A technology security dilemma is emerging between the United States and China. The problems wrought by this dilemma will draw in the Indo-Pacific—and indeed the entire world. Central to the concept of security theory and practice, a security dilemma arises when policies implemented by one state are perceived by another to threaten their national security. In response, that second state acts to safeguard itself and this defensive conduct is in turn perceived by the first state as threatening. Thus begins a spiral of action and reaction, potentially ending in war.
The security dilemma is often characterised as “tragic” because it can arise even when neither side has
Both the United States and China are framing critical technology issues through a national security lens and taking concrete steps to defend their interests. On 24 February 2021, President Joe Biden introduced an Executive Order mandating reviews of sectors where the United States is import-dependent, including semiconductors and high-capacity batteries. In accompanying remarks, Biden declared the issue one of concern to both “economic security” and “national security”. Indeed, the risk of disrupted imports was unfolding at that very moment, with American auto manufacturers being forced to cut production in light of unprecedented supply shortages of semiconductors. On 12 April, tech and auto industry executive met with the White House to discuss solutions.
The problems of interdependence
Whether arising from the malicious intent of a foreign government seeking to cause harm, or simply from some exogenous market shock (such as a pandemic), vulnerabilities stemming from economic interdependence are a central and bipartisan concern in Washington. This concern extends beyond the issue of ensuring stable and reliable supplies of critical technology inputs. Jake Sullivan and Kurt Campbell, now both very senior members of the Biden administration, wrote in 2019 that the United States would “have to safeguard its technological advantages in the face of China’s intellectual property theft, targeted industrial policies, and commingling of its economic and security sectors”. It is increasingly likely that industrial policy will become a prominent pillar of Washington’s overall strategy to compete with Beijing.
The Chinese side is also worried, perhaps even more so. China’s President Xi Jinping offered clear insight into Beijing’s thinking in a speech in April last year, saying that:
“supply chains cannot fall out at critical moments … In order to protect China’s industrial security and national security, we should focus on building an independent and controllable, safe and reliable … supply chain.”President Xi Jinping
For Beijing, safeguarding its security involves preserving offensive capability. In the same speech, Xi said China should “tighten the dependence of the international industrial chain on China, and form a strong counter-measure and deterrent ability for outsiders to artificially cut off supply” [translations via Sinocism]. These sentiments are given concrete prominence in the 14th Five Year Plan (2021-2025), which identifies technological self-sufficiency as an integral part of the “dual circulation” strategy. Given the current dominance (and protection) of state-owned enterprises in strategic sectors of Chinese economy, Beijing’s challenge is to create conditions that will spur innovation—notwithstanding heavy involvement from the state.
China sees the development of a strong and technologically advanced domestic manufacturing base as an essential foundation of its economic development. Given China currently imports more than US$300 billion worth of semiconductors annually, the drive to develop this sector is especially acute. As a middle-income rising power ruled by the ideological and authoritarian Chinese Community Party (CCP), the security risks inherent to such economic dependencies rise above standard national interests because they may threaten the legitimacy and political survival of the CCP. Beijing therefore faces an innovation imperative to acquire technological self-sufficiency.
China’s growing power and divergent values represent an inherent challenge to the United States and its partners, but China’s methods of prosecuting its geoeconomic interests have transformed the challenge into explicit security risks. Washington is concerned both by the short-term consequences of technology misappropriation, and the long-term implications of Chinese companies acquiring (fairly or otherwise) dominant market positions in sensitive sectors, given the tight relationship between Chinese private firms and the state. Moreover, Beijing’s frequent willingness to weaponise interdependence itself, through economic coercion against countries like South Korea and Australia, as well as evidence that Chinese companies like Huawei may already be doing Beijing’s bidding, heighten nervousness regarding China’s growing technological capabilities.
This dynamic is in an early phase, as the protagonists are still discovering the nature of their vulnerabilities. Meanwhile policymaking, albeit spurred by supply chain weaknesses revealed by COVID-19, remains in its infancy. This is especially true for the West: even the attempt to map supply chains is essentially unprecedented in peacetime. Many businesses (let alone governments) do not have full visibility of their supply chains, given the fragmented and transnational nature of 21st century production. In the near-term, therefore, it is unlikely much can be done to ameliorate the technology security dilemma. Over the longer term, however, governments will need to turn their minds to a pathway out, lest the spiral lead to more violent and destructive forms of conflict.
There are at least two pillars of a stable long-term security equilibrium. First, both sides need to feel materially less vulnerable, meaning that even if one wanted to, an adversary could not disrupt their technological ecosystems in catastrophic ways. To achieve this, a degree of technological decoupling is inevitable, as there will be some technology dependencies that are deemed to pose unacceptable risks. In this regard, the concepts of ‘managed interdependence’ and technological ‘spheres of influence’ may gain in currency. Part of this new equilibrium will occur naturally as governments and companies take incremental steps to mitigate technology vulnerabilities. This equilibrium will also rest on the choices of third states, who will try to walk the fine line between capturing the benefits of openness to each side without making either feel insecure.
However, at some point vulnerability mitigation will require political negotiations between the major powers. Comprehensive decoupling is both unrealistic and would itself impose crippling costs on both the United States and China, as well as many of their partners. Yet if both sides are going to retain a degree of reliance on each other and on globally sourced technologies, then the question of intentions becomes important. Each side will need to make efforts to persuade the other that it does not harbour aggressive intentions, and that if it ever did seek to escalate, fair warning would be given. Security studies scholarship has theorised the concept of reassurance, whereby each side takes steps to credibly signal both peaceful intentions and the lack of capability to be aggressive.
Efforts to apply the concept of such reassurance to technology are in their infancy. Many questions remain, and much work will have to be done. For example, could Chinese companies adopt more transparent decision-making structures to reduce fears of secret control from Beijing? Could the United States redesign its sanctioning frameworks to reduce concerns regarding their extra-territorial reach over non-American technology companies vital to foreign supply chains? In both instances, the major powers would be sacrificing valuable capabilities in the name of reassurance. But such is the nature of any arms control agreement, and framing the issue of technological competition as raising similar challenges offers a constructive starting point for negotiations.
Both the United States and China have legitimate reasons to feel technologically insecure. At some point, however, each will need to recognise that their own security will depend in part on answering the question: what will it take to make the other side feel secure, too?
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.