New Op-ed: American company under siege in Asia - by an ally!
American company under siege in Asia - by an ally!
Communist China's rap sheet of trade crimes is as long as a transoceanic containerized cargo ship.
It includes intellectual property theft, export subsidies, state-owned businesses masquerading as private enterprise and knocking off foreign products.
In fact, China is so adept at copying, it didn't even invent its predatory trade practices – it copied them!
Remember that the next time you hear someone say President Trump "should be working with our allies to take on China." Our allies are using the same playbook to steal American technology, dump below-cost-of-production goods on our market and drive American companies into bankruptcy.
Take South Korea for example, please.
In the 1960s, South Korea – a dictatorship at the time – began a program of government-directed economic development.
It declared the country must be self-sufficient in steel, created POSCO (formerly Pohang Iron and Steel Company) and lavished the government-owned company with grants, loans and other subsidies.
South Korea's industries, including shipbuilding, automotives, appliances, construction and engineering, were ordered to support POSCO by purchasing the designated national champion's steel.
A protected home market and government support enabled POSCO to grow into a sprawling conglomerate and the world's largest steel manufacturer.
It didn't take long before POSCO was exporting steel below the cost of production.
The Commerce Department found POSCO guilty of dumping steel into the U.S. at prices far below fair market value numerous times, a tried and true tactic China uses regularly. And it's why President Trump imposed tariffs on steel imports globally.
But dumping is not the only underhanded tactic POSCO is using against American business.
POSCO is abusing joint venture partnerships to steal intellectual property, another page from China's playbook.
Exhibit A is FuelCell Energy, a small U.S. manufacturing company based in Connecticut.
FuelCell is the first and only American company to produce fuel cell electric platforms – low-emission power generators – on an industrial scale. Its intellectual property is based on technology developed in conjunction with the Department of Energy, hundreds of millions of taxpayer dollars and 50 years of American engineering.
South Korea is the biggest market for fuel cell technology. FuelCell entered into a licensing agreement with POSCO in 2007 to expand its reach in Asian markets and meet the Korean government's environmental goals.
But in 2016, POSCO suddenly stopped selling FuelCell products and initiated a series of legal actions to force FuelCell to surrender its intellectual property or face bankruptcy.
POSCO asked a South Korean court to freeze all of FuelCell's assets in Korea. That made it virtually impossible for FuelCell to service its existing generators in South Korea since its revenues from those operations are frozen. FuelCell still runs a 20-megawatt, $250 million plant in South Korea. It needs to spend money to maintain the plant, but its assets remain frozen.
POSCO has also blocked FuelCell from bidding on approximately 1 gigawatt of power-generation opportunities. The Korean conglomerate asked the South Korean government to bar foreign manufactured fuel cells from clean energy programs to keep FuelCell out.
Meanwhile, POSCO refuses to negotiate or even meet with FuelCell.
Why is POSCO doing this? It wants to sell the division that produces fuel cells under the FuelCell Energy licensing agreement, but it can't get the price it wants unless it owns the intellectual property rights to the technology.
At a meeting with the Korean Ministry of Trade, Industry and Energy, FuelCell was told it should just give POSCO what it wants.
The sprawling South Korean conglomerate that benefits from subsidies and other government protections as well as trade with the U.S. is employing the same tactics China is condemned for using.
While Beijing simply orders companies to hand over their trade secrets, POSCO uses – or abuses – the Korean court system to extort FuelCell's IP. The goal is the same.
The United States shoulders the burden of South Korea's defense, deploying combat planes, attack helicopters, Patriot missiles and more than 28,000 troops.
The least South Korea could do in return is play fair and stop trying to steal U.S. intellectual property.
U.S trade officials have already hit POSCO for dumping steel.
Further penalties on the Korean conglomerate could force it to do the right thing, respect our intellectual property and negotiate an agreement with FuelCell.
-Curtis Ellis is Senior Policy Director for America First Policies