The US is waging war on Chinese hi-tech, but it can’t thwart Beijing’s ambitions on its own
- Joergen Oerstroem Moeller says the global rules-based trading system is under threat as Washington seeks to conscript other countries to its economic war on Chinese technology
Despite anecdotal evidence, not many US companies have been bought for this reason and, in the case of hi-tech companies, it is an open question whether they were in possession of the newest technology. The fear, however, of a foreign country such as China buying hard-won and expensive technological knowledge is widespread.
The objective is to stop China from selling equipment abroad, through which it may gain money to be channelled back into research and development. The US knows from its own experience how hi-tech exports help boost the financial capabilities of companies that can then augment funds for R&D.
These three policy steps all aim to increase the costs for China to turn itself into a hi-tech nation. In reality, this is economic warfare, and it comes at a time when the US is doing its best to dismantle a global order anchored in rule of the law, particularly through the World Trade Organisation.
If Washington harbours grievances, they should be brought to global institutions for investigation. Abandoning global rules and institutions, and choosing instead to act unilaterally, indicates an isolationist approach that disregards treaties and obligations undertaken by both parties.
The US is strong enough to launch this policy, vexing China and making its transformation into a hi-tech nation more costly. However, it is not strong enough to force fundamental changes in Beijing’s ambitions. To achieve that, it needs the cooperation of a large number of other countries.
The global supply chain implies that components from the US are used in other countries’ exports to China. They must therefore be enrolled in the endeavour to protect American hi-tech. Otherwise, China can indirectly, through trade and investment with them, acquire a good deal of what the US does not want it to have.
These countries’ positions vis-à-vis China’s technology policy are not that different from the US’ stance and they might have been willing to join Washington in taking these problems to the WTO.
Having ruled that out, the US has the option of cajoling them or forcing them to toe the American policy line. This will almost certainly be done by demanding that they do not export hi-tech with American components to China unless US permission is sought and granted.
With the US still leading in hi-tech, there will be no choice but to agree and accept some form of American control. This amounts to a quantum leap in US control over global trade and investment in hi-tech.
Introducing a kind of extraterritorial jurisdiction for global trade and investment in hi-tech might stoke protectionism and turn rules governing trade and investment upside down.
The current rules-based system ensures that the playing field is level. Extraterritorial jurisdiction, in whatever form the US pushes it, recalls the saying of Greek historian Thucydides: “The strong do what they can, the weak suffer what they must.”
Joergen Oerstroem Moeller is an associate senior fellow at the ISEAS Yusof Ishak Institute, Singapore, an adjunct professor at Singapore Management University & Copenhagen Business School and an honorary alumnus at the University of Copenhagen