Beyond the Gucci knockoff:China's industrial espionage

Goodyear headquarters in Akron, Ohio.

Washington, DC. In March this year two engineers working at a tire plant in Tennessee were charged with stealing trade secrets from Goodyear Tires and passing the information along to a Chinese company.

The Chinese tire manufacturer paid the two to enter a Goodyear facility under false pretences andto use cell phones to photograph processes and technology that it could then use to make similar tires without going through product development - a scheme that could lead to Goodyear having to unfairly compete with a knock-off of its own proprietary design.

"Stuff is really cheap when you steal it," says Kerri Houston Toloczko, AAM Senior Analyst and former member of the U.S.-China Economic and Security Review Commission (USCC).  "Why waste years and millions - or even billions - of dollars on research and development when you can pay far less by obtaining critical product information from spying and theft?"

American consumers are familiar with China's designer knock-offs and pirated DVDs, but its industrial espionage goes beyond breaking intellectual property laws for consumer goods.  According to Toloczko, China's plan to steal propriety information is organized, strategic, and a danger to U.S. interests.

"Make no mistake, China's wide-reaching and aggressive industrial espionage is not just about tires, handbags or movies; it is an enormous threat to our national and economic security," Toloczko notes.

She adds, "In the mid-1980s, China adopted a specific plan to steal emerging technology from other countries, and to financially reward any Chinese entrepreneur or manufacturer who could take the stolen information and turn it into a viable product or system."

Although many of the stolen products and technology come from the consumer or business sector, many of these items are "dual-use" technologies that the Chinese use in military applications as well.  In 2007, a former Motorola employee - a naturalized American born in China -- was caught at Chicago's O'Hare airport with $600 million worth of proprietary computer files and paperwork stolen from her employer, $30,000 in cash, and a one way ticket to Beijing.

She had been paid for the theft by a Chinese technology company, and according to the indictment, the stolen material was classified military communications and combat use tactical technology.

"The Motorola case is just one example of the on-going theft of sensitive information occurring in the U.S. at the hands of Chinese agents," according to Toloczko.  "These include government defense and technology contractors, private industry and even within our military itself.  Stolen information has military, biotech, software, energy and agricultural applications.   American products brought to China or made in China by American manufacturers are regularly "reverse-engineered" and marketed there with no consideration of patents or intellectual property laws."

"American law enforcement and security agencies need to pay closer attention to this activity and more aggressively and publicly pursue prosecution of these high level bandits," Toloczko concludes, "before we have our economic and national security interests stolen from right under our collective noses."

The Alliance for American Manufacturing (AAM) is a non-partisan, non-profit partnership forged to strengthen manufacturing in the U.S. AAM brings together a select group of America's leading manufacturers and the United Steelworkers. Its mission is to promote creative policy solutions on priorities such as international trade, energy security, health care, retirement security, currency manipulation, and other issues of mutual concern.