China's opportunity to fight back against US proposed tariffs on Chinese imports became dramatically clear last week as markets reacted negatively to China's devaluation of the yuan and the announcement that it would impose a further $ 75 billion in US tariffs. The US trade war has affected businesses from Apple to American cherry growers and shows no signs of stopping. President Donald Trump responded with further retaliation rates and a storm of tweets, demanding US businesses to "immediately start looking for an alternative to China" and leave the country altogether. At the root of this trade war lies the Trump administration's belief that the economy and security are interconnected, especially in the telecommunications field.
Telecommunications have become the core of US frustration over unfair Chinese business practices and worries the Chinese government is using the networks of private Chinese companies to spy on foreign authorities and companies. At the center of the debate is the leading Chinese telecommunications company Huawei, which has been accused of bad ethics, sinister security, intellectual property theft and even espionage for years.
In response, the Trump administration has signed an executive order that includes all but named and banned Huawei products, and appeals to allies to do the same. Trump claims that the negative impact on the US economy in the short term is "irrelevant" because "someone had to take on China" and his belief that the United States will be better in the end. Still, the fierce debate surrounding Huawei and the Trump administration's trade war reveals a fundamental weakness of the US economy: its lack of competitiveness.
In addition to letting consumers download movies and surf the Internet at high speeds, five-generation (5G) mobile networks will fundamentally change the economy; the Internet of Things, smart production, automation and defense will be built on the new network. No matter which country leads in 5G development, the engineer will produce and not only the network itself, but the applications and devices that come with it. As 5G spreads, so will related devices and technologies, making this country a world leader in wireless technology.
Huawei's entry into the US 5G and wider telecommunications market concerns security experts. The Chinese government and Chinese companies have continually infiltrated US companies and government agencies: the data breach in the Office of Personal Management, the theft of NSA cyber tools and the ongoing hacking of prominent US companies are a few examples of this determined effort. Furthermore, the Chinese government requires that all telecommunications equipment installed or manufactured in China retain access to the back door, recently exemplified by security camera manufacturer Xionmai. This means that allowing Huawei components to be installed throughout the US telecommunications network will leave the United States vulnerable to infiltration.
Although the United States should continue to defend itself against potential security threats from Chinese companies, they should not rely on these protections merely as a strategy to maintain competitiveness. The erosion of US dominance in other key sectors, such as automobiles and consumer electronics, suggests that there are more fundamental problems.
According to Sandra Rivera, Executive Vice President of Intel: "There is no US-based wireless access provider today building [5G] solutions." Given the critical economic and security interests associated with 5G, it is alarming that the United States has not shown greater leadership in developing it, and lost ground for Huawei and other international competitors. 5G is the technology of the future, but the United States is not a competitor. A US willingness to invest in 5G would shed light on the entire Huawei debate.
American competitiveness has also declined in other industries. Although the US robotics development may have reached the top, for example, China's robotics industry is developing an incredible amount. Last year, China installed 136,000 robots, and dwarfed the 34,000 installed in the United States, making the United States inferior in workers' productivity. By 2026, China is predicted to become the world's largest user of robots.
China has made similar impressive breakthroughs in artificial intelligence: by 2020, China is expected to outperform the United States in the number of published research articles on artificial intelligence (AI), even when controlling for research quality. Unlike the US, where most research is done with private funding and oversight, most Chinese research receives state support and funding.
Energy, biotechnology, shipping and electric vehicles – high-value, high-tech industries historically dominated by the United States – have all seen significant advances by Chinese companies. But these companies are benefiting from Beijing's willingness to subsidize high-tech industries. A small glimpse of the Chinese government's subsidies includes $ 58.8 billion in support for electric vehicles between 2009 and 2017, $ 435 million contributed to solar energy this year, and $ 65.5 billion Guangdong Province plans to invest in strategic industries including robotics. When needed, the Chinese government is willing to fund valuable industries to ensure their success and promote international domination.
U.S. lawmakers are beginning to notice China's strategy. Recently, a bipartisan coalition of senators unveiled the 5G Leadership Act, pledging $ 700 million to replace Huawei telecommunications technology in rural American communities. While reducing vulnerability to Chinese influence, this legislation fails to offer a plan to foster innovation of US alternatives. As such, $ 700 million is just a costly band-aid.
More Than Just a Spoiler
While the Trump administration has legitimate national security reasons to ban Huawei tech, the ban does not address the US decline as a global leader in research and technological innovation.
Huawei tech poses an apparent threat to both national and enterprise security, but the current approach to eradicating pre-installed equipment, prohibiting its future use and encouraging allies to follow suit without offering a US product comparable in quality and price has a numerous unintended consequences. Not only does the United States provide access to innovative technology and 5G connectivity, but it also stops efforts to expand access to basic wireless connectivity in the same rural areas that Trump promised not to ignore.
If the United States wants to maintain its high-tech leadership, they must be willing to invest in the industries critical to success in the twenty-first century. This investment need not only be monetary; it can be regulatory. The United States recently ranked forty-sixth in the world for easily starting a new business, behind Afghanistan. It can be in human capital; the cost of higher education has ballooned to 11.1 times what it was in 1980. Or it may be in immigration reform; over one-third of US start-up companies have at least one foreign-born founder. Possible solutions abound, but what is clear is that the United States needs to do something. By doing nothing, Washington is securing its future technological irrelevance.
Tom Le is assistant professor of politics at Pomona College. He is on Twitter at @profTLe . Lucy Onderwyzer Gold is a junior at Pomona College majoring in politics. Ryan Levy is a senior at Pomona College majoring in international relations.
Image: Flickr / Sandia Labs