One thing the Biden administration will inherit when it comes into office is a trade and a tech war with China. President Donald Trump put all kinds of restrictions on American companies doing business with China on the use of technology from Chinese companies like ZTE and Huawei, bans on Chinese smartphone sales here and, of course, an executive order banning TikTok and WeChat, which is still in court.
The moves were ostensibly about national security, but also an effort to keep China from developing the next generation of technology faster than the U.S. I spoke with Samm Sacks, a cyber policy fellow at the nonprofit New America and a research scholar at Yale. I asked her what U.S.-China tech relations are like right now. The following is an edited transcript of our conversation.
Samm Sacks: I think it’s just creating this uncertainty. Are U.S. companies going to have to choose that they want to tap into potential funding to bring home manufacturing to the United States? Or do they want to choose to be in China and tap into industrial policy in China? And it’s kind of creating a zero-sum environment for business.
Molly Wood: So what does that mean for the incoming Biden administration? What might we see around these restrictions?
Sacks: I think the Biden administration wants to shift away from a unilateral approach — going to partners and allies in Europe and saying, “Hey, if you don’t ban Huawei from your networks, we’re not going to share intelligence with you anymore.” I think we’re going to still see a hard-line approach on companies like Huawei, but the intent is to do it with other countries. The challenge here with the multilateral approach is there’s a real digital divide across the Atlantic right now, and European officials have basically said, “We’re just as concerned about the unregulated power of Silicon Valley companies, as we are about authoritarian tech coming from China.” One, how do you bridge that digital chasm, and two, there are countries in Europe that are really dependent on Chinese exports and have actually doubled down on investing in R&D in China.
Wood: Interesting. So the Biden administration may attempt to pursue a more multilateral approach, but find that the isolation is kind of embedded? It’s not as global an effort as we thought?
Sacks: Yeah, I think they’re going to have to really walk back from the isolationism under the Trump administration, and also, I think, get our own house in order when it comes to technology policy. European concerns about tech in the U.S. have to do with things like how we’re regulating privacy and antitrust and surveillance here, which in some ways are bigger issues than just China. So we have to find alignment on those grounds before we can begin to work with Europe as a counterweight to China.
Wood: What has China done in the interim to become an even more important supplier to other parts of the world? By placing these restrictions on China, did the U.S. actually force China to kickstart more of its own technology?
Sacks: The Chinese government has long talked about weaning off of reliance on foreign technology. And they’ve thrown billions of dollars and a lot of policy support at industries like semiconductors, but then they haven’t really succeeded at doing it. I think what’s happened though is, ZTE [and] Huawei, these were wake-up calls that said, “You know what, this is a national security issue if companies like Huawei get embargoed from U.S. chips and software, so let’s make sure we do this right.” And we’ve seen a doubling down on China’s efforts to wean off foreign technology. And maybe this time around it’ll be successful. It’s been spotty in the past, though.
Wood: What about strategically growing the tech sector in the U.S. — moving semiconductor development in the United States, being less reliant on that Chinese supply chain? Have we seen that start? Do you expect it to continue?
Sacks: It’s still in really early days. There’s a number of bills making their way through Congress, which would create more incentives for U.S. companies to invest in R&D and manufacturing at home. This is one of the one areas, I think, where a divided Congress might actually make some progress. China has had “Made in China 2025.” “Made in America 2025” may come back around. And particularly if you have a GOP-led Senate, where they’re going to try to block a lot of Biden’s initiatives, American industrial policy might be the one area where they can agree.
Wood: What about TikTok? Do you think we’re going to get to keep it?
Sacks: I think the Biden administration probably thinks there are bigger data security risks out there than TikTok, one. And two, there’s a real concern about the overuse of executive authority. The problem is that it’s really politically difficult to stand down the litigation that’s going on. I think, politically, it will be hard for the Biden administration to withdraw that case, even if they think there’s bigger fish to fry. And there are a lot of problems that would come with setting a precedent, like banning an app like TikTok, but it’s not going to be easy to do. I don’t think it’ll be top of his agenda.
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The highest-profile company caught in the U.S.-China tech war is, of course, Huawei, the big telecom equipment and smartphone maker that’s also a leader in 5G technology. Over the weekend, CNBC reported that Huawei is hoping for a reset in relations under a Biden presidency. And on Friday, the U.S. government granted an exemption to its ban on U.S. companies selling chips to Huawei — sort of. Qualcomm can now sell 4G chips to Huawei for its smartphones, but not 5G chips. Still, analysts said it’s a huge boost for Huawei, but not big enough. The U.S. ban on business and sales has definitely hit Huawei hard. The company said on Tuesday it’s selling its budget smartphone business to a consortium of buyers and focusing on premium smartphones with higher margins. Huawei said it made the decision to “ensure its own survival.”
But there’s some interesting stuff happening with China’s relationships with its own tech giants. You remember China recently stomped on the planned IPO of Alibaba affiliate Ant Group, which would have been the largest IPO ever. There were lots of reasons. Some of them might have involved some badly timed comments by Chairman Jack Ma, but one of the reasons was concerns that Ant Group and Alibaba were creating a big and very powerful parallel banking and financial system that represents a huge threat to China’s state-owned banks, and potentially was creating a financial bubble, according to some analysts. And since then, China has started to crack down on its own tech industry, drafting antitrust guidelines last week that caused a huge sell-off in Chinese tech stocks.
It’s not clear how far the Chinese government will go in preventing tech monopolies, but regular listeners will know I’m obsessed with China’s parallel tech economy, the only one that rivals the size of the U.S. giants, and the idea that China would rein in its tech companies to create fair competition and protect consumers — and let’s be honest, probably its own power. Meanwhile, the U.S. government mostly just holds increasingly performative Senate hearings but doesn’t actually do anything. Just fascinating.