If that were the case, we would all be running Chinese operating systems instead of Windows. MS has more to worry about from Linux then from Chinese copies of Windows programs. This is nothing new,,, years ago in Hong Kong you could buy black market copies of all the popular programs (Lotus 1-2-3, etc) for 25% or less of US retail value. Yet still,,,we create, produce, & sell.
Will free trade solve the trade deficit? Of course. Trade deficit is far less an issue than it's made out to be. It's a red herring for inefficient companies. As the trade deficit increases, the standard of living of average Chinese will grow, as will the Chinese middle class. These Chinese will seek out foreign goods (as they already are), which will send money back to more advanced economies, like ours. The value we get for these products & services will be greater than if we tried to prop up textile production, or whatever, in the United States. Thus,,,, we have the natural equilibrium effect of the free market.
Alternatively, we could prop up inefficient industries,,,, but it would be coming out of our tax dollars.
Remember that the capital to produce can come from only one of two places: private business, or the government. Private business will not invest in inefficient, money-losing industries. And government,,,well,,,,government HAS no money,,,other than that which they confiscate in the form of taxation. When government is allowed to dictate which industries receive that investment, the results have been very poor, as indicated by the historical record. A national industrial policy has proven to be produce great short-term spikes but very poor track records long term. Many recent examples of this in Japan, W. Europe, S Korea, etc. Inevitably, government will end up lending money in irrational ways (again, MANY examples of this). The free market will ensure the free flow of capital, and capital flows to where it is protected.