This is my normal point of view, but after thinking more about the industrial revolution in England vs the US, where the US started way behind, stole rapidly, then moved into "improve" quickly too, I wonder if it won't work out for Western companies.

The knowledge won't stay in a bottle. I doubt any treaty in the world could keep an automotive industry from developing in China. Maybe the only potential progressions are (a) let local clones develop while ignoring the market, watch hopelessly if those local clones then go on to innovate further than you or (b) do ventures like this to at least be directly exposed to any potential upside if the local folks surpass you?

There's also a side question here about the difference between physical goods and software. Something like WeChat faces a really steep uphill climb to conquer the west because the starting conditions are so different - I'd have to be convinced to change from our existing ways of doing the same thing, vs being one of the first to enable things in a new market. On the other hand, smartphone clones can sell everywhere with the same hardware (especially once Google gave Android away freely). Japanese/Korean auto manufacturing is more the example for that (and obviously for Tesla), and that happened on its own.

You could survive a house robbery. It'd "work out" for you.

Thats not a meaningful way to conceptualize the event though.

So what is your position? That it would "work out" to ignore China entirely, and just hope that we'll never have to compete with or deal with it?

Sounds like they are following after American heros:

https://en.wikipedia.org/wiki/Samuel_Slater

    Samuel Slater (June 9, 1768 – April 21, 1835) was an 
    early English-American industrialist known as the 
    "Father of the American Industrial Revolution" (a phrase
    coined by Andrew Jackson) and the "Father of the
    American Factory System."

    In the UK, he was called "Slater the Traitor" because he
    brought British textile technology to America, modifying 
    it for United States use. He memorized the designs of
    textile factory machinery as an apprentice to a pioneer
    in the British industry before migrating to the United
    States at the age of 21.

Sure. It was shitty when US did it and it is also shitty now when China does it.

Wasn't some of this prompted by Britain's effective technology embargo on America? I think there was a time we couldn't even legally import good woodworking tools for fear these things would allow the Americans to outgrow Britain.

Didn't the US have an embargo against China? And even when Nixon lifted the embargo, it was only for non-strategic items (which encompassed more than just militarily strategic; factory technology etc. if I understand right).

Also, the founding fathers were no strangers to protectionism.

https://en.wikipedia.org/wiki/Infant_industry_argument

You are talking about something eons ago, before we had wto, which arbitrage against intellectual property theft.

There's a slight difference between someone memorizing how things work, versus whole sale theft of corporate documents, data, complex technical design, etc.

This makes absolutely no sense. If I implement a machine whose design is someones else's protected IP, the law cares not a bit whether I recorded the design details or merely memorized them. And no one else will care either.

You'll note that this was exactly the case with Samuel Slater; the Brits considered him a thief regardless.

No.

Yes.

There, it's even now.

That's like saying there is no difference between a verbal description and a video of something.

No, it's not.

Yes, it is.

It's not stealing, it's forcing you to share your know-how (sometimes patented, but perhaps not in China) in exchange to access to market. That includes training of workers (sort of like graduates joining Google, leaving getting trained, after a couple of years they leave and establish a startup).

The other side of this is takeovers in the West - sometimes they get blocked by government, like quite recently in Germany.

The West wanted cheap workforce, it came with a hefty price that will be paid years later after WTO admission, didn't you know?

Like you mentioned, the problem is that China promised an open market 15 years ago to wto. What we got instead is forced local 50/50 “partnership” and tech transfers. With the Chinese state enterprises winning at the end.

In the case of car manufacturing, it isn’t about getting access to a cheap workforce, but getting access to the Chinese market.

It’s interesting that companies are willing to risk losing their lead to a copycat chasing a 10T economy when us + eu + japan is 40T.

This gets really fun when thinking about media piracy.

The risk of ignoring a market isn't just the lost immediate revenue, it's that that market might develop in ways that are worse for you in the long run.

The canonical can't-argue-against example of pirating a movie or show is "I literally can't even pay to watch this in my country, right now." But once a substantial industry exists to satisfy the people with no legal option, the people in the countries with plenty of legal options have access to it too! And then it turns into "why pay when torrent?"

If Spotify had existed worldwide in 1998, would Napster have been big? If Netflix/Hulu/Amazon/iTunes purchases+rentals had all existed and been global in the year 2000, would movie/TV file sharing have taken off in the same way it did? Or would it be more like app store piracy - I'm sure it exists, but I don't know anybody who bothers, and those things were global and online from day 1.

The comparison to cars isn't direct, but it's not hard to find disruption of physical goods manufacturing sparked by lower-end-at-first competitors arising from a less-served market.

The copycats are coming either way, you might as well make some money in the mean time. Even if it were impossible for copycats to emerge without these partnerships (so ignore domestic innovation, reverse engineering, foreign education, foreign consultants, and espionage) odds are your competitor already partnered so you have nothing more to lose.

I'd say the size is not as relevant as the potential to grow and sell things. (Ignoring the "cheap" labor aspect for a bit..)

Most companies aren’t as desperate for free cash flow as Tesla is. They (literally) can’t afford to ignore China.

If Tesla wanted, they probably can let the Join Venture do some assembly works and keep critical battery, Self Driving SW, etc IP to the main company.

Not much diff than AirBus has join venture in China for some Airplane assembly works. But it certainly didn't share all the Jet Engine technology, Filght Control Software etc with the Join Venture in China.

China knows that it has big market and would like leverage to get more benefit from western companies who like to access that market.

It is just business.

It’s not that big of a market compared to us or eu. Wouldn’t make sense giving up your secret sauce so you can lose in us and eu as well.

China right now is No. 1 for auto production and sales.

There are a large number of existing auto JVs, and I'd bet that it's not much like an aircraft company, where it's completely normal to order a jet engine from a different company than the plane manufacturer. And jet engine technology is subject to export controls.

I looked at the GM JV situation, and it appears that they do manufacture engines in China.

I kind of disagree, only because you don't need to be in China for them to steal your IP. China is known to engage in industrial espionage, both digital and physical, and steals from companies all over the world, and the US in particular. It's probably more effective to bring them in as a partner to mitigate that risk, than it is to try to avoid them.

Also, if you don't agree to this then it provides a competitive advantage to local companies. Its almost like an import tax on information / Intellectual Property instead of money. I don't see Tesla really winning this battle at all.

That is the cost of doing business in China, and it (doing business in China) is voluntary.

Although on one hand it makes me mad, I can't help but feel a bit envious that I don't live somewhere with a government so interested in protecting domestic manufacturing.

Isn't that part of the government's responsibility?

If they really just want to steal wouldn't it be easier if they let Tesla have a factory? As it stands now China is on the way to sell 1 million EVs a year and Tesla is not going to have a factory by 2020 at the earliest. Doesn't sound like a great plan if the plan were to entice Tesla to have a factory so they can steal from it.