Last week Senator Carl Levin and Senator Debbie Stabenow wrote to U.S. Trade Representative Ron Kirk complaining that China is attempting "shakedowns" of American companies in order to obtain their technology secrets.  The Senators from Michigan cited China’s purported attempt to condition the Chevy Volt’s rollout in China on General Motor’s willingness to share the Volt’s technology with General Motor’s Chinese partners.  In her letter, Senator Stabenow claimed that “forced technology transfers are already allowing Chinese companies to use American technologies to compete against American companies in industries such as water purification, high-speed trains and wind turbines…”

While it is possible that Senators Levin and Stabenow have their facts right, they are wrong to call what is going on a “shakedown”.  What is going on between China and U.S. technology companies hoping to do business in China is just business—a haggling over price, a dance as old as time.

There is no question that Chinese companies, with the strong support and active involvement of their government, want to acquire U.S. electric vehicle, energy storage and smart grid technology.  U.S. technology in these areas is the best in the world.  Although Chinese technology is in some areas very good and getting better, U.S. “green” technology has a huge head start and is improving even more rapidly.  If China wants to manufacture top quality electric vehicles and a build a world-class smart grid, it must acquire American technology.

By the same token, American companies that want to make substantial EV and smart grid system sales must go to China.  That is where the market is, and that is where it is likely to be for the next several years.  To make sales, American companies must sell products.  Among the products the Chinese want to buy is technology and know-how.  Technology and know-how are saleable business assets just like physical inventory.  The buyer and the seller must simply agree on a price.

Nothing is wrong with selling technology and know-how.  As I wrote last week, selling technology is what the U.S. does as a country.  It is what we have done for decades, and no one does it better than we do.  The key to making this work as a business model is to be sure that once you have sold the current technology and know-how, you are the first to develop the next generation technology.  That is why government support for technology research and development is so critically important for the long-term economic health of the United States.

But Senators Levin and Stabenow have a legitimate concern.  For while it may be OK for U.S. companies to sell their technology and know-how to China, the terms of those sales will be negotiated and determined by the relative negotiating leverage of the parties to the transaction.  Here U.S. companies, which negotiate deals independently with Chinese counterparts that are often government-owned or government-directed, are at a serious disadvantage.  The leverage held by the Chinese party (i.e., access to a market comprising one quarter of the earth’s population) is huge.  General Motors is a large and sophisticated company that can probably take care of itself.  But for the vast majority of U.S. companies facing requests for technology transfer, it is a one-sided negotiation.   This should rightfully concern Senator Levin and Senator Stabenow, as the “green” technology and know-how being traded away on unfavorable terms may well have been developed with U.S. taxpayer dollars.

There is a useful role for the U.S. government to play here, and one that does not involve the government writing a check.  U.S. electric vehicle, energy storage and smart grid companies need access to the Chinese market for U.S.-made products.  They are willing to sell their products, and their technology and know-how, for a good and fair price.  What they need is the negotiating leverage to get that price.  This is what the U.S. government could provide.  Large framework multi-company deals with China involving the sale of American-made products and the transfer of U.S. “green” technology—such as the smart grid deal I suggested last week—is the key to revitalizing the American economy and leveling the playing field in China.

We have to start thinking more like the Chinese in dealing with the Chinese.  Notwithstanding their thirty year hiatus from capitalism, the Chinese have been negotiating business deals for four thousand years.  It is concerning, therefore, to see our political leaders look at a tough business position, see a “shakedown”, and call for lawyers.  American companies need sales, not investigations and lawsuits.  Let’s call for negotiators, not lawyers, and get some deals done.