is heat in American politics, there is no light, and if you want to discover a truly important issue, it is often necessary to look to one that is relatively neglected – such as the protection of intellectual property. The American economy is not built on denying foreigners investment opportunities nor on importing stoop labor, but on the ideas and creations of our minds and imaginations.

Foreign countries go about systematically stealing those immensely valuable intellectual products, and the Bush administration has done very little to try to stop them. With the recent visit to Washington of Hu Jintao – president of the kingdom of intellectual piracy otherwise known as China – the protection of intellectual property should move closer to the prominence it deserves. Hu should be held to account for the low thievery that is a routine part of the Chinese economy.

In an eye-opening study, American Enterprise Institute economist Kevin Hassett and former Clinton administration economist Robert Shapiro document the importance of ideas to our economy. “We estimate,” they write, “that U.S. intellectual property today is worth between $5 trillion and $5.5 trillion – greater than the gross domestic product of any other nation in the world.”

Nearly 10 percent of U.S. GDP is accounted for by copyright industries such as music, publishing and software, together with patent-intensive industries such as computers and pharmaceuticals. Innovation – in other words, new ideas – is the key driver of the American economy, creating “an estimated 30 to 40 percent of the gains in productivity and growth achieved during the 20th century,” according to Hassett and Shapiro.

As Shapiro says, innovation and creativity represents the comparative advantage of the U.S. economy – it is what we do better than anyone else. And it is ripped off, especially in Asia and Latin America. China is a leader: 85 percent of recordings there are pirated; 50 percent of certain drugs are counterfeit; government computers have been known to run on stolen software. The Organization for Economic Development reports that companies around the world lose more than $600 billion a year to piracy, “losses greater than the total GDP of all but 12 countries,” Hassett and Shapiro note. The cost to the U.S. of counterfeiting alone was $56 billion in 2004.

If something tangible were being robbed from us – say, our airplanes or oil deposits – there would be national outrage. Since it is intangible assets, there is a national yawn. The Bush administration has been notably uninterested (perhaps understandably – it has had other things on its plate). Between 1996 and 2000, the U.S. filed 15 intellectual-property cases with the World Trade Organization. Since 2001, it has filed just two, and one of them was filed recently and perhaps under pressure to be more active on this front.

The Chinese are beginning to make better sounds. But assurances are cheap. Every major city in China has markets openly selling pirated CDs, DVDs and computer software. Surely if President Hu’s government can hunt down people for doing Falun Gong breathing exercises, it can crack down on these markets. We shouldn’t believe anything the Chinese say about this issue until they come up with a serious plan to reduce their theft and comply with the intellectual-property protections set out by the World Trade Organization.

The U.S. can’t compete with many countries around the world when it comes to cheap labor and real estate, or sometimes even when it comes to low taxes. What we can still do is out-innovate, -think and -imagine anyone else. We should be protecting that ability like the priceless resource that it is.

Rich Lowry is a syndicated columnist. He can be reached via e-mail at: comments.lowry@nationalreview.com.

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