Press Releases

Washington, DC—Senator Jim Webb (D-VA) today introduced legislation to stop technologies developed with the support of U.S. taxpayers from being given away to China or other countries. Many American companies operating in China are required to transfer their intellectual property and proprietary technology to China as a prerequisite for doing business there.  Many of these technologies were developed using U.S. tax dollars through grants, loans, loan guarantees and other federal incentives in order to make America competitive and create American jobs.

“If taxpayers supported the development of the technology, they own a piece of it and it can’t just be given away,” said Senator Webb. “Federal dollars that go toward R&D funding, loan guarantees, and public-private partnerships in order to help develop the next generation of technologies here are supposed to be making American businesses competitive and generate American jobs—not to help develop other industries, such as those in China.”

“In cases where technologies are developed with the support of the American taxpayer, my legislation prohibits companies from transferring the technology to countries that by law, practice, or policy require proprietary technology transfers as a matter of doing business,” continued Senator Webb. “The transfer of publicly supported proprietary technologies by American firms to China -- and potentially other countries -- clearly and unequivocally places the competitive advantage of the American economy at risk.”

Examples:

• General Electric has transferred valuable aviation avionics technology to state-owned Aviation Industry Corporation of China.  The U.S. government has long supported the aviation industry through procurement initiatives and federal research projects.  The fruits of U.S. taxpayer support may now be incorporated into Chinese commercial airliners, in line with Beijing’s desire to develop an internationally competitive aircraft industry that could rival U.S.-based Boeing.  (Source: The Washington Post)

• Westinghouse Electric has transferred more than 75,000 documents to Chinese counterparts as the initial phase of a technology transfer agreement in exchange for a share in China’s growing nuclear market. These documents relate to the construction of four third-generation AP1000 reactors that Westinghouse is building in China.  U.S. taxpayers supported the development of the AP1000 as well its predecessor, the AP600, through decades of nuclear energy research and development at the Department of Energy (DOE).  Moreover, the DOE Nuclear Power 2010 program provided years of government support for the design and licensing of this reactor. (Source: The Financial Times)

• Ford Motor Company is looking to share certain proprietary technologies for electric vehicles in exchange for selling cars in China.  The electric vehicle sector has enjoyed significant federal R&D funding, loan guarantees, and public-private partnerships funded by U.S. taxpayers.  In 2009, Ford Motor Co. received a $5.9 billion loan guarantee from the Department of Energy to advance its vehicle technology manufacturing program. (Source: The New York Times)

A U.S. Chamber of Commerce report warns that China’s “persistent” intellectual property theft is “compounded by the indigenous innovation industrial policies which compel technology transfers in order to have access to the China market.”

In a January 2010 letter to Obama Administration officials, the heads of 19 U.S. business and industry associations—including the Business Roundtable, the National Association of Manufacturers, and the Chamber of Commerce—wrote of “[s]ystematic efforts by China to develop policies that build their domestic enterprises at the expense of U.S. firms and U.S. intellectual property.”  

Senator Webb’s legislation, offered as an amendment to the Currency Exchange Rate Oversight Reform Act (S.1619), is available here: http://www.scribd.com/doc/67481436/Senator-Webb-Amendment-to-S-1619

A copy of the letter from U.S. business leaders is available here: http://www.bsa.org/~/media/Files/Policy/China/ltr_cnprocurement.ashx

The text of Senator Webb’s speech today on the Senate floor:

Mr. President, I would like to speak about an amendment I introduced today, that in my view gets to the heart of some of the more troubling Chinese trade policies that are threatening the economic security and the long-term competitiveness of our country.

It is well-known that many American companies operating in China are required to transfer their intellectual property and proprietary technology to China as a prerequisite for doing business in that country.  I will repeat that: they are required to transfer this technology.

Despite assurances from Chinese leadership earlier this year that this was no longer “official” Chinese policy, China does continue to be aggressive and overt in its pursuit of foreign intellectual property, as it seeks to develop its own, what it calls, “indigenous innovation.”

Companies like General Electric, Westinghouse, among many others, have been required to transfer proprietary technology to their Chinese counterparts in order to do business there.

If a private company has developed technology on its own, and it makes the business decision to transfer that technology to a joint-venture partner in a place like China -- unless there are national security issues -- we are obligated to respect the free marketplace. They may be seeking short-term profits at the expense of long-term competitiveness, but that is a business decision. But it’s a different case when the American taxpayer has financed the development of these technologies through federal funding assistance, and I do not believe it’s appropriate to allow those technologies simply to be given away to other countries.  

Every American owns a piece of intellectual property that has been financed through taxpayer assistance. Federal dollars that go toward R&D funding, loan guarantees, and public-private partnerships in order to help develop the next generation of technologies here are supposed to be making American businesses competitive and generate American jobs—not to help develop other industries, such as those in China.  My amendment would prohibit that practice.

Last year the United States Chamber of Commerce issued a report entitled, “China’s Drive for Indigenous Innovation.” The Chamber noted that China’s master plan for the development of science and technology “is considered by many international technology companies to be a blueprint for technology theft on a scale the world has never seen before.” The report went on to state that China’s “persistent” intellectual property theft is “compounded by the indigenous innovation industrial policies which compel technology transfers in order to have access to the China market.”

The New York Times recently reported that Ford Motor Co. is looking to share proprietary technologies for electric vehicles in exchange for selling cars in China.  The electric vehicle sector has been developed through federal R&D funding, loan guarantees, and public-private partnerships—costs borne by American taxpayers.  In 2009, for instance, Ford Motor Co. received a $5.9 billion loan guarantee from the Department of Energy to advance its vehicle technology manufacturing program.

We see these types of transfers in other industries as well.  The Washington Post reported last month that General Electric has transferred valuable aviation avionics technology to state-owned Aviation Industry Corporation of China.  Our government has long supported the aviation industry through procurement initiatives and federal research projects.  The fruits of American taxpayer support may now be incorporated into Chinese commercial airliners, in line with Beijing’s desire to develop an internationally competitive aircraft industry that could rival American-based Boeing.  

We see similar examples of technology transfer in the nuclear energy sector.  According to the Financial Times, Westinghouse Electric has transferred more than 75,000 documents to Chinese counterparts as the initial phase of a technology transfer program in exchange for a share of China’s growing nuclear market. These documents relate to the construction of four third-generation AP1000 reactors that Westinghouse is building in China.  

American taxpayers supported the development of the AP1000 as well its predecessor, the AP600, through decades of nuclear energy research and development at the Department of Energy (DOE).  In other words, our taxpayers provided years of government support for the design and licensing of this reactor.

In January 2010, in a letter to Obama Administration officials, the heads of 19 American business and industry associations wrote of “[s]ystematic efforts by China to develop policies that build their domestic enterprises at the expense of U.S. firms and U.S. intellectual property.”  Signatories to that letter included the Business Roundtable, the National Association of Manufacturers, and the U.S. Chamber of Commerce.  

I am introducing an amendment today. It is intended to protect American innovation and American jobs and it is intended to make America competitive and to create jobs here at home.

In cases where technologies are developed with the support of the American taxpayer, my legislation prohibits companies from transferring the technology to countries that by law, practice, or policy require proprietary technology transfers as a matter of doing business.

Specifically, it says: A country, which by law, practice or policy is required to transfer proprietary technology or intellectual property as a condition of doing business in that country will not be the recipient of any of these technologies that were developed with the assistance of the American taxpayer.

Quite simply, Mr. President, if taxpayers supported the development of the technology, they own a piece of it and it can’t just be given away.

The transfer of publicly supported proprietary technologies by American firms to China -- and potentially other countries -- clearly and unequivocally places the competitive advantage of the American economy at risk.

Our trade laws are designed in order to protect national security. But our economic security is also an element of our national security. Intellectual property in the civilian sector should also be protected.  

My amendment seeks to do just that, Mr. President. I believe this is an issue that every Senator can support. I thank the chair and I yield the floor.

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