ARGUMENT: Technology leadershipThe Sino-American Race for Technology Leadership
The reaction in Washington – one of alarm and outrage — to reports that China trawls America’s open innovation ecosystem stealing prized technologies got that much right. AI and quantum computing, to name just two of them, could change the balance of global power. In identifying economic competitiveness, innovation, and democratic principles as core pillars of national security, the Trump team was on the right track, but instead of offering a coherent strategic response, the Trump administration opted for export and foreign investment control laws with broad and vague reach. “This approach was counterproductive to American innovation leadership. It also failed to address the reality that acquisition of U.S. technology is not the only challenge from China or even, arguably, the most important,” Ferial Ara Saeed writes.
The reaction in Washington – one of alarm and outrage — to reports that China trawls America’s open innovation ecosystem stealing prized technologies got that much right. AI and quantum computing, to name just two of them, could change the balance of global power.
Ferial Ara Saeed writes in War on the Rocks that one would have expected Congress and President Donald Trump to mount a strategic response. Instead, they opted for export and foreign investment control laws with broad and vague reach, expanding powers that the administration was already using to block China’s access to U.S. industry. Media reports piled up describing how regulation, actual and anticipated, was diverting capital and talent over to the competition, including China. “This approach was counterproductive to American innovation leadership. It also failed to address the reality that acquisition of U.S. technology is not the only challenge from China or even, arguably, the most important,” Saeed writes, adding:
General Secretary Xi Jinping is leveraging state resources and extending the state’s reach into the economy in pursuit of industrial plans hymning the battle for technology supremacy. Xi has reversed the trend of market liberalization in this strategic sector to win. That is the central challenge. There is reason to believe that this approach will ultimately fail, but accommodating China’s state-guided capitalism no longer makes sense. Admittedly, formulating a strategy is a difficult balancing act. Half of the Chinese economy is open and competitive, a lucrative market where foreign firms want to do business. Likewise, a large American corporate footprint abroad serves the U.S. national interest. U.S. influence over China is also waning as rivalry dominates the relationship.
In identifying economic competitiveness, innovation, and democratic principles as core pillars of national security, the Trump team was on the right track. However,
the administration offered no coherent strategy. It is time to reflect on what happened in order to chart a better path. This should start with sound analytical judgments about China, employing regulation and other pressures but emphasizing bilateral and multilateral initiatives when confronting China’s non-market behavior. Above all, this new approach should ensure that America continues to host the world’s most attractive innovation ecosystem, the best guarantee of winning the technology race.
Saeed concludes
Out-competing and out-innovating China requires that America remain the world’s most attractive innovation hub, enticing the best talent, drawing in the most venture capital, and generating the largest revenues to support U.S. leadership of technology’s newest frontiers. It means continuing to “move fast and break things.” The ethos that made America a technology superpower can keep it so. It also means injecting some strategic realism into U.S. policy. As former Secretary of Defense William Cohen put it, China’s actions have caused the United States to say, “we can’t do business the way we’ve been doing business,” but, “we still have to do business.”
