ECONOMY - The Chinese Raiders

"New Chinese Antitrust Law Threatens America’s High-Tech Leadership" by Daniel Ballon, Pacific Research Institute

As athletes from around the world gather in Beijing for the 2008 Summer Olympic Games, the Chinese government has its eyes on the gold. The gold that China wins on the field of play, however, will pale in comparison to the riches it plunders from America’s most successful innovators. Armed with a vast new antitrust law that went into effect this month, the country is gearing up to extort billions of dollars from leading firms such as Google, Intel, and Microsoft.

The purpose of this new law is clear: take money from American businesses and use it to prop-up state-owned competitors with strong ties to the Communist Party. If foreigners do not submit to this government shake-down, they could be locked out of the world’s fastest-growing high-tech market. At a July 17 hearing, the House Subcommittee on Terrorism, Nonproliferation and Trade addressed the threats to American businesses from rampant “corruption and cronyism” in Chinese markets. According to Chairman Brad Sherman (D-CA), China routinely blocks “access to its markets just by mistreating our companies.”

The new law empowers Chinese regulators to arbitrarily punish foreign businesses that threaten “healthy development of the socialist market economy.” Because “antitrust” can be used to justify nearly any punishment against any company for any reason, countries around the world are rushing to turn America’s most creative firms into their own personal piggy banks. This trend threatens to halt innovation in the rapidly evolving high-tech sector, as explained in a new report from the Pacific Research Institute, Tech Titans or Political Piñatas? How Global Antitrust Laws String Up, Beat Down, and Hold Back America’s Leading Innovators.

Instead of promoting a competitive marketplace, antitrust laws are increasingly used by self-interested bureaucrats to shelter failing products from competition. In order to succeed in this environment, every technology company from scrappy startup to multinational corporation must now siphon resources away from research and innovation in order to fund aggressive lobbying campaigns. According to PRI’s study, computer and Internet firms today spend more on lobbyists than any other industry except pharmaceuticals, insurance, and electric utilities.

As countries around the world assume authority to extort and bully America’s technology leaders, unfriendly governments will increasingly see antitrust as a tool for bolstering their nation’s influence on the international political stage. The time has come for a moratorium on antitrust hostilities. If policy makers do not act to stem the rise of global antitrust abuse, it threatens to dismantle the high-tech pioneers of today and drive away the most innovative entrepreneurs of tomorrow.