Kelsey Clarke CMC'22 interviewed Adam Segal on Sept. 19, 2019.
Do you think the term “technology Cold War” is an accurate description for the increase in hostilities between China and the US in the tech and cybersecurity sector?
Generally, yes. I think it is a pretty good term. There are lots of reasons why “Cold War” is a bad term for what’s happening between the US and China given that the Cold War between the Soviets and the US was much more militaristic and, in particular, the most important distinction was that the US and the Soviets had very little economic contact with each other. That is not the case with China and the US given how interdependent the two economies are. So, there are reasons why the term isn’t great but I do think “technology Cold War” really captures how the two sides see a certain number of critical technologies as being important to economic and national security, and how the competition between the two over technology is increasingly global. It also captures how it is increasingly likely that we will see a split into spheres of influence around technology.
The United States and China are splitting further and further apart on technology cooperation. What detrimental effects do “decoupling” pose on the global economy and technological progress? Should national security concerns outweigh economic considerations?
There are two main concerns. One is that it will slow down the overall pace of technological discovery and innovation. That is a negative - both for the US and China, and for the rest of the world. Especially for transnational problems, like climate change or global pandemics, you want as many smart people working together on the same problems and collaborating. There is a real risk that competition over technology will slow down the pace of global innovation. The other risk is for the United States. In trying to prevent the flow of technologies to China and slow China’s rise, the US could possibly inflict self-damage. The risk is that Washington will place too broad controls on technology, which will be ineffective and hamper US industry. The US may overreact on the threat of espionage from Chinese scientists and damage the flow of Chinese talent to the United States. There is a real risk that the US will, in effect, slow itself down while trying to create barriers for China. There are instances where national security concerns do outweigh economic considerations, but those are pretty specific and you have to look at individual technologies and the specific and strategic context. That is a form of the argument that the United States has been making to many of its friends and allies in Europe and other places about Huawei and 5G. Essentially the US is saying, “you may be able to get Huawei at a cheaper cost, but you should also keep national security concerns in mind, and that there are also economic costs to not having great security.” In this case, the US is trying to argue that these countries should put national security concerns over economic considerations.
Considering both international attempts by the US to confront China, as you just briefly mentioned, as well as domestic initiatives such as the congressional reform of CFIUS, how effective is the current U.S. approach to the so-called “tech war”?
It has been effective in drawing attention to the issue. Some of the attempts at preventing the flow of technology have been useful, in particular, the reform of the investment process in the United States---the reform of CFIUS, the committee on foreign investment in the United States. However, I think the big drawback is that there are lots of other countries, in particular the EU, that have similar concerns about Chinese technology policy and the United States has not done a good job at coordinating a broader approach to Chinese tech policy. The administration has engaged in its own trade conflict with the Europeans. The US’s failure at building a comprehensive strategy is probably the biggest negative.
Four major U.S. technology companies—Broadcom, Intel, Qualcomm, and Xilinx—almost immediately stopped working with Huawei, and Google announced that it would no longer provide the Android mobile operating system to Huawei smartphones. Have these measures fatally weakened Huawei’s business?
So far, it doesn’t look that way. Some companies have restarted sales, they have interpreted export control laws so that they are allowed to sell certain things to Huawei. Some companies have basically sold products that they produced abroad, so they argue that they should not be affected by the Entity List. Huawei has been stockpiling a lot of the components that it needed and it has been seeking other sources. Probably in the long-term, the most damaging will be done in the chip sector and on the software side. Huawei has been producing an operating system that it hopes to substitute for Android called Harmony OS, but right now it is not as good as Android’s and it doesn’t have the ecosystem of apps and everything that goes there. That’s probably the biggest long-term threat to its business. For example, Ren Zhengfei, CEO of Huawei, did an interview with the Post last week where he basically said, “Yes it’s damaged us. There has been a downturn in sales but we will survive.”
Considering that the US is incapable of harming Chinese businesses to the point that these corporations can no longer recover, do you consider US attempts to decouple our technology sector from China’s the wrong approach?
It depends on what the goal is. If you are trying to kill Huawei, which perhaps there may be people in the administration that are trying to do that, then it hasn’t succeeded, and that would require international cooperation which the US would probably not get. I think what the US is trying to do in regards to Huawei is punish it for sanction violations, punish it for national security risks, and convince allies and friends not to use Huawei equipment. The measure of success is different along certain levels. The Entity List certainly did damage Huawei and has scared Huawei. But over the long term, it looks as if though Huawei will be able to continue and survive. The strategy to convince neighbors, friends, and allies not to use Huawei has had pretty mixed results: Australia, Japan, and New Zealand have all said that they are not going to use Huawei and others have been on the fence about it. Europe seems to be accepting some of the arguments the US has made but still a lot of it is up in the air.
How is China as a whole responding to America’s tech offensive?
Essentially the response has had several components. First, China has been doubling down on the idea of self-reliance and the need to reduce dependency on American suppliers, especially in semiconductors. The Chinese have been trying to move up the value chain, they have been trying for decades. This year they put $129 billion, if I remember correctly, of funds into semiconductors and introduced new tax breaks for semiconductor manufacturers. They are pushing very hard in that space. They are also looking for new suppliers and they are trying to diversify to producers who they think will not be affected by the US sanctions list or asking suppliers to move their production to China. They are getting ready, and have started to move, to respond against US companies. Two weeks ago, the Financial Times was reporting that Chinese government agencies were told to remove over the next several years foreign software and hardware. The Chinese Ministry of Commerce is allegedly producing their own “unreliable entity list” that they want to use to sanction US companies and organizations. We have also seen a return of cyberespionage, so targeting technologies that are of interest to them through theft.
Is a genuine concern for cybersecurity threats and national security considerations the leading cause behind the US-China tech war or is it merely a tactical gambit in a larger battle over supremacy and hegemony of the digital world?
It is a bit of both. There are different motivations that exist both in China and the US among different policy makers and agencies that are pursuing these things. Both sides have genuine and legitimate concerns about cybersecurity and national security risks, and I think that was what was motivating a lot of first initial steps. However, I do think that there are people who see this as a longer-term game and think of it as a competition for, as you say, hegemony of the digital world, shaping the technologies that underlie that world, and the norms and rules about how the technology is used.
I understand why issues such cyberespionage pose a security concern, but what I don’t understand is why the US does not want China to be a rising tech power. As long as we can get China to follow US-led norms of cybersecurity governance, why does it matter whether they are an equal, or superior, tech power with capabilities comparable to ours?
The problem is that the US has argued that China has not followed those norms. The vision of China’s internet is one that promotes cyber sovereignty and control, and China has generally used cyber for surveillance and increasingly for oppression. We know about the industrial cyberespionage against US targets and the administration has argued that as Xi Jinping has consolidated power, the Communist Party has exerted more and more authority over Chinese companies and Chinese society so that it is impossible to trust Chinese actors. I think that yes, if this was in the ‘80s when the US faced a rising Japan, there was less worry about Japan’s technological capabilities. There was certainly a focus on technology and technology competition, but that was primarily economic because the two sides were allies. However, given the ideological differences between the United States and China and the two governments, then it is very hard to imagine how you build trust.
Do you think it is a losing battle for the US to try to undermine China’s technological rise as a way to safeguard cybersecurity? While there are ideological differences, wouldn’t it be a more effective strategy for the US to push for better international global governance frameworks and norms?
Yes, I think increasingly people have argued that the US can only really slow China down on the margins and it is very hard to do. There are costs to also portraying all of China's scientific progress as a threat to the United States. As we talked about in the beginning, we want to find areas where the two sides can cooperate and address global problems together. I don't think we have been able to do that so far. What we have seen with the Trump administration is a swing in the pendulum about US-China policy that is much more focused on competition. And now that we have established that, it would take both sides to figure out the areas of where they are going to cooperate. But as you mentioned, I think there is a more effective strategy that should be in place - one that focuses more on ensuring the US is as competitive and innovative as possible - that it runs as fast as it can. Second, that it works with its friends and allies on defining these norms for emerging technology and tries to shape China’s behavior so that it accepts these rules. If China doesn't, then the US and its friends can build a broad enough alliance based a widely-shared set of norms that hopefully encompasses important players like Brazil, India, Indonesia, and other developing economies that are important to setting these global standards and norms.
Do you think that the Trump administration’s policy on the tech war with China is a natural progression and reflection of how the international tech environment was progressing and evolving, or do you think he really took a distinct turn from the Obama Administration and what another US president in his position perhaps would have done?
In some ways, the Obama Administration was beginning to get to this space. At the end of the Obama Administration, you have increasing worries about tech competition with China and the pull of technology out of the US to China. So to some extent it is a progression, but of course the policy tools, the kind of broad-trade war and those things, are unique to the Trump Administration.
Is there a middle ground here? What are the best methods for the US to adopt to alleviate increasing hostility in the US-China tech war and co-exist with China? Is it too late to reverse the tech war?
It's probably too late to reverse it, but it's not too late to do the first part of the question which is to contain how far the competition spreads. To figure out which areas we think are most important for competition and ones we can collaborate in. And even in the areas we are going to compete, to engage the Chinese on discussions about norms and behavior. That requires at least a two-step process. One, you need a broad discussion in the US government and the private sector about what technologies are we most concerned about, where do we need to be the most competitive, and what can we do to prevent the flow of technology out. Once you have that discussion, then you can engage with your allies and China about norms and behavior around AI and cyber, and to be firmly clear with them in which areas you are going to compete and where you are going to cooperate. But this requires a great deal of attention and would probably have to be driven out of the White House. It would require resources and flexibility of working with friends and allies which right now is hard to imagine, given the Trump Administration’s attitude towards working with multilateral alliances and the politics in Washington.
The White House from Washington, DC [Public domain]