For the first time, the United States has publicly announced that it believes China is the world’s leading source of economic espionage. Robert Bryant, U.S. National Counterintelligence Executive, released the report Wednesday, essentially confirming what many government officials have been saying privately for years.

The silver medal goes to Russia, who, in the words of President Vladimir Putin, must “more actively protect the economic interests of our companies abroad.”

For a lesson on how to deal with the issue, the United States needs look no further than its own history. Just after the United States won its independence, it initiated a policy of ignoring the intellectual property law of the United Kingdom. For a fledgling democracy who had just survived a costly war on its own soil, this was vital to survival as a nation.

China is in a vastly different position. There has been no war on its own soil. It is not a fledgling nation in any sense of the word. In fact, it has maintained most favored trade nation status for years with the United States.

The world is also a different place than the one that saw the US ignoring the laws of the country that had oppressed it. It is a global economy. Actions that hurt one country can cripple countries all over the world. It is also an information economy. The world pays for the gigabits flowing through its optical fibers as though they were made of gold.

Should the US create firewalls around China? Stop allowing Chinese students to study at US Universities? Revoke it’s favored trade status? Refuse to let corporations have offices in China? I don’t think any of these things are likely to happen precisely for the reasons mentioned above.

What should China do? It complains about its own technical inferiority while relying on US educators to train its best and brightest. Even if one day they have all of the intellectual property of the United States (and they may already have most of it), they still won’t have the culture of innovation that the US does. Are they willing to change their culture? Should they be concerned about creating a culture that is dependent on others for innovation?

Intellectual Property laws around the world need to change in order to recognize how the world economy has changed. Unfortunately, the pace at which the law changes seems to always lag behind the pace at which technology and Globalization have moved. What we need to do is to picture a world where information moves even faster than it does today. Where ideas are shared even more freely than they are today. Where there is a “Creative Commons” style license for all intellectual property. Where there is incentive for companies to take risk and form new relationships rather than destroy competition and reduce innovation. China has an opportunity to take a leadership role in innovating here and now rather than creating an economic standoff.

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