The Digital ‘Great Game’ – The Technological Frontier in US-China Strategic Competition

The Digital ‘Great Game’ – The Technological Frontier in US-China Strategic Competition

okay hello everyone thank you for uh joining us sorry for the delay we had a technical difficulty but right now uh everything is running smoothly apparently we’re going to give everyone a quick minute to start before we start so give us another minute for everyone to join in and then we start okay let’s start hello and welcome everybody to the institute for peace and diplomacy’s running series on the current landscape of sino-american relations where we look to shed light on the challenges and opportunities for the u.s and chinese bilateral relationship in the 21st century that’s increasingly defined by multi-polarity and the specter of great power politics my name is bijan ahmadi and i’m the executive director of the institute for peace and diplomacy a non-partisan think tank committed to promoting and amplifying innovative thinking in north atlantic foreign policy we stand for dialogue diplomacy prudent realism and restraint principles which we believe are the four cornerstones of sustainable peace in an increasingly complex and dynamic international system so far in this series we have explored the nature of u.s china relations from the perspective of policymakers in washington as well as in beijing focusing on the nexus between the evolving strategic context and geopolitical realities and the shifting perceptions among national security establishment in these two countries additionally we have been examining the place and role of the many smaller countries middle powers as they pondered their position between these two great powers today we’ll be discussing the digital great game and the technological frontier in the context of us china’s strategic competition what are the geopolitical incentives behind increasing competition in the technological domain and what the role what role does such technological race play in the strategic calculus of washington and beijing and in the possibility for escalation and conflict how will the evolving dynamic between beijing and washington colored the nature of issues like cyber security intellectual property protection artificial intelligence and 5g can these two nations constructively work together in areas of common interest or is their rivalry going to impact every aspect of technological innovation in the near future here to bring us insight on these and many more related issues are our distinguished panelists our moderator rebecca um fannin is a leading tech and innovation journalist having written for cnbc and forbes she’s the founder of silicon dragon ventures and author of tech titans of china i leave it for rebecca to introduce the other panelists before we start a quick reminder that all our china discussions are also live streamed on youtube and a recording of each will be available on our youtube channel so i encourage you all to subscribe to the youtube channel uh to uh both watch these discussions and also receive updates about future panel discussions rebecca thanks for being with us today the floor is yours please go ahead all right well thank you for the invitation to moderate this panel i’m glad to be here we’re streaming to you from silicon valley uh from washington d.c uh and from the netherlands so uh we’ve got um a lot of bases covered here so uh let me uh just uh introduce the panelists uh we will be going in alphabetical order by their last name so first up is roger creamers co-founder of digichyna and he is an assistant professor at the university of leyden in the netherlands uh so hello roger uh next is paul triolo managing director global tech policy at the eurasia group in washington dc hello paul and steve weber a professor at uc berkeley uh also faculty director of the berkeley center for uh long-term cyber security security uh so hello steve so what we were going to be doing is uh starting out with a few minutes seven to eight minutes of discussion our presentation by each one of these panelists and uh we are also going to be taking q a from the audience from the online audience so if you have a question you can write it into this q a box here and we will be monitoring it and getting to the best question so make sure your question is a good one uh so we have um until uh 12 45 uh west coast time i’m chiming in here from silicon valley so i’m on west coast time uh so why don’t we start then with uh roger uh roger um are you ready yes i am uh how um thank you very much uh for having me on uh i’m roger kramers and uh as rebecca already very kindly said i spent a lot of my time working on uh chinese technology issues uh both in terms of domestic governance how does the chinese government use technology in order to govern in order to enhance its ability to to govern social economic and political processes but also internationally how it does china’s growing footprint in global cyberspace influence uh all of us um and obviously i’ve learned a lot about that but there’s also something that i’ve learned and that is i think perhaps very important with regard to the question that we’re discussing here today and that is telling that story to western audiences who in very many ways fundamentally lack a basis for that story to be told um and this is uh this is very much where i would like uh to start today because you know as is very clear um there are very many points of potential conflict or points of potential tension competition uh between the west and china and in particular between the us and china um right this is also something where we shouldn’t too easily uh assume that the west is the united states and anyone sort of peddling along in its wake i’d like to think of that in europe we have a little bit of geopolitical independence left um but um i think it’s very clear that in this tension there are obviously conflicts of values there are obviously conflict of hard interests hard economic interests hard security interests hard geopolitical interests but i think if i were to ask the question what kind of challenge china actually represent i would say first of all and before we can discuss seriously any other aspect china is an intellectual challenge because what china’s growing success in technology presents us with here in the west is a world that we never believe could exist and even as it unfolds itself right in front of us we seem to find it exceedingly difficult or even impossible to grapple with its consequences now why is that uh a lot of this again it has to do with storytelling human beings live in stories you know we use stories to structure the way around us and the story that we in the west have been telling ourselves particularly since the end of the cold war is we won we won the cold war and this proves the superiority of our system it proves that the only way in which a country can exist successfully and sustainably and should exist morally is the combination of liberal democracy plus free market capitalism and this is what we ended up believing this is what we started living out at home and technology really came to symbolize that you know when we talk about silicon valley today when we talk about the tech industry it’s really that combination of the triumph of the private sector even though that could be heavily criticized for instance by people like mariana matsukato and uh you know the fact that this brings this enhances liberal democracy right technology is about free speech it’s also about bringing the light of free speech free association information to the dark corners of the world because that fits within that post-cold war narrative where you know we in the west who are we what do we do we beat dictators and we did it in germany we did it with the ussr and with tiananmen essentially we led ourselves to believe that we were going to do the same in china or at least that it would only be a matter of time before communist governance followed a comment the communist party of china followed the communist party of the soviet union into the dustbin of history so for pretty much three decades we’ve been trying to figure out when uh trying to figure out how china would democratize and that’s created an enormous blind spot in the sense that we’ve not paid attention seriously to what is actually going on in china in terms of governance and exactly because we believe that only liberal democracies uh can be both policy competent and morally good you know i’m not going to be dragged into a whole discussion about the morality of the chinese government but i will say that in terms of policy competence they are far more competent than we give them credit for and we overlook their competence to our detriment right we believe that china can only be successful if it cheats and i think you know clearly uh there has been uh there has there have been significant efforts from the chinese side to acquire technology from abroad this is what rising powers do and i would invite anyone to take a look at us industrial history in the second half of the 19th century when exactly the same happened only on slightly smaller scale because we didn’t really have broadband connections that can funnel terabytes of data halfway across the globe in seconds um so what we need so what we are now confronted with is the fact that that naive wonderful tranquil post-cold war period is coming to an end or to put it in sort of you know slightly uh click-baity political science terms we’re coming to the end of the end of history we are now entering the post-post-cold war period um and that in the same way that the post-cold war period was characterized by our view of technology this new period is characterized by the hangover of that view of technology it’s safe to say that both in the us and in europe and i would argue the crackdown we are seeing in china against the private sector is also part of that global movement but i think we can safely say that we’re done with big tech in the way that it exists at present and in europe we’re moving in fairly strongly to regulate just look at gdpr a couple of years ago there’s now the digital services digital markets act uh working its way through parliament there’s been a whole bunch of stuff on online consumer protection um i fully expect some degree of uh anti-trust regulation uh amongst others and obviously the whole debate about section 230 to come in the us as well and that is partially because after this post-cold war party that we had we’re now hungover we got drunk on technology um and now we’ve started to see that that techno optimism was misplaced and china and technologies really become part of that story as well where suddenly digital technology is something to fear because it turns out that this big bad adversary that that china of which we cannot even understand that it still exists because surely it should have democratized by now wheels and so from our own refusal to engage with the complexity of that world suddenly we have this boogeyman sort of running up at us uh from the shadows uh of the loopholes in our own narratives and where i’d like to conclude is this china has never been so naive and this is something that we really need to take into consideration in our techno optimism during that post-cold war period we have not addressed a whole bunch of policy questions that we really should have asked with regard to technology china has you know how do you how do you actually govern content at a point in time where the content space is no longer characterized by scarcity but by abundance and it has done that for numerous very thorny questions and i will be the first to say that one doesn’t need to agree with the answers that china gave to them personally i don’t but at the same time i would argue that the fact that they did puts them in a very strong position to navigate the fairly perilous uh or the the the fairy the fairly murky trajectory of technology to come and here i would like to give an example when people like you and me talk about data protection all we talk about is personal data protection that’s all there is it’s about individual privacy as you call it in the united states it’s about individual fundamental rights as we call it in europe it’s pretty much the same with a different label this is about people and the relationship to the state and the relationship to businesses and then yes we do have a little bit of a regulatory framework for classified government information but that’s pretty much it a couple of weeks ago the chinese government passed or the chinese national people’s congress passed the data security law this is a law that will stand next to the personal information protection law which will likely come out within a month or so and it answers a very interesting question how do we deal with those elements of data whether it’s personal data or any other kind of data industrial data critical information infrastructure data whatever kind of data and the relationship between national security and the public interest as far as i’m aware china is the first and only major digital power in the world who has regulation of that to have regulation on these issues on the books we haven’t even started to ask the question on how we might deal with the question and that means that i mean i’m one of these people who is fairly skeptical whenever we talk about a race quote-unquote with china in very many ways it really isn’t you know however china regulates particular domestic processes has no bearing on how we do that you know there is no explicit link there to me but what i would say is that certainly from a european perspective where the eu likes to see itself as a regulatory superpower one has to recognize that on a lot of these issues china is the only game in town and that will put it in a very powerful position uh in turn of in terms of influencing decision making in other other governments and it may also put it in a first mover position the moment that it comes to global governance on these issues so my big takeaway from having researched chinese technology for over a decade now but particularly talking to western policymakers and audiences is we need to get our own house in order and quickly thank you and i look forward to the discussion well that was wonderful i just would like to follow up with the question that you raised about china being ahead on this regulatory front do you think that the western governments wish that they could do the same sort of uh regulation that china has now or is doing now i’m not sure part of the problem is that governments of the west have sort of gotten themselves into a hands-off mode of thinking certainly in the netherlands we see that a lot but we see it across europe and certainly the united states has some of it where you know the moment we we seem to have gotten a point where we say there is a system the economy and that system works in one particular way that really cannot be influenced that much by politics so really the task of governments is to attend to the needs of that system rather than try to at least mold the parameters within that within which that system can operate and so i think we have a generation of politicians now for whom evasion of accountability has become core to their modus operandi um and so i frankly i think that there are many legislators many uh many uh members in executive uh in executive branches across europe uh and more broadly the western world they’re just scared because they are asked to do something that they’ve never had to do before in their you know in that sense relatively cushy existence [Music] interesting very interesting um thank you very much uh roger well let’s move on uh to paul creolo from the eurasia group uh paul thank you and roger we uh reggie we call that regulatory lag in my world the idea that regulators think there so um if you’ll notice rajesh got through the whole thing without mentioning any company names so in my world um where we are we are a geopolitical risk consultancy and um many of our clients are major players in this uh arena that we’re talking about here um just about any large technology company you can think of we do not have clients in china though uh for for complicated reasons um but we are dealing with these issues sort of at a you know a fairly a little bit below the the level that roger very nicely laid out in terms of sort of the the bigger picture uh here in terms of where the us and china are or the us and china and the western world so i think um when we talk to clients of course we we’re talking about sort of really nitty-gritty things like you know how is this or that export control gonna affect their uh supply chain um in the next you know the next month or maybe the next three to five years uh if we extrapolate out some of the political risks um around um for example u.s china relations and taiwan um so i think if we just step back quickly on i think rajee laid out sort of the bigger picture but i think in terms of sort of the the where we where we are now and how we got here i think it’s important to just touch on a couple of couple of key issues first of all um you know the the the this tech u.s china tech cold war is as i have called it i started tweeting this in in uh january of 2019 uh it turned out that my good friend paul moser at the new york times had coined that term several years before but i did not know about that and so we agreed that we were like scientists on either side of the atlantic that had sort of come up with the same discovery um at the same time uh and so we we uh i i began using that largely because of the of the tech issues coming out of the trade talks the u.s china trade talks which centered around things like market access in china uh forced technology transfer um subsidies uh under under various chinese government programs so that that that if you look at the language just in the section 301 report that came out in 2018 um there’s lots of tech it’s all about technology i mean there are other issues around agriculture and subsidies and other things but this basically focuses on technology so so but what what changed because if this really wasn’t under the obama administration we weren’t really in this world but what changed was the accession of course of xi jinping in 2012 and then over the over the course of five to six years the chinese government rolling out a whole bunch of initiatives that sort of set off alarm bells in the west and this includes maine china 2025 the belton road initiative um the national ic investment fund which former commerce secretary penny pritzker described as a plan to appropriate global supply chains for semiconductors um and then things like the ai development strategy which people still cite as china wanting to dominate ai by 2030 which we can we can talk about but i think is sort of an absurd proposition i talked to the drafters of that six months after that and they admitted that most of it was already overtaken by events um so very aspirational but a lot of these things aspirational as they may be ended up setting off alarm bells um or furthering uh concerns that uh that were of long-standing and then you throw in things like military civ fusion which uh which roger knows knows quite a bit about um the idea that somehow uh the chinese military is leveraging every uh gain in in the in the in the civilian sector for military gain which of course they base on u.s the u.s model um you know you throw that in and and then you have a pretty pretty rich stew of technology concerns so what that means is out of that come up come these memes that have that have grown to be part of what people uh call the washington consensus which which evolved in the last particularly two years of the trump administration and have continued very much intact into the biden era and these are things like okay well there’s there’s um uh china’s industrial policy gives it advance its companies advantages and unfair advantage and the us needs a similar approach in some key sectors so we’ve already seen of course the buy demonstration embark on uh an industrial policy light you could argue and of course the eu and and others are sort of uh all talking about more industrial policy in the tech sector there’s other another meme which is that there’s too heavy dependence on china for supply chains um like rare earths and semiconductors is more complicated but there there still is perception that supply chains centered on china ev batteries is a good example are a national security concern so there’s there’s over dependence on china and so there’s a big effort now again under the biden administration that’s starting in the trump era to deleverage uh u.s dependence on supply chains that originate in china and but i think there’s a couple more memes that are really that that are that are much more sort of long you know deep and probably gonna are gonna last you know much longer than the by demonstration one is that there’s a long-term struggle for these key technologies we’re talking about here like ai 5g quantum computing um and critically though that china is misusing these technologies or more willing to misuse these technologies in the in the in the uh support of government surveillance um uh or um you know exporting these technologies globally for other governments to so these can be used nefariously so that that’s a huge a huge issue techno authoritarianism for example that’s what means and then finally the other issue is goes back to the sort of civil fusion which is that china is leveraging u.s technology and has taken advantage of u.s and other western technology the openness of markets in the west to to um for military gain and and this to a large degree accounts for china’s um military modernization um which is obviously a huge concern when i first started following china 30 years ago china’s military was sort of a joke um and um you know was was largely using outdated equipment and and so in in the course of my my career i’ve seen china go from sort of you know can’t do anything right either in a technology side or or in the in the military side except for maybe nuclear weapons and and and transcontinental missiles to being sort of 800 pound gorilla so as rajya said i think that part of the problem is is that there’s this is a complicated picture in some areas yes there are truths to some of these memes for example but but in other areas one could argue for example the u.s is overreacted to made in china 2025 right if you look at the actual if you look at actual you know where china is on semiconductors um based on base compared to where they aspire to be in made in china 2025 documents there’s a huge gap for example i mean a yawning gap um so in any case what what um you wanted to get quickly we want to get into the 5g area so that’s an area that we obviously do a lot in um because it’s sort of the poster boy for some of these things right because a lot of the concerns around cyber security etc national security have centered on on huawei and and and the uh the chinese companies major role in in 5g rollouts um and so i think um you know this this is something again that sort of evolved over time but it’s an important part of the equation because i think you know quality and zte have been of concern for a long time in the us and congress going back to 2012 but i think 5g the sort of dawn of the 5g era or the imminent dawn of the 5g era sort of crystallized a lot of concerns around huawei partly because of the data issue and the idea that for example you know large amounts of western data the lifeblood of western democracies would be traversing huawei equipment around the world and people had a lot of a lot of issues with that and so so we saw that we saw that 5g issue become you know hugely uh of a huge importance in in in the the trump era and particularly there were two major events here that that i think are important to unpack a bit and look at the their impact in the geopolitical uh issues around them one is the may 19 may 2019 huawei entity list action taken by the commerce department which kind of came out of a little bit out of nowhere um and it came in the wake of the the collapse or the failure of the u.s china trade talks which had been looking pretty promising up until uh up until may of 2019. um and then the second event though which i think is even more important is in may of 2020 the inclusion of a huawei uh uh on and this expansion of u.s export controls through the so-called foreign direct product rule to basically say any company in the world anywhere that is using u.s technology to produce semiconductors on behalf of huawei needs to get a license so this is this was a very unprecedented expansion of u.s uh export controls and the sort of weaponization of supply chains around semiconductor manufacturing equipment as part of this broader u.s china tech conflict and it has a lot of really really important implications um because it really um it disrupted supply chains in in that sector it probably contributed to the global chip shortage if you talk to industry people for example um the figure is usually 10 to 15 of the global chip shortage can be attributed just to that action against huawei i think it might be larger because it changed the thinking among procurement officials at big companies and particularly in china uh and and made them more willing to stockpile semiconductors um and that that contributed to the to the lack of capacity that uh that ended up uh sort of coming together in the pandemic for a lot of other reasons but certainly contributed to it but the one of the most important other other aspects is that it’s drawn taiwan into the into the u.s china conflict in a much more sort of visceral way um and uh we are very concerned for example erasure group about the sort of tail risk of um of this of taiwan and china and the us and that that sort of delicate balance politically being being upset by the tech that some of these tech issues and so um if you think about sitting in beijing and you’re your number one company it’s like an at the apple of the apple and the google of china combined being cut off from producing advanced semiconductors in a province you consider part of china um you get a sense of sort of where of the potential uh geopolitical uh risk around this issue and so um in addition to huawei uh in an early in the biden administration sort of continuing this concern about chinese uh tech modernization and military modernization the the by demonstration put a chinese company called phytium on the entity list now fideman manufactures cpus in taiwan at a very advanced level and uses them in high performance computers in china that happen to model military systems like hypersonic missiles and weapons of mass destruction so there’s a lot of talk in dc now for example about extending that exterior territorial export control law to phytium to cut them off from manufacturing uh semiconductors in the tsmc so what we’re in what i call a sort of a unknown an era of unknown red lines so for example in the u.s taiwan relationship there are a lot of known red lines diplomatic visits and arms sales to taiwan et cetera but now we’re in the technology domain where we don’t know what the what beijing’s red line is in terms of for example cutting off more chinese companies from being able to manufacture uh semiconductors in taiwan which is which of which there are many chinese companies doing that but if you look at the logic behind the u.s export control laws for example um that those could be extended if again if if it’s a national security issue um then the question is you know what is the what what is the the the limits of this kind of export control part of the problem is that the export control system in the us for example was set up in the era of weapons of mass destruction where the national security issue was very clear so if you were shipping beryllium to iran that could be used in a nuclear weapon then you know the industry was very capable of understanding that that was a concern usually these are very small companies but in this era now um under the trump administration and currently under the blind administration there has been no clear articulation of what is the national security issue here and how do you how do you define uh controls over over technology in the era when these are all dual use technologies uh and shine and the real problem is china and china’s technology rise um that’s that’s sort of the unstated national security concern here but it’s never been defined in a way for example that industry can understand uh this uh we have clients for example who were cut off from supplying huawei uh and really we’re just applying commodity semiconductors for for a whole range of business lines in of huawei and they and the licensing process around that has been very chaotic and there’s been not any guidance for example um in the trump era from the white house about what was actually the real concern and what what should what should the licensing criteria be now late in the trump era they finally came down it was 5g so 5g anything going to huawei that could be used in 5g is bad but that’s a hard that that definition is a little bit squishy too right because it could be a semiconductor a commodity semiconductor going to hallways enterprise business that’s used in a cloud data center that’s supporting a 5g network right so it’s very murky and and none of that has really been laid out in any uh in any way any clear way so just finally the the where we’re going here then is in the geopolitical realm is that this u.s china tech confrontation here um particularly when it comes to things like semiconductors is headed into this very complicated and and potentially dangerous area where the u.s government is pushing hard on some of these things uh for example in the export control arena without a really clear strategy around what the end goal is um and this could push china into a corner uh and so uh if if taiwan was cut off for example from all chinese members were cut off from taiwan all chinese companies and there’s discussion of that in washington by the way um then you know this pushes this conceivably could push beijing into corner on taiwan and take away some of the deterrent effect for example which taiwan has which is that both sides are very dependent on tsmc for their advanced semiconductors um and tsm2 is in a very unique situation and that also has translated into this industrial policy uh push which i mentioned earlier which there’s a the growing recognition over the last two years because of these issues that there’s too much dependence on on tsmc 92 percent of advanced semiconductors being manufactured in one place that’s so geopolitically uh fragile is not a good thing and everybody recognizes that the problem is that’s a 10-year problem to solve um by any by any reasonable stretch in terms of just the money and the and the uh and the sort of people and the technologies you you would need to move out of taiwan and put other places to to to really diversify that those supply chains so in any case we’re sort of at the cusp of of all these issues getting more complicated 5g is definitely in the mix we can talk more about the cyber security of 5g if you want um but i think we’re at a really delicate point where the biden administration still has not really articulated what is china’s strategy is other than to continue a lot of the policies that were started in the trump era um and uh there’s a lot of concern that there’s no clear commercial and trade for example agenda yet from the biden team and in the meantime the technology stuff is sort of turning forward and creating some of some big geopolitical risks um so let me stop there and happy to take questions and and talk about these issues uh in more depth as we go forward right uh paul that was great um on so in the 5g realm with huawei uh this one may really represent a genuine risk or is this part of the whole china tech cold war uh that’s going on that it’s a pushback strategy against huawei well it’s a great question it’s a complicated issue um i’ve written pretty a lot a lot a lot on this i think the bottom line is the huawei became an obsession um of the us government you know again long before some of these issues i mentioned long before xi jinping even um came came to power so it’s hard to this what’s hard to disentangle though is you know what is the us government’s concern about huawei if you look at just for example the entity list action and you talk to people in the trump administration you get seven different answers as to why they were put on the email list right it was was it iran’s sanctions was it their bad business practices was it fear that they were dominating uh unfairly the 5g uh marketplace so certainly there are legitimate issues around you know vendors in in a particular space the issue though here is you know what is the what what are the risks and how to reduce the risk so i think basically there are two two schools of thought here one is that you can you can reduce the risk in in 5g networks regardless of who the vendor is by cleverly uh layering security and this is the approach that the uk has taken um the national cyber security center i’ve had a lot of talks with them and they they’re putting in place a very strict law that that mandates um you know very strict security practices from the vendor the operator because again huawei is just a vendor people i’ve heard people say talk about huawei as if it was a carrier it’s not it’s a vendor it’s just supplying the equipment the operator is responsible for for really the overall operation of the network not not huawei but because of 5g and the software nature of 5g the cloud native uh nature of 5g there’s a lot of concern because vendors will be doing a lot of software updates but there’s still lots of ways you can you can um you can make you can maintain the security or and reduce the risk mitigate the risk um through clever clever uh requirements on both vendors and operators so that’s one school of thought then the u.s school of thought and the sort of clean network as we saw in the trump era and the prague proposals is basically you can’t trust a vendor that’s from china i mean the bottom line is then there is if the political and legal system in china are or are taken into account um any vendor from china could be subject to chinese law and required to turn over data uh and so therefore you can you have to have a zero trust policy there so those two those are the two of the two you could argue sort of extremes in this um and i guess i would come down uh the the um with the sort of uk approach because it’s very rigorous and it and it’s it’s going to provide security and 5g regardless of the vendor and they actually started originally with the idea that the chinese government could order huawei to do something nefarious and they still felt like they could secure the network through their approach right and so that’s at least an evidence-based approach to the whole thing the other approach is sort of an ideologically based approach right which basically says we can’t trust china we can’t trust a company headquartered in china because of the nature of the chinese regime and i think that the only danger of that is that it can really and has of course disrupted um the deployment of 5g globally and particularly in europe right right okay very good um steve weber professor at uc berkeley um so hi steve hi rebecca hi everybody thanks again for the opportunity to join this good conversation um agree with a lot of things roger and paul said but i want to take a slightly different angle um and start with 5g and then sort of expand from there so um so when i think about the the 5g i will say race actually um we can argue about whether or not it’s really raised i i think this is much more than a telecommunications network conversation because 5g is actually not about the traditional sort of conventional national security concerns about espionage and back doors um whether those things are present or not i i think those are some of the easy headlines and i think writer pointed to that with regard to you know trump’s phone and so on and so forth 5g to me is a proxy for the competition over the control and use of data and i’ll call it you know ambient data remember people used to talk about ambient computing i think now we live in a world that’s actually about ambient data iot and industry iot and transportation iot and day-to-day life and of course the competition about ambient data is fundamentally a competition about the what’s called the the uh the supply chain for machine learning and artificial intelligence so that’s really what we’re talking about and um for me it it it carries with it memories of the 2000s debate we had with regard to china around access to intellectual property so that came up earlier and i want to kind of use that analogy a little bit um probably people remember the fights over pharmaceuticals music video content even earlier software source code and in fact we lived through those kind of intensive arguments and we saw this like really volatile mix of complaints about business models how do you create and protect value when that stuff can move across borders so easily i remember having a client um a manufacturing company that had lots of facilities in china and we asked about like protecting the source code for their products or in this case the ip behind their products and the answer was look we just know we’re going to lose 10 percent of it a year and our business model incorporates that knowledge so those were the kinds of conversations having about business models there were ethical questions about what’s fair um for example particularly when it came to the pharmaceutical sector was it fair to hold back drugs because of pricing issues there were the historical economic development questions which i think roger pointed to the u.s did exactly the same thing with regard to ip promiscuity and copyright there’s this famous story about how edgar allen poe came to the united states and found it was surprised that all of his books were published and he had received absolutely no royalties from any of them there were security questions about reverse engineering and source code and then fundamentally and most importantly i think there were the innovation questions and roger made this point i think really profoundly and i want to repeat it um when i was in grad school we learned that a state-led economy in a non-democratic country cannot innovate at the technological horizon and is limited to playing catch-up or fast follower which is not really that big of a problem and in some ways might even be advantageous to the united states and i think as rogers argued the last decade has falsified that set of arguments for anyone who was looking closely and that’s a really really profoundly destabilizing and troubling conclusion to come to so let me sort of wrap that back to the 5g i mean each of those elements that i just referred to in vip debates is already present and it’s going to be magnified in the us debate over 5g and the associated data race in the next phase business model for the telecom providers obviously ethical questions that touch on i’ll call it you know the still emotive nationalism associated with telecom networks it used to be every country had to have its own airline now we have this kind of emotive connection to our own telecom networks the historical economic development questions particularly about emerging economies which have a point in arguing that they deserve access to the least expensive infrastructure build out they can possibly get which is usually huawei and then of course the core security questions which are in the news really every day and most importantly ultimately the innovation questions about where the biggest uncertainty and lack of confidence lie i think roger and paul both pointed to that so let me pose that last question sharply i think the simple and the profound um issue around 5g is do we think of it just as kind of an enabling infrastructure with value-add innovation that kind of sits one level or more up the stack you know paul said huawei is just a supplier of infrastructure for the telecom network it’s not an operator does that distinction matter in that case like an innovation friendly policy says look you know just buy those inputs as cheaply as you can from wherever you can it’s a commodity and put your effort energy and resources into building that stuff higher up in the stack on the other hand if you think of 5g as the foundation of a kind of integrated innovation system where ownership and control of that foundational operating system gives you an ongoing advantage in the ecosystem then it’s a very very different story and then you have to control that whole stack and you don’t want someone else selling you quote commodity infrastructure at the bottom now i think today for many people in the united states like the answer to that question even if it’s not posed explicitly is implicitly the latter and i wonder you know maybe we should stop and talk about that as a group um as a provocation let me put it this way um data leaks and espionage backdoors might turn out to be the least important thing about 5g and huawei i think this innovation substrate question could be the most important thing that we should be thinking about a couple years from now and it’s a really fundamentally a question about where people’s beliefs lie about where that line should be drawn what is enabling commodity infrastructure what is integrated foundation for the innovation stack and the fact is and i think this goes to roger’s point that we have a lot of work to do still we don’t know where that line really is and that line moves over time um i’m old enough to remember the 1980s when we thought that commodity memory chips the p whoever led in commodity memory chips would lead the world a decade later you know memory is treated as a commodity low value at input that you just want to get as cheaply as you can wherever you can and it may be the 5g network infrastructure moves in that way um the same direction over the last of the next couple of years um let me end with one last point um and i want to it’s kind of a response to this argument poem made about the biden administration sort of not having a clear policy about what they think the end goal is and where they want to go i kind of disagree with that um and so i want to put that on the table i think um they are bringing a pretty deep strategic mindset and a discipline to the management of the relationship um in a way that um you know some people like might like some people might not like but i don’t get telling you deny it’s there there’s long-term strategic thinking i think exemplified by people like kurt campbell at the nsc i’m eli ratner at dod um and i think what we’re seeing come out of that and paul made many points in this regard is a kind of whole of government approach to the competition which we haven’t seen for a long time and watching it from the outside it’s quite impressive how quickly and how comprehensively this whole of government approach is rolling out uh one of the areas that i watch closely is uh iot surveillance cameras that are sold to like homeowners municipalities school districts hospitals you know reasonable people can disagree whether or not americans should be allowed to buy any of these commerce that are made in china and it’s you know impossible to prove a negative if you start from the presumption that a surveillance camera made in china must have a security risk we can debate that but my point for the moment is you know you’ve got the ndaa placing one set of restrictions on that from the pentagon you’ve got the commerce department entity list placing another set of restrictions on that and now just recently you have the federal communications commission the fcc weighing in and saying you know maybe we’re going to remove authorizations from existing cameras and maybe prevent authorizations from being made in the future this is like a whole of government approach and now new bills introduced in a house in the senate that would do exactly the same thing so my point is that whether or not you agree with the goals i think we are seeing a whole of government approach which is in some sense i think strategically thought of almost like a whole of society competition which is why there is a cold war analogy at play um it it except it’s not just government to government and it’s not just you know nuclear weapons competition or space race competition or other such things are really being driven first and foremost by governments it is a whole of society competition and i think that’s what the next decade is going to be about um i hope we’ll debate this a little bit um i would argue just to finish up this is a significant advantage for the united states actually um and that’s just not a philosophical assertion about free societies and all that it’s actually a very practical one because in a whole of society and whole of government competition that relationship is likely to be able to be managed and evolve i think actually much more cooperatively inside washington dc than it’s going to be managed and how it’s going to evolve in beijing and i think some of what we’ve seen even in the last week between the chinese government and the large chinese technology companies tells us a lot about what that’s going to look like so let me stop there and i hope we can get into some of those issues yeah no that that is true with the china clamp down on chinese tech companies and at the same time the the us is uh doing some similar actions at least with antitrust i think it’s just the opposite though but we can talk about that i think it’s just the opposite conclusion okay let’s get into it uh paul uh go ahead i mean where do you think this is all heading is are we added to this uh decoupling world that everybody talks about of you know dual standards that’s where i take issue with with uh i appreciate the steve’s comments but i think i take issue with a couple of things because i think the first the first thing is that um you know that the strata there is there is no real well articulated strategy i mean um kurt campbell is not a china hand um he’s he’s a longtime japan hand knows a lot about asia um but but there aren’t there aren’t real strategists in the us government understand china and the relationship with china is more is very complicated um it’s not like the cold the big difference between the cold war is there’s huge interdependence so in the middle of all this are china u.s companies and many of those u.s companies success is because they’ve had access to the china market for example so disentangling sort of you know whole of society struggle um here is really i think not not not a particularly useful way to look at it because you know in in the middle of that are are lots of companies and lots of jobs and lots of innovation right i mean the other issue is the extent to which u.s companies and their innovation capacities have been uh you know enabled or or um or you know enhanced by having access to the china market um and so when you talk about the coupling for example one of the big issues is is the market outside of china uh you know in the in europe and in the us and canada for example is there enough capacity there to support um you know technology companies and 5g operators and 5g vendors for example as alternatives to china there’s a huge question about that which nobody has really asked or run the numbers on um and so i think the the the issue of uh of sort of the zero-sum game that’s part of the in some sense part of this uh this you know washington consensus and this idea of great power competition here sort of neglects um the the the tight interdependence um of the us and china in many areas not just high tech but in advanced manufacturing for example and so the question then is how deep is the decoupling that you’re that you’re talking about um who’s going to who’s going to support that um and how deep is it going to go and what’s the impact going to be nobody’s run all i can tell you is nobody’s run the numbers on the impact of that and this and that’s what i mean when i talk about um a lack of strategy here um in in from the biden team uh at least so far is nobody has run the numbers on this um and said you know what’s the real impact of this and how far do you want to decouple um you know it’s it’s it’s because that’s a huge question right i mean and it’s it’s not a trivial one because you know china is a three trillion dollar manufacturing economy um and many many u.s companies um rely on that um in terms of the um the the other issue about about the china the recent what we prefer to call rectification um not a crackdown it’s a rectification of issues with chinese tech companies across a whole number of sectors driven by different issues data security um in the case of dd but other antitrust issues in the case of alibaba but really it’s an effort to align the tech sector with beijing’s priorities and to gird itself for this competition with the us no longer can china afford for example to have you know e-commerce companies competing for for customers and not actually investing in things like deep tech and innovation these are the terms um that people like vice premier leo has using hard tech so they realize they’re in a 10-year you know struggle here to to as the us cuts off access to chinese companies that i mentioned earlier um particularly in semiconductors that they need to really up their game here and so that’s the the reason for some of the the recent the recent actions is is is precisely to to because they can’t writ they’re trying to de-risk across all these sectors um uh their their their the potential exposure to to us um actions and also just to make sure that that investment in china is going in a direction that’s gonna optimize their their innovation capacity so they can compete in this in in this uh this competition so um i see this as sort of a natural evolution in their in their regulatory system it doesn’t mean they want to cut their companies off from us capital markets it just means that they can no longer afford to have certain kinds of business practices in china um uh driven by by by particular kinds of companies and market forces and they’re and they’re sort of you know rectifying that um and it’s messy because u.s investors are are up in arms but that’s partly because the chinese system can move very rapidly um in the regulatory space when they want to so antitrust you know wow they moved fast the us would take 10 years to do that right to do what they did to ant group for example um and so that’s another thing that i think uh people who who who have lived and work in china understand that you know when the signal comes from the top um uh to do something then the system then the regulators can can jump into action um and roger knows this very well and particularly in the data security side which isn’t guess it gets to another i think a very important uh message that stephen mentioned here because data really is this big issue and so the the crackdown or the the rectification of dd and full truck alliance and uh probably not tencent and other listed companies having to go through a cyber security review is because data is a big issue and these companies are all handling huge amounts of data internally uh to china and data is now a national security priority and the us has done the same thing um through cypheus reviews of deals involving personal to us personal data and the new icts supply chain rule for example has a requirement for a review of transactions where there’s a companies have one million or more users which is exactly the figure that the chinese uh cac rewrote its uh its cyber security review guidelines um to match so you know data definitely is a huge issue going forward here and and but i think the um i i don’t think that um that the chinese companies are are going to be a big part of of this of the struggle and i think that um you know they’re they’re up beijing is eager to get them all on the same page along with beijing’s priorities right well given all these issues do you think that china has the opportunity uh to become a global tech superpower or a regional tech superpower it’s a question for everyone right but you could chime in maybe should take this one i i think we underestimate the extent to which it is already uh because again you know uh i think we very often underestimate the extent to which you know when we talk about decoupling what we really should be talking about is unscrambling an omelette uh that has been sort of composed for the last couple of decades so you know when you buy an iphone i’m sure that most people would see it as an american product and certainly a lot of the design and programming work for it has taken place in capertino um but the iphone wouldn’t have been possible without the logistical know-how and the manufacturing expertise that you get in china and which at least for the time being seems indisplaceable uh certainly for for a company like uh like apple and even if it’s possible it’s going to cost billions but it isn’t even that it is also the fact that every iphone and any other smartphone contains um dozens of small improvements and innovations for instance at the level of material science uh the glass in the iphone for instance being developed to break in a particular way but also to scratch in a particular way so that you can you can put it into your pocket next to your keys a lot of the very boring underpinning work for that kind of extremely niche research takes place in china as well and we privileged the steve jobs of this world and sort of the tech evangelist who sort of bring the story to the people but the iphone simply without china would not exist uh and i think you know in the same way that i used to live in britain before that suddenly in the same way that we’ve all become um how shall i put it uh experiential experts in virology over the last year you know the brits are now becoming experiential experts in the complexities of trade policy because through brexit they’ve exposed themselves to that level of unscrambling and omelet slightly different normal but nonetheless so you know the question whether china could become a tech superpower is essentially the is essentially the question whether china could become like the united states the answer is of course no in the same way that the united states could never become like china but together they had created something where you know that that created something that at least for a certain period of time worked and that you know we you know there may be very good reasons for us to make it stop working but as paul already said you know at least let us think through what the consequences are of that are going to be because this is you know the point about strategy is strategy isn’t throwing around expensive think tank approved uh slogans in the dc beltway strategy is identifying a goal identifying a possible secondary goal if you can’t meet your first goal and then and both of these goals need to be feasible and then you need to marshal the resources in order to achieve your goal at the least possible cost now when i asked the question in europe to governments and government officials where do you want to be with regard to china in 10 15 years what is an what is a future that you find both acceptable and feasible right what is realistic as well as doable um then suddenly the soundtrack becomes one of crickets um and you get very very uncomfortable silences um and i’m sure the same is true in the united states as well uh that’s my six-year-old coming to say hi to all of you she uh uh she wants to come and do a wave do a wave that’s great can i just jump in quick and i second uh roger rogers uh comments i just think a real practical example in answer to your question rebecca is the semiconductor manufacturing space so here china has a real problem which is that um it’s companies that are competing in the semiconductor tool manufacturing sector for example and their companies that are manufacturing semiconductors are heavily heavily dependent on us technology and so to the extent that the u.s government for example in the by administration continues to strong-arm the dutch government to prevent asml the leading dutch company and the lithography company from shipping a extreme ultraviolet photography system to smick which smick has contracted for basically freezing china’s domestic manufacturing for example at the between 10 and 14 nanometers depending on on how you slice it you could probably get down to seven nanometers for some uh layers in the process but it’s very very hard to do commercially so china cannot in that in other words become um a super pac a technology superpower without um having a a more robust um semiconductor manufacturing capability or having access uh to to western technology or to you know manufacturing in taiwan or other places so to that extent um the weaponization uh by the us government of the uh semiconductor tool supply chain is is a real constraint on china now there’s some will argue that that’s going to push china domestically so in 10 years for example uh with a real push to develop uh their own you know capability that that in 10 years time they will come out of this you know with a very strong in a very strong position but certainly in the short term there’s no way that they can overcome um for example this cutoff of euv equipment uh there’s just there’s no path to for example advancing uh manufacturing advanced semiconductors um below seven nanometers without having that euv equipment so there’s sort of hamstring here now i’ve argued uh in in other venues that you know for example in looking at the global semiconductor shortage that a a potential national security strategy on the part of the us government for example that that is more holistic and looks at the whole semiconductor sector as a sort of as a sort of national security issue you could make the argument that the u.s government should allow uh that asml equipment to go to smic so that you increase capacity in the system and prevent these kinds of shortages that have already resulted in the loss of jobs in the u.s in the uss auto industry for example and you could take other measures to try to restrict the end user in china for example the military end users in china from obtaining certain semiconductors um but you but you but just cutting off smic for example and again that’s another another policy that’s never been articulated what is the us government goal there in cutting off smic other than uh preventing them from it from manufacturing advanced semiconductors it turns out that for most military applications though you don’t need advanced semiconductor manufacturer semiconductors you can use most of them are between 14 and 20 nanometers you know their heart their radiation hardened et cetera they’re real cutting edge semiconductors used for hpc modeling you could argue have a military a more multi application um but again that that none of that’s been articulated by the administration or even in the trump era it was just hey let’s deny china this most advanced equipment because we’re concerned about china’s rise as a technology power that’s about the extent of the articulation of the strategy there so that’s what i mean um when you know when i talk about no strategy and that and not having a clear strategy there has implications that rebound on the u.s um in this case uh you could argue um through the chip semiconductor sure is costing jobs in middle america right so without a clear strategy are we just going to see an escalation of these u.s china tech tensions um or are there areas of cooperation or collaboration or are those a thing of the past steve yeah so let me comment on that i i mean obviously i take a slightly different view than paul and roger do of like the let me put this the willingness the ex the expressed i know i think over the last year or two the demonstrated willingness of both sides to um unscramble a surprising percentage of the omelette even though it’s quite expensive to do so i agree that nobody has put a aggregate number on exactly what that would cost um i think most firms with deep supply chains that go across the pacific are doing as much as they can to estimate what it would cost for them individually to unscramble those supply chains in ways that um that i think they are foreseeing as a a real plausible move they would need to make i do think in in some specific areas like in semi-conductor production we do have an estimate of what it would cost for example to do a kind of semitech version 2 and substantially subsidize u.s semiconductor production back at home um what it would cost for example for intel to buy global foundries then consolidate those found those factories into one or those fabs but i do think um the question that you asked rebecca is is something that um we’re not going to see that evolution while we put it this way the answer is not going to become clear yet i think that over the course of the next couple years the part of the strategy which says by identifying areas in which we actually really think it’s in the best interest united states to the couple and let me be clear i’m not endorsing that just stating it um that will leave other areas clear where in fact some common interests can be identified and cooperative arrangements could be managed for example carbon reduction or something like this um i think that rhetoric sounds hopeful um i remember hearing a great deal of it during the um late days of the u.s russian cold war i think that that you don’t get to those conversations until you clear away some of the resistance and some of the i’ll put it deep nationalist meanings on both sides around this process of decoupling so although i think what the administration my sense is that the administration would like both of those conversations to be going on in parallel like over here this is stuff we just cannot work with you folks on and in fact we’re going to decouple as much as we can but that doesn’t affect over here we’re going to try to find common interests and do those things together because it’s in everyone’s best interest i don’t think those conversations actually can be joined up yet i think that you know 2022 2023 maybe they get joined up in a more constructive way but but it’s going to be a while yeah i totally and i totally agree with steven i think that we’ve already seen rhetoric from beijing basically saying hey you know you want to collaborate on climate change but then the rest of the the whole rest of the relationship is going to be confrontational and competition um you know we’re not sort of buying into that so beijing has already sort of basically said that that’s maybe that’s a bit of a non-starter so the challenge is to find some other areas and that’s where i think that for example in the trade the trade arena um i’m i’m a little slightly more hopeful in in the in the trump era that the one thing that really worked was the lighthizer leo ha relationship during the trade talks it was a very professional uh negotiation uh leoha brought a very competent team to that negotiation there’s a lot of mutual respect between um those two individuals and their teams so you know in april the heady days of april 2019 which seemed very very long ago now um you know there was we were on the brink of some significant structural breakthroughs with china opening up you know licensing around cloud services which u.s companies by the way still care about um so um you know there was that there there are examples of places where um where there there there could and there still could be it has been could be some cooperation and and moving and to address some of those really tough issues uh that were raised in the trade talks but right now the political atmosphere is so toxic um and you know when when wendy sherman goes to tianjin well first of all the chinese make her go to tianjin and not beijing um and then um you know there’s the us is continuing to sort of lecture and criticize beijing at every turn even though a lot of these issues are are long known and we can’t even get back to letting journalists go back into into each other’s countries or diplomats right there the wall street journal used to have 20 people in china they have two now i think new york times has one now is that a good thing for the relationship over the long term probably not um but we can’t even you know these politically low-cost things like re-establishing diplomatic presences and some of these consoles that were closed and letting journals back and we can’t can’t even get to that as sort of a good will gesture on both sides so i’m a little pessimistic that we’re going to see progress in the near term on the collaborative things but i think you know climate change is not going to go away so um you know there’s a huge need for collaboration on that a
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The Digital \'Great Game\' - The Technological Frontier in US-China Strategic Competition

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