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US must change China trade deal

It is well known that the Chinese Communist Party steals intellectual property of American businesses and forces the transfer of technology as a condition of doing business in China.

These practices eliminate American competitive advantage and enable CCP companies to produce cheap knockoff products with their low-cost (and suspected slave) labor.

American jobs are lost, and our children and grandchildren are robbed of them as well. We must take a strong stance against these behaviors — even if some short-term pain must be endured.

However, the CCP is not the only entity responsible. Some American companies are complicit in these activities.

William Barr, our attorney general, made exactly this point recently. He noted that some managers of American businesses involved in trade with China are turning a blind eye to the theft of intellectual property and forced technology transfers from their respective companies.

These managers benefit mightily today from their Chinese trade via their cash bonuses and stock options. However, their compensation is not clawed back when America loses its competitiveness in years to come.

In economics, this is called an externality.

Simply, an externality occurs when there is a difference in the private cost of producing something and the cost society incurs to produce it. Usually, these costs are equal. However, when the private cost of producing something does not include all the cost society incurs, we have a problem.

Environmental pollution provides a recent example. Products were produced and sold, but air and water pollution occurred in the manufacturing process.

But the price of the product did not include the cost of addressing the pollution. As a result, private cost was less than social costs.

Government put various incentives and penalties into place to correct the deficiency and air and water pollution are things of the past.

Locally, one could look at the history of paper production in Tyrone as an example of this type of externality addressed by government action.

Let us look again at some American businesses and their trade with the CCP. The managers of some American businesses turn a blind eye toward the theft of intellectual property and forced technology transfers. The managers benefit today from the trade, but do not share in the social cost later.

American society bears that cost now and later, and government must address this situation.

That is why Barr raised the issue. He wanted to alert us that it was taking place. Thankfully, government has some experience dealing with economic externalities.

It dealt with air and water pollution.

It can and should address this issue as part of the restructuring of our trade relationship with the Chinese Communist Party and include American businesses dealing with the CCP.

American jobs will be saved, and our children and grandchildren will be protected.

Gable resides in Altoona. He is occasional contributor to the Mirror’s Opinion page.

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