Mutual distrust: fostering cooperation in tech competition

In the last few years, the world has witnessed the technological cooperation and competition that defines the virtues of global innovation which may gradually evolve into a vicious battle. Beyond the fierce competition of economic power, this competition has also become a debate on the superiority of political regimes, a concern of national security, and part of a greater war of values. It is a runaway train; there is little that can be done to stop it – all we can do is try to maintain control.

The end of the Trump administration does not mean the end of technological or economic competition between the US and China; in fact, the next phase of this competition is a seamless continuation from the past administration. President Biden has raised the science advisor to a cabinet-level position, showing just how crucial innovation is to America’s national interest. Meanwhile, the new US secretary of state, Antony Blinken, remarked that there is;  

“…an increasing divide between techno democracies and techno autocracies. Whether techno democracies or techno autocracies are the ones who get to define how tech is used…will go a long way toward shaping the next decades.” 

It is clear that for the new US administration, technology is still a vital geopolitical force. 

US turn to tech multilateralism 

Where the Biden administration differs from that of Trump is that the Biden government emphasises the significance of alliances and the importance of international organisations in foreign policy and technology. 

President Biden has already engaged with allies and partners on emerging technologies like 5G and artificial intelligence –with China’s advancements firmly in mind. The American AI Initiative recognises partnerships with US allies and partners represent a key “source of strategic competitive advantage.” More recently, the final report of the National Security Commission on Artificial Intelligence calls for the Quad, NATO, and sympathetic nations to establish an “Atlantic-Pacific Security Technology Partnership,” and Secretary Blinken has also supported efforts for a ‘D-10’ group of democracies to cooperate on 5G and vulnerable supply chains.  

These American efforts have been met with support in other western nations. 

On the EU side, the European Commission proposed a ‘New EU-US Agenda for Global Change’, suggesting setting regional and global standards for AI rooted in EU values. The European Commission also proposed a ‘Transatlantic Trade and Technology Council’ to set joint US-EU standards on new technologies, including 5G mobile networks, artificial intelligence and data flows. The EU High Representative for foreign affairs Josep Borrell claims that these efforts are to support multinationalism. However, the Chinese could hardly believe the proposal intends to encourage cooperation between the EU and China, especially when “global standards rooted in EU values” are stated goals of the council.  

In Australia too, the Quad Tech Network was established to “support research and promote engagement with academic and think-tank partners on cyber and critical technology issues that reflect Australia’s interests as a liberal democracy committed to the international rules-based order”. China has every reason to understand such efforts are to help establish a NATO-style regional technology alliance countering China.  

All these together reflect that traditional allies and partners are tightening cooperation to fight against non-democratic countries that do not follow the international rules-based order. Though disagreements still exist between allies and partners, China is facing a relatively united alliance, at least when it comes to “like-minds”, “same values” and the “international-rule based order”.  

China’s intensifying tech battle  

While Trump sought to hedge China on his own, American’s return to cooperative foreign policy stances substantially narrows down space for China to win any flexibility or possible dominance on standards and regulations. These international organisations, including G20, will be critical platforms used to influence Chinese policies and practices, all under the flag of protecting and respecting values such as autonomy and privacy. 

For China, this lack of flexibility will substantively strengthen Chinese determination to fight for supremacy in the latest innovations. The slogan of “catch up and surpass” and the slogan of “self-reliance” have mass technological mobilisation as their aim. China’s 14th five-year (2021-25) plan clearly emphasised innovation, including in AI, quantum computing, integrated circuits, genetic and biotechnology research, neuroscience, and aerospace, among others. Premier Li Keqiang said that China would increase research and development spending by more than seven per cent annually over the five years between 2021 and 2025 in pursuit of “major breakthroughs” in technology. In addition, fiscal policies will be revised as well to support the flow of venture capital into startups, and to encourage research and development.  

Such policies would definitely lead to more harsh criticisms on the Chinese model of massive state investment to support strategic industries and China’s breaking the rules of fair trade and market economy. However, under increasing pressure, it is rational and inevitable for China to make such decisions and respond accordingly. 

Regarding specific technologies, given the significance of 5G networks, it is unimaginable that the Biden administration would call an end to sanctions. Further, the competition over 5G infrastructure will not be limited to the US and its allies, but also expand to large numbers of developing countries. US allies and partners will become more active in expelling Chinese technologies out of other regions.  

These efforts will be hampered by China’s continued expansion, especially through the estbliashment of a BRICS innovation base to strengthen cooperation among the five countries, including India, in the areas such as 5G, AI and the digital economy. Further, expansion of Chinese technology into developing countries will come from the Digital Silk Road (DSR), as a part of China’s Belt and Road Initiative (BRI). Given the significance and the scale of digital infrastructure in many developing countries, it is believed that Chinese enterprises will control more global markets, which will enhance the power of the Chinese government to set global standards and better control technological innovation.  

…the ‘multilateralism’ and exclusion of China in the governmental space will continue to extend into the private sector…

Of course, the US will not ignore such expansion. Besides the security concerns frequently addressed, DSR is continuously criticised for enabling recipient countries to adopt China’s model of technology-enabled authoritarianism and surveillance. Further, the ‘multilateralism’ and exclusion of China in the governmental space will continue to extend into the private sector, as can already be seen in the race for 6G an the Next-G alliance

China will also suffer from a lack competency in high-end chip manufacturing, as it would take around a decade for Chinese chipmakers to catch up to a moving target. Also, to maintain the resilience of global value chains, whose fragility has been exposed by COVID-19 and the trade war with the US, China is seriously considering a strategy of localising production of semiconductors.  

The trade war reminds China of the importance and necessity of maintaining technology independence, and the urgency of self-reliance.  

Success in local chip production will be crucial to the creation of faster artificial intelligence chips. Given the wide-ranging economic impacts of AI across manufacturing, transportation, health and education, the competition between China and the US is fierce. China has been catching up with – and perhaps even surpassing – the US concerning patenting in the areas of specialised AI chip development. However, compared with developed countries, .This is an obvious bottleneck issue, which cannot be changed overnight.  

However a conundrum that China and the US share is how to deal with the ethics of AI. Even though the US and its partners agree on democratic values, agreement on the ethics and standards of AI would be as difficult a task to reach between the allies and partners as it would be between China and the US.  

Entrenched tech competition 

The unpredictability of the Trump administration might have passed, however the US image of China as a technology rival rather than a benign competitor remains. Further, the technology war against China extends to US allies, being deeply rooted in issues of democratic values. Unified actions by these allies, either on sanctions or on exclusive standards-settings, will drive China to isolate and centralise its effort – which will in turn give the allies more reason to isolate China even more. 

The US side will spare no effort to strengthen the possibilities of self-reliance on a more reliable supply chain, which is difficult and time-consuming – but not impossible. Also, there is no doubt that China, given its giant market and economic power, will resort to any possible resolution with full force to realise self-reliance and maintain its influence on the broad developing countries. However while these two technological and economic spheres are currently only weakly tied and feature increasing mutual distrust, these ties and mutual interdependence will not be cut off completely. 

This can be seen in chip production. In the case of China, to chase a moving target is an unusually challenging and long-term process. 99 per cent of the microcontroller market is still in the hands of international manufacturers, and these chips will be vital to China’s progress. However, some recent progress indicates China has the capabilities of building an entire microchip supply chain, though it will take some time.  

The US will have to convince allies and partners to conduct and follow a comprehensive import and export control list on all critical hi-tech; something that will be hard to maintain.

However the consistent technological breakthroughs from China in the area of chip production and AI will make it hard for the US and its allies to decouple completely. The US will have to convince allies and partners to conduct and follow a comprehensive import and export control list on all critical hi-tech; something that will be hard to maintain. Some companies have already flouted trade restrictions, and both developing countries and East Asian economies such as Taiwan and South Korea will be make every effort to manage a dilemma in which they are forced by their allies.  

The coming tech ‘security dilemma’ 

While any partial decoupling on technology would not substantially affect the progress of development on either side in the long run, what is more concerning is the increasing mutual distrust based on the difference in ideology, which could possibly drive both sides further towards a ‘security dilemma’ style of technological competition. The cycle of isolating China, centralisation, and further isolation, hold the potential to push both sides to extremes. Thus both sides must be cautious not to ‘cross the Rubicon’ for the sake of innovation. Given the great strength on both sides, any comprehensive economic and technological war will be too expensive to justify. Both the US and China must ensure technology competition brings benefit, not mutual destruction.  

This article is published as part of a series of analyses that considers the key trend lines with the in region which see the regional order, critical technology and geoeconomics as arenas of competition and tools for strategic influence, and how they will influence regional security over coming decades.

It is published with support from the Japanese Embassy in Australia. The ANU National Security College is independent in its activities, research and editorial judgment and does not take institutional positions on policy issues. Accordingly, the author is solely responsible for the views expressed in this publication, which should not be taken as reflecting the views of any government or organisation.