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Economy

Keeping One’s Head in the Tech Arena

Oct 08 , 2020
  • Li Zheng

    Assistant Research Processor, China Institutes of Contemporary International Relations

Since summer, we’ve seen an escalation in the conflict between the United States and China in the technology sector. Not only has the U.S. government continued to adopt more coercive and restrictive measures against specific companies, such as Huawei, but it has also begun to emphasize the national nature of companies, products and services in an attempt to exclude Chinese companies from the U.S. digital market entirely.

In August, the U.S. State Department’s so-called Clean Network concept — which targets all of China indiscriminately — called for cutting ties with Chinese companies in five main areas: U.S. carriers, app stores, apps, cloud services and submerged cables. The idea is impractical, as it lacks a legal basis and violates basic U.S business rules. However, it sends a negative signal to the international community that the United States government could seek to quickly cut ties in the digital economy, without regard to commercial interests or policy costs.

Approaches such as the Clean Network have sparked a debate on the future of the global digital economy. Some scholars have argued that they see a resurgence of technological nationalism in the world today that could lead to a new backlash against the globalization of science and technology.

Technological nationalism is an extreme protectionist measure in the science and technology arena. The idea stems from governments’ concerns about the security of information and communication technology products and services. To guard against possible vulnerabilities that could be exploited by other countries, a government may impose blanket restrictions on the adoption of certain products and services in its own market. The concept advocates the creation of “national champions” through incentives and restrictions, while at the same time curbing competition from foreign firms.

Traditionally, the United States has not supported technological nationalism. In 2011, it launched the International Strategy for Cyberspace, which emphasizes internet freedom and the free flow of data, which is the exact opposite.

The Trump administration’s reversal of position on this issue can be attributed mainly to three things:

First, the U.S. has long neglected investment in basic technology research and development. In some frontier technologies, the U.S. technological advantage has begun to weaken, and it’s difficult to overcome more powerful overseas competitors via commercial means.

Second, the U.S. believes that the world’s overall attitude toward digital sovereignty and privacy protection has shifted. The perception that information security takes precedence over commercial interests has become a major trend.

Third, it is more likely that the U.S. can win in industrial competition by limiting competitors’ innovation and overseas markets than by maintaining its advantage through further innovation.

The United States has not only begun to embrace the idea of technological nationalism but also has combined this idea with American hegemony to craft a policy tool that amounts to digital decapitation. According to the New York Times, Huawei was the first target of digital decapitation in the United States. The policy relies on the U.S. monopoly in certain fields of science and technology and characterized by cutting off key supply and financing chains that feed specific companies, disrupting their technological development routes and erecting enormous barriers to survival. The U.S. has been tightening export controls on Huawei’s technology, and continues to signal its intention to exclude Huawei from the global communications market, ultimately inducing Western companies to cut off cooperation as well.

Digital decapitation by the United States has created a dangerous precedent, raising the risk that other countries will follow suit with protectionist measures. Countries that object may not have the same technological clout as the United States, but they can impose market, financial or data constraints on foreign companies — measures likely to be used in retaliation against U.S. technology giants.

If such protectionist measures were to be widely adopted, the foundations of technological globalization would be loosened and the technological hegemony of United States would be diminished.

Technological nationalism and digital decapitation have also made it more difficult for the United States and China to resolve their technology disputes. By targeting China as a whole, the U.S. has further weakened the level of trust between the two sides, making it difficult for China to continue to believe that it can resolve differences in a respectful, businesslike manner.

As an example of this, in the recent U.S.-China TikTok deal, security concerns are not the priority for the U.S. Rather, it wants to use the deal to create a psychological advantage in the ongoing competition, or even to turn the deal into an election issue. Political factors have made this already complex deal even more difficult.

The outrageous approach of the United States also reinforces China’s determination to safeguard the interests of Chinese enterprises and support their independent innovation efforts. It is impossible for China to unilaterally concede to the unjust and unreasonable demands of the United States.

The basic logic of win-win or lose-lose cooperation in sci-tech and innovation has not changed as a result of technological nationalism. Countries still want to foster cooperative relationships with a higher level of strategic trust while protecting their basic security. Technological nationalism may also create a backlash by increasing the urgency for countries to promote international multilateral negotiations in the digital domain.

The governments of China and the United States will inevitably meet at future multilateral negotiations on the digital economy and may find good reason to create workable solutions that will put an end to technological nationalism and keep everyone’s heads on their shoulders.

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