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INSIGHTS into the WORLD / High-stakes tech battle escalating

By Takashi Shiraishi / Special to The Yomiuri ShimbunThe United States is hardening its stance toward China. The Trump administration, citing the alleged forced transfer to China of U.S. intellectual property, began imposing an additional tariff of 25 percent on $34 billion worth of Chinese goods in July and $16 billion worth of imports from China in August. Further, it is considering levying a 25 percent tariff on $200 billion worth of Chinese products.

The United States is also raising the stakes in its showdown with China in other areas. In August, the U.S. Congress passed the Foreign Investment Risk Review Modernization Act (FIRRMA), which stipulates the reinforcement of the Committee on Foreign Investment in the United States (CFIUS). About two weeks later, Trump signed into law the National Defense Authorization Act (NDAA) that incorporates FIRRMA.

CFIUS reviews foreign mergers and acquisitions and, in the case of any transaction that it thinks will threaten or impair national security, recommends that the president block the transaction. The federal body’s powers have been expanded to scrutinize small-scale inward investment, plans to set up merged firms and investment funds. CFIUS now takes a more vigilant stance to prevent foreign acquisition of sensitive U.S. technologies and foreign access to classified U.S. government information.

The CFIUS reform is a clear indication that both Democratic and Republican legislators on Capitol Hill have recently grown more wary of China. In a related development, the U.S. Department of Commerce on Aug. 1 added to its export control list 44 Chinese entities, including companies and research institutions affiliated with the Chinese People’s Liberation Army, because of national security concerns. 

In its first-ever National Security Strategy (NSS) released in December 2017, the Trump administration identified China as a “revisionist power.” The upshot of the NSS regarding China was that Beijing is seeking dominance of the Indo-Pacific region. To that end, the presidential document said, China continues expanding infrastructure investments and trade and reinforcing its military strength so as to “persuade other states to heed its political and security agenda” and “threaten the sovereignty of other nations.” The NSS specifically warned of China’s “efforts to build and militarize outposts [on artificial islands] in the South China Sea” posing military threats to other nations in the area.

Years of engaging and deterring

In the 1990s and 2000s, the U.S. government under President Bill Clinton and his successor George W. Bush continued basically being wary yet accommodative toward China, in the name of “engagement and deterrence.”

But the United States became increasingly wary of China as it declared the South China Sea one of its “core national interests” in 2010, embarking on the construction and militarization of artificial islands, and launching the “One Belt, One Road” initiative in 2013 to establish a China-led economic zone connecting its trading partners from Asia to Europe and Africa along land and sea corridors.

Around those times, complaints among U.S. businesses about “state capitalism” practices such as the alleged theft of U.S. intellectual property began escalating, although they recognized China as a market of great importance to them. The inauguration of the Trump administration prompted all the wariness toward and discontent with China in the United States to surface at once.

What implication do the ongoing events between the United States and China have for the world from a long-term historical perspective?

Since the end of World War II, the United States has advanced “Pax Americana” with the backing of its overwhelming military power, in the name of helping people achieve “a life of plenty and freedom.” Preaching the principles of democracy and the liberal international economic order, the country has spearheaded the international effort, based on maritime alliances with its North Atlantic and Pacific allies, to ensure the stability and prosperity of the international community.

Since choosing in 1978 to proceed on a course of “reform and opening,” China has accepted “Pax Americana” under the “Tao Guang Yang Hui” strategy, based on Chinese leader Deng Xiaoping’s maxim to keep a low profile, hide its strength and bide its time to concentrate its efforts on economic development. In other words, China has enjoyed a “free ride” on the liberal international economic order while retaining both its party-state regime and socialist market economy, of which state-owned enterprises control about 40 percent of the national economy.

Until Trump came into power, one U.S. administration after another remained accepting of the way China was run, as they thought that the Asian country would become a democracy with a market economy as it was integrated into the global economy.

In recent years, however, China has become a hyper-surveillance state in the name of building a “society of plenty and security.” On the international front, the country has been building and expanding its spheres of influence, challenging the U.S.-led international order.

Tech dominance key to the competition

How has the United States responded to such a Chinese challenge?

Of late, we have often heard the phrase “Thucydides’ Trap” — which is named after an ancient Greek historian — to refer to the key strategic question in which a rising power and an established dominant power would end up waging war. In the fifth century B.C., Athens as a rising city-state began challenging the hegemonic state of Sparta. The shifting balance of power intensified their confrontation. Athens and Sparta eventually came to war as the leaders of both camps failed to manage the worsening contest. How can such a trap be averted in today’s world?

I believe the question is misleading. To see why, we only need to ask what comes to your mind when you hear the word “war.”

When Athens and Sparta were at loggerheads, there were only two dimensions of warfare and defense — land and sea. Even in World War II, there were only three — land, sea, and air. Now we have five: space and cyber, in addition to land, sea and air. Today’s defense system is network-centered, combining and integrating all five domains. Artificial intelligence, the Internet of Things, robotics, quantum computing and other technologies are the key to the automation and “smart-ization” of any network-centric defense system.

As such, technologies that are key to industrial competitiveness are imperative for security as well. This means the de facto winner in such a technological battle will be the one that is in a position of overwhelming superiority in both security and industry.

To put it in a different way, the battle for technological dominance has been going on for quite some time. In recent years, the United States has often taken issue with “unfair” threats from China, including industrial espionage by the Chinese, forced transfer of technologies from U.S. companies entering the Chinese market, and investment in U.S. firms that have advanced technologies of their own.

But it should be noted that China is governed in a different way than Japan, the United States and Europe. In Japan and other like-minded countries, it is private-sector companies that develop and have advanced technologies. In China, the state takes the lead in investing in technology and industrial development, as in the case of the “Made in China 2025” initiative to make China a technological superpower. The issue is which side will be superior in advanced and innovative technologies, not whether the Chinese approach is “fair” or “unfair.”

What implication does the U.S.-China tech battle have for Japan? Robotics, IoT, and high-tech materials technology are among the areas that are key to 21st-century industrial competitiveness and security. These are areas where Japanese companies remain highly competitive. There are also Japanese research institutes and universities with research groups that are competitive in those areas. Internationalizing Japanese research institutions, universities and private-sector research and development and promoting their collaboration with research institutions and universities abroad is a must for maintaining and enhancing the competitiveness of Japan’s science, technology and industry.

At the same time, it is wrong for the government to do nothing to protect advanced and innovative technologies Japanese companies and universities have. While upholding the very basic principle of “open science,” Japan should adopt a robust security clearance and industrial security framework and system to protect security-sensitive technologies in line with international norms.

Special to The Yomiuri Shimbun

Shiraishi is chancellor of the Prefectural University of Kumamoto. From 2011 to March 2017, he served as president of the National Graduate Institute for Policy Studies, and from 2007 to 2018 was president of the Institute of Developing Economies-Japan External Trade Organization.Speech

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