Perspective: China syndromeChina Will Dominate High-Tech Unless the United States Takes Off the Gloves

Published 3 September 2019

The U.S.-China trade war has affected businesses from Apple to American cherry growers and shows no signs of halting, but the profuse debate around Huawei and the Trump administration’s trade war reveals a fundamental weakness in the American economy: its lack of competitiveness. The United States should continue to defend against potential security threats posed by Chinese firms, but it should not rely on these protections only as a strategy to maintain competitiveness. The erosion of U.S. dominance in other key high-tech, high-value sectors – automobiles, consumer electronics, robotics, AI, energy, biotechnology, electric vehicles —suggest that there are more fundamental problems. “If the United States wishes to maintain its high-tech leadership, it must be willing to invest in the industries critical to success in the twenty-first century,” three experts write.

The U.S.-China trade war has affected businesses from Apple to American cherry growers and shows no signs of halting. President Donald Trump responded with additional retaliatory tariffs and a storm of tweets, demanding American businesses to “immediately start looking for an alternative to China” and leaving the country altogether. At the root of this trade war is the Trump administration’s belief that the economy and security are intrinsically linked, notably in the realm of telecommunications.

Trump contends that the negative impact on the U.S. economy in the short term is “irrelevant” because “somebody had to take China on” and his belief that the U.S. will be better off in the end. Tom Le, Lucy Onderwyzer Gold, and Ryan Levy write in the National Interest that the profuse debate around Huawei and the Trump administration’s trade war reveals a fundamental weakness in the American economy: its lack of competitiveness.

“Although the United States should continue to defend against potential security threats posed by Chinese firms, it should not rely on these protections only as a strategy to maintain competitiveness,” the three write. “The erosion of U.S. dominance in other key sectors, such as automobiles and consumer electronics, suggest that there are more fundamental problems.”

American competitiveness has also declined in other industries. For example, while U.S. robotics development may have peaked, China’s robotics industry is advancing at an incredible rate. Last year China installed 136,000 robots, dwarfing the 34,000 installed in the United States, leaving the United States disadvantaged in worker productivity. In 2026, China is forecasted to become the world’s largest user of robots.

Le, Onderwyzer Gold, and Levy write:

China has been making similarly impressive inroads in artificial intelligence: by 2020, China is expected to surpass the United States in the number of artificial intelligence (AI) research papers published, even when controlling for research quality. In contrast to the United States, where most research is conducted with private funding and oversight, most Chinese research receives government support and funding.

Energy,biotechnology,shipping and electric vehicles—high-tech, high-value industries that have historically been dominated by the United States—have all seen considerable progress by Chinese companies. But these companies benefit from Beijing’s willingness to subsidize high-tech industries. A small glimpse of the subsidies provided by the Chinese government include $58.8 billion in support for electric cars between 2009 and 2017,$435 million contributed to solar this year, and $65.5 billion Guangdong province plans to invest in strategic industries including robotics. When necessary, the Chinese government is willing to bankroll valuable industries to ensure their success and promote international dominance.

Le, Onderwyzer Gold, and Levy conclude:

If the United States wishes to maintain its high-tech leadership, it must be willing to invest in the industries critical to success in the twenty-first century. This investment doesn’t need to be monetary only; it could be regulatory. The United States recently ranked forty-sixth in the world for ease of starting a new business, behind Afghanistan. It could be in human capital; the cost of higher education has ballooned to 11.1 times what it was in 1980. Or it could be in immigration reform; over a third of U.S. venture-backed startups have at least one foreign-born founder. Possible solutions abound, but what is clear is the United States needs to do something. By doing nothing, Washington is ensuring its future technological irrelevance.