Robert Atkinson, president of ITIF, and Dennis Shea, chair of the U.S. China Economic and Security Review Commission, testified today before the House Science, Space, and Technology Committee Subcommittee on Investigation and Oversight hearing on “The Impact of International Technology Transfer on American Research and Development”.

Chairman Paul Broun (R-GA) started the hearing with the fact that many business people were unwilling to testify on the topic because of a fear of retaliation against their businesses by foreign governments and noted that technology transfer may not be optional if a company wants access to a market – a directly opposing business climate to the one that we have in the US.

Atkinson gave an overview of the big picture surrounding technology transfer from the US to other countries. IP theft, weak IP protections, IP laws that are not enforced, foreign state owned companies purchasing US companies, and countries with large markets requiring local joint ventures, compulsory licensing, and other measures in order to access the markets are all drains on the research and development of science and technology of US companies. He said raising awareness of this issue with policy makers is important as well as increasing enforcement via USTR. Additionally, making joint agreements with other countries such as the EU and Japan to act as one against such policies using trade agreements would be helpful.

Shea noted that the US China Economic and Security Review Commission released its 2012 report to Congress in November and that most of his testimony was based on the report. He noted that China is completely honest about its goals of gaining expertise in high tech areas to transition away from a manufacturing economy and that the fastest, easiest way for China to do this is to get the technological foundation from other countries. China’s policies require a joint venture with a Chinese company, often a state owned company, to do business in China and that the technology transfer must be made before such a venture can be made. Such policies are, in the US view, a violation of the WTO compliance that China agreed to when it was accepted. Shea agreed with Atkinson about the need to use trade agreements to band together with other countries to push back against such policies and he also stated that the US should demand reciprocity from China and Chinese companies.

Both witnesses noted that this kind of tech transfer is not voluntary but is required in order to access the markets of countries such as China, India, and Brazil – markets so large that they are not optional in today’s globally competitive environment. However, policy and legislative solutions are not straightforward or easy. Blanket policies forbidding tech transfer to foreign countries would give a significant competitive advantage to companies from outside the US. One possible solution that both stated might be helpful is to create industry antitrust exemptions so that all the companies in a specific industry can agree to keep the technology and research in the US and not be threatened by a competitor gaining market advantage by going to a large foreign market. Atkinson also recommended having research funding agencies monitor where the commercialization of technology they have funded happens in order to see if tax payer investments are staying in the US.

The full written testimony of both witnesses can be found here.