What’s Driving Washington’s Panic Over Chinese Tech

Why does Beijing’s shadow suddenly loom large over nearly every major tech issue confronting D.C. policymakers?

Chinese tech firm ZTE, which has admitted to violating U.S. sanctions law and is accused of spying for China, is one of the focal points of tension between the two powers.
AP Photo/Manu Fernandez
July 9, 2018, 8 p.m.

From the White House to Capitol Hill to the Federal Communications Commission, Washington is suddenly wracked with anxiety over China’s technological rise.

The “Made in China 2025” plan, which aims to transform the country into a high-tech superpower through subsidies and aggressive government intervention, is clearly the catalyst for new trade penalties imposed by the Trump administration on Friday. But Washington’s worries over Chinese tech activity extend far beyond tariffs.

Congress and the White House are battling over the fate of ZTE, the Chinese telecommunications firm that has admitted to violating U.S. sanctions law and is accused of spying for China. A recent, unprecedented foray by the FCC into national security policy is driven by fear over Chinese-built “backdoors” in America’s telecommunications infrastructure. A bill to grant the government greater veto power over foreign investments is squarely aimed at the Chinese tech industry’s efforts to snap up sensitive intellectual property.

The concerns extend to the global race for 5G wireless supremacy, after a perceived Chinese advantage sparked White House plans for a nationalized 5G network and provided an argument for T-Mobile and Sprint to deflect skepticism of their proposed merger. China is also tied into the ongoing debate over data privacy, with lawmakers scrutinizing Facebook’s data-sharing arrangements with Huawei and other Chinese telecom firms. And Chinese advances in artificial intelligence and quantum computing are driving a congressional push for a massive increase in investments for high-tech research.

Some experts say Washington’s fixation on China’s technology policies is long overdue. Doug Brake, the director of broadband and spectrum policy at the Information Technology and Innovation Foundation, said that past policymakers gave short shrift to the way China’s mercantilist policies have shortchanged U.S. businesses, particularly in the tech sphere.

“That was not talked about enough for years,” Brake said. “And now all of a sudden it’s switched over, where it seems like it’s all we can really talk about.”

Brake and others believe that the Trump administration is the central force behind the confrontation with Chinese tech, but that long-simmering anxiety on Capitol Hill and China’s own recent advances are playing key roles. The increased tension stems from a perceived need to both preserve the global competitiveness of U.S. technology and prevent Chinese spies from piggybacking on America’s telecommunications grid. Those dual tracks are mutually reinforcing, experts say, but also distinct enough that tensions could ratchet down on one even as they escalate on the other.

And while most experts see some logic behind Washington’s newfound willingness to push back on Chinese tech, far fewer endorse the government’s strategy—particularly when it comes to trade.

“I think what we need to do is understand that this kind of problem is serious, but a tech Cold War with China isn’t necessarily going to make the U.S. safer, isn’t necessarily going to make our economy more productive,” said Scott Kennedy, an expert on China’s global economic relations at the Center for Strategic and International Studies.

Despite Washington’s newfound obsession, the notion that the Chinese government would bolster its technology industry through spy craft and unfair trade practices is hardly a new one. Josh Kallmer, the senior vice president for global policy at the Information Technology Industry Council, said China has been “abusing the privilege” of being invited into the international trading order ever since it joined the World Trade Organization in 2001.

“China [has been] putting its thumb on the competitive scale,” Kallmer said, “particularly with respect to the highest-value technology products and services that are out there.”

While President Obama may have recognized how the Chinese government’s unfair practices helped boost its tech industry while endangering America’s national security, experts say he did little to crack down on the issue while in office.

“One of the reasons we got into this mess is that China signed up to the WTO and other agreements, and we were overly kind to them in not pushing enforcement and compliance because we didn’t want to hurt their feelings, we didn’t want to ruffle too many feathers,” Kennedy said, adding that the Obama administration “gave [China] the sense that they could come in and do whatever they want without facing significant punishment.”

Some believe that Trump’s election changed that trajectory. “Tensions with China over [intellectual property] protection, market access, hacking, and innovation supremacy are not new; they’ve been core issues for the U.S. tech sector for two decades,” said Bruce Mehlman, a tech lobbyist at Mehlman Castagnetti Rosen & Thomas. “What’s new is an administration no longer satisfied with constructive dialogues that just seem to kick the can down the road for the next guys, and unafraid that a global trade war might derail the U.S. economy.”

Others say the president is partly responsible for increased tensions, but add that the rapid advancement of Chinese researchers in AI and rising congressional fears over China’s use of its telecom companies for espionage mean the escalation this year between the U.S. and China was likely inevitable.

“Certainly many of the national security concerns have arisen out of Congress, and I would have expected those to have arisen in any event,” Kallmer said.

But despite the bluster and frenzied activity, experts say Congress and the administration have so far failed to settle on a coherent framework to challenge China on tech.

“There’s no real collaboration with our international allies, and there’s no overarching strategy within the administration itself,” Brake said. “All of a sudden you have all these independent actors, different fiefdoms across policy areas targeting what they can towards these harmful policies that China has been building for years.”

Kallmer sees some progress on the national security track, noting that legislation designed to strengthen the ability of the Committee on Foreign Investment in the United States to crack down on cross-border tech transfers is being narrowed to focus on only the most sensitive technologies.

“It’s fact-based, it’s rigorous, it’s concrete,” Kallmer said. “And it focuses on the actual harm, rather than broad swathes of activity.”

But he did not say the same for the trade confrontation with China over its technology policy. Absent a major shift, Kallmer and others worry that an escalating spiral of tariffs and counter-tariffs will eventually sever the ties upon which tech companies in both countries depend.

“I think we’re in danger of making this a purely zero-sum game, where the national security concerns drive us into our respective corners and we disconnect our supply chains from each other and have a very fragmented global economy,” Kennedy said.

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