American and European Union’s trade negotiators arrived in Beijing…recently for five days of talks. Businesses and citizens of the affected countries could reasonably assume, from the multitude of prognostic descriptions regarding the themes – issues of the talks, that they were variously (perhaps primarily) intended to reduce the probability that a ‘trade war’ would develop between the U.S. and China.
Thomas Friedman writes…in a May 1, 2018, New York Times OpEd, that the meetings shed significant light on the real issues in play which are, he says, an effort to redefine the conventional rules which have governed the economic and power relationships between the world’s current superpowers, ala America and China. More specifically, Friedman suggests, the discussions – negotiations had little, if anything, to do with disagreements about trade per se, between the countries.
Should Friedman’s perspective be true, which I suspect it is, now, that’s relevant to most everyone residing on planet Earth!
The trade discussions are not solely about...theft, misappropriation, infringement, or product piracy of U.S. company’s intellectual property as some ‘echo chambers’ persist in charactering. I have been variously (professionally) involved-engaged in safeguarding IP and their contributory, underlying, and value-add intangible assets, i.e., intellectual and structural capital especially, since the mid-1990’s.
Yes, during the early – initial era of ‘door opening trade’…countless U.S.-based-owned companies literally raced to the Shanghai and Beijing airports and scattered about the country, many quite naively, in efforts to negotiate and consummate trade deals with Chinese firms. Numerous company’s though, experienced surprising and revelatory challenges, the most significant being that executing much sought after lucrative long terms trade deals, irrespective of size or terms with China, those prognostications would seldom come to fruition as a proverbial ‘cake walk’ so many naively imagined.
Unrepentant theft, infringement, and misappropriation of intellectual property and proprietary business (product production) processes and know how, i.e. intangible assets…was already embedded in Chinese business culture. But, the Chinese did not view this through the same lens as the west in the context of intellectual (privately owned) property.
Had western business persons only studied – acquired awareness and sensitivity for the Chinese business culture first…untold U.S. and European companies may still be successfully operating today. And, it wasn’t just an initial round of companies that experienced that dissatisfaction with the cultural status quo. Instead, it was a continuous stream of company executives trying to ‘do deals’ with and in China, many of whom genuinely believed they would achieve success where their predecessors had wholly failed, but conducting it without the necessary respectful modifications.
My experience suggests, many U.S. companies, in their largely unnecessary rush to gain footholds – be the first in China…overlooked the importance – necessity to acquire operational familiarity with Chinese business culture, particularly…
- the lens which many Chinese business persons viewed ‘products of one’s intellect’ and,
- how such culture-based views would rapidly become institutionalized as government practice, i.e., as requisites to ‘doing business in China’.
Spend time just ‘listening’ to conversations in airport terminals…of passengers awaiting flights back to ‘the west’, as I did, where stories are freely shared describing various ‘I’ve heard it all before’ challenges associated with trying to successfully do business in China.
China’s current and previous ’25-year economic growth plans’ have…to my knowledge, never been state secrets. In fact, they are very much open source. China touts them, as well they should. Perhaps, as Friedman admirably conveyed in his op-ed referenced above, that’s precisely what U.S. business c-suites should be paying – should have paid (more) attention.
Understanding (assessing) China’s ’25 year economic growth plans’…combined with a healthy respect for Chinese business culture, could produce very valuable business strategies for western companies. After all, Ruan Zongze, executive vice president of the Chinese Foreign Ministry’s Research Institute, described these talks as ‘a defining moment for U.S.-China relations…this is about a lot more than trade and tariffs…this is about the future.”
But wait, Friedman describes the current talks as…
• ‘in one corner stands President Trump and his team of China trade hard-liners, whose instincts are basically right, ala, ‘this is a fight worth having now, before it is too late, before China gets too big’, whereas,
• ‘in the other corner, stands President Xi Jinping of China, whose instinct may also be right, ala ‘this is a fight worth having now, because it is too late — China is just too big.
A bolstering insight to the above ‘corner stands’ is as a Tsinghua University trade expert explained to Friedman…
“no one can contain China anymore…China is confident its one-party system and unified society can take the pain of a trade war far longer than Americans can…and, yes, there is a trade imbalance today because China has been investing in its future, while the Americans have been eating their future”.
Another Chinese economist, who Friedman said had worked in the West, summarized the issues in this manner…
“you (Americans) brought China into the world…but, China has changed…now China is in the world, and it is becoming self-propelled.”
Now those perspectives are worthy of reflection…but, such reflection, for those who care to do it, and any business – trade decisions that may emerge from these and subsequent (future) talks, should come with an ‘operating manual’ for understanding that today, it is an indisputable economic fact that 80+% of most company’s value, sources of revenue, profitability, competitiveness, and sustainability lie in – emerge directly from intangible (non-physical) assets, not tangible (physical) assets!
So, successful, profitable, and sustainable trade is dependent…on each business recognizing what and how to safeguard their transaction relevant intangible assets for the duration; that’s what matters!
Michael D. Moberly May 8, 2018 St. Louis firstname.lastname@example.org ‘The Intangible Asset Blog’ (http://kpstrat.com/blog) where attention span and action really matter!