Transfer and Transition

Over the past years of escalating trade disputes between China and the US, the latter has repeatedly highlighted a practice it considers anathema: technology transfers that US companies need to offer to their Chinese collaborators if they want to do business in the country. Donald Trump railed against them and Joe Biden branded them “unfair.” Across the other side of the Atlantic, European Commission President Ursula von der Leyen explained that such practices by China threaten Europe’s “economic and national security” and necessitate multipronged “de-risking” measures to unlink the two economies. In this framework, technology transfers are being “forced” by a major competitor.

But the demand that foreign investors help lower-income countries move closer to the technological frontier in exchange for facility siting or accessing their labor markets is nothing new. In fact, most now-industrialized countries employed precisely such policies when they were at lower levels of industrialization.