Why Future Trade Between The U.S. And China Is Uncertain
LULU GARCIA-NAVARRO, HOST:
The markets are jumpy. The rhetoric is sharp. And the future of trade between China and the United States is uncertain after a week in which both countries escalated their battle by proposing tariffs. President Trump says China engages in unfair trade practices. And in particular, he's highlighted what he says is China's theft of American intellectual property or IP. Jim Phillips is the CEO of an advanced nanotechnology company, NanoMech. And he supports the president's actions. And he's here to tell us why. Welcome to the program.
JIM PHILLIPS: Good to be here.
GARCIA-NAVARRO: So your company NanoMech is in Arkansas. And you manufacture, as I understand it, lubricants and coatings. What kind of technology does that require?
PHILLIPS: Well, it really requires the very latest in what we call deep-science manufacturing. So we work at the nanoscale, which has in effect reinvented oil and all oil products. And at the end of the day, the world runs on machines. Machines run on oil - and obviously lubricants and coatings.
GARCIA-NAVARRO: So two years ago, you considered starting a China office. And you sent a team over there to discuss it. What happened?
PHILLIPS: Well, we just found out just how tough it is to do business in China because they use so many foreign ownership restrictions and so forth. They introduce things like unfair joint venture requirements and so forth.
GARCIA-NAVARRO: Basically meaning that you have to have a Chinese company partner with you in order to do business in China.
PHILLIPS: Absolutely. And then a lot of times, they take ownership. And so you get into equity limitations that you wouldn't want to do, and you typically wouldn't have to do with anybody else. They pressure you for tech transfer. You know, they kind of hold you ransom if you're going to do business and get access to the Chinese market and so forth.
GARCIA-NAVARRO: What do you mean by tech transfer?
PHILLIPS: Well, tech transfer always involves taking your - what's typically patented - and describe in terms of, you know, how you build something, how you make something, including the know-how. So when they suddenly start talking about requiring tech transfer and also requiring some type of an equity relationship with you just for you to sell your goods into China, that is so abnormal.
GARCIA-NAVARRO: Is it limiting to you though not to have access to a huge market like China?
PHILLIPS: At some point in time, it's probably going to be because as we grow, you know, into a larger company, you've got to deal with China. Of course, in the U.S., we have this thing called the National Nanotechnology Initiative, which is to protect this type of science and technology, which is truly a groundbreaking technology, from foreign interests and foreign control. But we've been told by them that, you know, you almost have to go off the grid. It's hard to protect at some point. So some...
GARCIA-NAVARRO: You mean, you lock it in a room, and it isn't on the Internet essentially.
PHILLIPS: Isn't that amazing? So we had to go back in time basically in order to protect, you know, our best science.
GARCIA-NAVARRO: And you support these tariffs that President Trump has enacted. Do you think that this will change things in terms of intellectual property?
PHILLIPS: Well, yeah because it'll bring them to the table to the extent that they need us more than we need them. I mean, they're exporting over 500 billion to the U.S. every year. We export about 130 billion. I mean, this vast disparity at the end of the day means that something's got to change. And so IP will be on the table front and center. And it's going to make it easier, you know, once you have these agreements in place, and they're enforceable - OK? - for U.S. companies - especially smaller, enterprising, emerging companies to do business in China.
GARCIA-NAVARRO: That's Jim Philips, CEO of NanoMech in Springdale, Ark. Thank you so much.
PHILLIPS: OK, thank you.
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