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BUILDING GLOBAL PARTNERSHIPS: OPPORTUNITIES IN U.S.-CHINA COOPERATION Introduction Dr. Wessner expressed delight at having Anna Borg to speak at the symposium in place of Under Secretary of State for Economic, Business, and Agricultural Affairs Robert D. Hormats. Under Secretary Hormats, ironically, had been called away to travel to China. Ms. Borg, assistant secretary to the Economics Bureau at the State Department, has a “distinguished career in the foreign service,” Dr. Wessner said. He mentioned that when he tried to reach Ms. Borg the previous day to confirm she could speak on short notice, he asked her office to contact her on her cell phone. “Their answer was that the White House doesn’t like people being called when they visit the White House,” Dr. Wessner said. “I think that gives you some indication of the role Assistant Secretary Borg has.” Anna Borg U.S. Department of State Ms. Borg said she was happy to be invited to speak at the symposium. Ms. Borg noted that Under Secretary Hormats has spent a “tremendous amount of time recently in China” and that many State Department officials were going to China for an upcoming U.S.-China Strategic and Economic Dialogues.1 “This is a prelude to that, which occurs in just a few days.” 1 The U.S.-China Strategic and Economic Dialogue is a series of high-level bilateral meetings established by President Barack Obama and Chinese President Hu Jintao in April 2009 to discuss a broad range of issues between the two nations. 49

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50 BUILDING THE 21ST CENTURY: U.S.-CHINA COOPERATION Ms. Borg added that it was “very enjoyable to hear about all of the different innovations that have come out of China and to hear from our Chinese colleague about some of the thoughts he has in regard to innovation.” During the day’s discussions, “we realize that not only do we innovate, but we innovate very often when we look at challenges that we face,” Ms. Borg said. “Climate change, energy shortages, disease epidemics, famine, and terrorism are just a few that come to mind. Innovation—the development of new ideas and products—is necessary to offer previously unthought-of solutions to these hurdles.” As the world’s largest economy and the world's fastest-growing economy respectively, the United States and China “share an opportunity and an obligation to work together to promote and protect innovation,” Ms. Borg said. “Cooperation between the governments of the United States and China as well as its citizens and businesses are imperative to solve the problems of today and tomorrow.” Three key areas where the United States and China should work together are “creating an environment that favors innovation; maintaining an open, rules-based trade system; and advancing efficient and sustainable energy policies,” Ms. Borg said. To create an environment that fosters innovation, “countries need to get a range of policies right,” Ms. Borg said. These policies include education, research-and-development funding, good governance, transparent regulatory policies, open and competitive markets, and “policies that allow companies to succeed and sometimes fail.” She said nations “must also embrace and enforce an intellectual property system that allows innovators to reap the benefits of their ideas and rewards risk- taking.” Intellectual property promotes innovation, Ms. Borg explained. “Without it there is little or no incentive for companies to produce new products or services.” Copyrights, trademarks, patents, and trade secrets that protect creativity, entrepreneurship, and innovation are key drivers of domestic and global economic growth, she observed. “Therefore, the theft of IP continues to be a concern. Emerging nations like China need to rigorously protect intellectual property rights for their own companies and for foreign companies.” The latter, she added, should be treated “fairly, just as (governments) would want their businesses treated abroad.” The U.S. government would like to work with China’s government “to ensure that the rights of all intellectual-property holders, such as in the software, pharmaceutical, music, and fashion industries, are well-

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51 BUILDING GLOBAL PARTNERSHIPS protected and that laws are consistently enforced,” Ms Borg said. “We hope that China shares these objectives and will work with us in fostering an innovation climate.” She said that such support “will go a long way in deepening” the two nations’ cooperation in innovation. An open attitude toward innovation is essential in today’s global economy, Ms. Borg said. Companies are forming innovation networks that include other firms, customers, suppliers, universities, and government institutions around the world. Their products incorporate technologies from a number of countries and companies. “Rarely are such complex products based solely on the intellectual property of a single business or a single nation,” she said. “Nations that fail to protect intellectual property will find themselves cut off from these dynamic global partnerships because innovative firms will hesitate to invest in or form partnerships with countries where their intellectual property may be stolen.” China and the United States also must work together to promote open trade in order to promote innovation, Ms. Borg said. Both nations have a stake in an “open and rules-based global trading system,” she said. “There is need for frank discussions between our two countries about broader constructive trade frameworks supported by generally accepted rules and international institutions.” Ms. Borg said she recognizes China has made development of local creative industries a top priority. Some of the greatest benefits of innovation, however, come from adopting and adapting the innovations of others. “The imposition of barriers in the form of performance, investment, or intellectual property requirements to achieve this goal will ultimately be self-defeating,” she warned. “In the short run, China's entire economy will be less competitive when it is denied access to the full range of innovative products available in the global market. In the long run, China's own creative industries will be stifled when they are denied the benefit—and it is a benefit—of international competition and exposure to new technology.” The Chinese government’s "indigenous innovation" policies are of particular concern to the United States, Ms. Borg said. “We applaud China's goal to become an innovative society by the year 2020,” she said. But the U.S. government is concerned about the recently introduced indigenous innovation accreditation system and its requirement that government purchases be linked to products developed domestically and Chinese-owned intellectual property. The United States suspects such policies “constitute a step toward import substitution,” Ms. Borg said. The United States wants entrepreneurs and researchers in places such as Silicon Valley and Tianjin to work and benefit together. “That will not

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52 BUILDING THE 21ST CENTURY: U.S.-CHINA COOPERATION happen if there are restrictive and nationally focused procurement, standard-setting, or licensing policies,” Ms. Borg said. “Protectionist policies are unsustainable because they restrict competition and invite retaliation.” China and the United States should work together to identify best practices that encourage innovation, Ms. Borg said. Making it easy for American companies to operate in China and for Chinese companies to operate in the United States is essential. Foreign investment into the United States is becoming “critical to our economic growth and job creation,” she explained. “As China seeks to increase investment abroad, we want to work together to ensure a transparent environment consistent with our regulations and laws.” She pointed out that China also benefits from foreign investment. “The United States seeks fair and equitable treatment for our investors abroad,” Ms. Borg said. “That is the impetus behind our many dialogues and exchanges.” These discussions are conducted within the Strategic and Economic Dialogue, the Joint Commission on Commerce and Trade, and the U.S.-China Ten-Year Framework for Energy and Environment Cooperation. The Ten-Year Framework illustrates how the United States and China can collaborate to advance technological innovation in the energy sector, Ms. Borg said. It provides a forum to promote adoption of highly efficient, clean-energy technology and sustainable use of natural resources. “As the two largest energy consumers and greenhouse gases emitters, both the United States and China have a critical interest in adapting to and mitigating the effects of climate change,” she said. The eco-partnerships that have emerged through the energy framework and other bilateral dialogues, Mr. Borg noted, have paired U.S. and Chinese cities, research institutes, and businesses to work on issues such as clean air and water, natural resource conservation, electric vehicles, and renewable energy. “Successfully meeting the clean-energy and climate challenge will help anchor U.S.-China relations in the years ahead and demonstrate to the world that our two countries can work together to effectively address global issues,” she said. In sum, Ms. Borg said, “the United States and China are, in every sense, building a global partnership.” There still are many areas where the two nations “must form stronger collaborations and come to agreement,” she said. “Nevertheless, I remain confident that, over time, we will continue to expand technological cooperation and collaborative innovation between our two countries.”