Kudlow: Trade ‘Truce’ Doesn’t Mean We’re Backing Down on China Technology Theft

Top White House economic advisor Larry Kudlow said the US wants changes on things like auto trade before it will decide to keep the EU and other allies off the list of countries subject to biting import tariffs on steel and aluminum

The chief White House economic adviser Monday defended the administration’s use of tariffs in trade negotiations and as an enforcement tool, while also stressing that the U.S. would protect U.S. technology from forced transfers to Chinese companies.

“We cannot allow the theft of IP, we cannot allow the forced technology transfers. That’s America’s golden jewels, that’s America’s bread and butter. We produce technology that nobody else does. We invent it. We apply it. That’s why our economy is growing so rapidly. We can’t let that be stolen and that has to be protected,” National Economic Council director Larry Kudlow said in an interview on CNBC’s Squawk on the Street.

The administration wrapped up the latest round of trade negotiations with China this weekend, announcing that it had reached the framework for an agreement under which China would drop barriers to U.S. exports. The president and Treasury Secretary Steven Mnuchin have touted the benefits of the agreement for America’s farmers and producers of natural gas and shale oil.

But some China trade hawks have privately been voicing concerns that the U.S. had lost sight of an issue they regard as just as important as China’s trade barriers: the practice of forcing U.S. companies to hand technology over to Chinese companies as a condition of doing business in the country. Kudlow’s remarks Monday were aimed at assuaging those fears.

“Regarding the forced technology transfers, one of the ways to solve that is to let American companies own their companies in China. Not 49 percent, which forces you to put the blueprint on the table for the provincial governors and then they take all the technology information,” Kudlow said. “We will own them, and that’s a good thing. They will open the doors and changes their rules to permit that.”

Kudlow brought up forced technology transfers without prompting from the CNBC anchors, an indication that the Trump administration wants to make it clear that it remains focused on the issue.

Kudlow, who describes himself as a free-trader, also defended the use of tariffs to force China to open its markets. On Sunday, the Treasury secretary said that U.S. plans to apply tariffs to $150 billion of Chinese goods had been put on hold.

“I’m a free trader. But sometimes selective tariffs go a long way. This kind of negotiation and the president has said this many times. Tariffs are suspended right now, as per Mr. Mnuchin. That’s a good thing. But you cannot remove tariffs as a negotiating tool or an enforcement tool from this process. You cannot do that. And therefore, I don’t think we’re saying tariffs are over,” Kudlow said.

Kudlow praised the framework on trade with China as something that would benefit the U.S. economy.

“I regard it as a growth document. If China lowers their barriers, whether its tariff or non-tariff barriers, we will export enormously. As the president said today, we’ll sell them every farm commodity in the book, we’ll see them all the energy, all the LNG, all the manufactures. The United States is the most competitive economy in the world right now after our tax and regulatory reform,” Kudlow said.

Echoing Secretary Mnuchin’s statement that “trade war has been put on hold,” Kudlow described the trade framework being worked out with China as “a sort of peace treaty.”

“We’re making terrific progress on a topic which everybody knows is very difficult but we must do this. Because the unfair, illegal trading practices have to come to an end,” Kudlow said.