Technology Transfer, Development, and Security

For years, disputes over technology transfer have been framed as a question of legality and fairness. Western governments accuse China of forced technology transfer by compelling foreign firms to surrender technology as a condition for market access. China responds that these arrangements are voluntary, contractual, and consistent with international rules.

Both sides insist the law is on their side.

In an important sense, they are both right.

Under the rules that govern global trade and intellectual property, conditioning market access on negotiated technology transfer is not inherently unlawful. The World Trade Organization’s framework, including its agreement on intellectual property rights (TRIPS), allows countries to require joint ventures, foreign ownership limits, or local production when these arrangements operate through commercial choice rather than state coercion. Firms remain free to enter or exit the market, to negotiate the scope of any technology shared, and to receive compensation in return. These rules were not written accidentally. They reflect a development-oriented compromise reached in the 1990s, when trade liberalization was paired with the recognition that access to technology is essential for countries seeking to industrialize.

At the time, the logic was straightforward. In the early 1990s, high-income economies accounted for the overwhelming majority of global research and development spending, while most developing countries had little domestic technological capacity to speak of. That distribution has shifted sharply. China alone now accounts for roughly a quarter of global R&D expenditure, and several middle-income economies host advanced manufacturing and innovation ecosystems that barely existed a generation ago.

The difficulty lies in the fact that international economic law still treats all states as formally equal when it comes to technology transfer, even though the economic effects of these policies now vary dramatically depending on a country’s technological position.