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The US is now in a panic about DJI, the Chinese company that makes about 75 per cent of the world’s consumer and commercial drones. Photo: DJI
Opinion
Outside In
by David Dodwell
Outside In
by David Dodwell

What’s behind US paranoia about Chinese phones, drones and pills? Not ‘national security’ but pride

  • The Trump administration has been using a cold-war law as a trade weapon over the past three years, against countries from Canada to China. The Americans can’t seem to admit Chinese companies sell advanced products at competitive prices

Most among us recognise the myriad risks that surround us as we open our borders and commit to globalised trade, but prefer to get on with our business and personal lives.

But then there are others – a paranoid minority I hope – who recoil in alarm at those risks, who see foreign ghosts around every corner, and regard any outsider’s actions with suspicion. It is this paranoid minority who prefer to invest billions in protecting us from terrorists, rather than investing in humdrum protections against accidents at home, fatalities of our own cars, and murders by crazy malcontents living in our own communities.

Don’t get me wrong – we need to be constantly wary of terrorist threats, but a balanced assessment of the main risks we face, both in our business and personal lives, tells us consistently that the main dangers we face sit close to home, rather than in the Machiavellian plots of foreign agents or pesky foreign companies.

This is what troubles me most about the Trump administration’s invocation of “national security” over the past three years, using a cold war law, Section 232 of the 1962 Trade Expansion Act, as the trade weapon of choice to keep pesky foreign companies at bay. It allows the United States president to block or put tariffs on any goods if he deems they are being imported “in such quantities or under such circumstances as to threaten or impair the national security”.

A so-called national security exception in the World Trade Organisation’s General Agreement on Tariffs and Trade permits any economy to use perceived threats to national security as a legitimate basis for throwing up trade barriers – but until the US moved three years ago, no one had dared to open this Pandora’s box.

While the Trump administration’s decision to exploit national security feeds on domestic paranoia about ruthless foreign companies conniving to undermine plucky and upstanding domestic companies in their home market, I believe the reality is more cynical. When Donald Trump’s men used Section 232 to block steel and aluminium imports from Canada, Mexico and Europe, and then followed up with barriers to car imports from Europe, South Korea and Japan, it was clear that no one in the US administration truly believed that these countries, or these products being blocked, created any kind of threat to national security. It was simply a convenient, effective means of keeping pesky foreign products at bay.

From those early initiatives, national security provisions have come into their own as a means of defending the US against the ultimate existential threat – China.

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First came an array of initiatives to banish Huawei from US shores. In the absence of proof of alleged “back doors” in Huawei telecoms systems that would enable China to spy on US consumers, the US defence and intelligence communities resorted to the next best defence – that we should trust their word when they tell us that the Chinese company has the capacity to develop “back doors” if it chooses to. There is too much pride to be swallowed in acknowledging that Huawei simply makes highly sophisticated stuff very cheaply, and is probably three to five years ahead of the rest of the world in the development of 5G telecoms infrastructure.
More recently, the national security panic button has been pushed in response to DJI, the Shenzhen company that began as a start-up in 2006 and today makes about 75 per cent of the world’s consumer and commercial drones. Until DJI came along, drones tended to be a military monopoly, developed to peek in on people, things and places where army bosses did not want to put military lives at risk. Even today, the military accounts for about 70 per cent of the world’s drone market.

DJI founder Frank Wang Tao’s petite quadrotors, designed initially for hobbyists, have taken the world by storm, and now dominate markets that no one 10 years ago thought could exist. The global commercial drone market of around US$4 billion today is forecast to grow beyond US$40 billion before 2025. Whether it is mapping and surveying, inspecting oil and gas pipelines, working on construction sites, keeping watch over crops, or supporting emergency services, Wang has combined increasing sophistication with ferociously low costs to blow all competitors away. DJI’s annual sales are around US$3 billion.

The US military establishment probably got alarmed when police and fire departments across the US were going to Best Buy and getting DJI drones. As one US competitor in the drone market noted: “Counties like Los Angeles [realised] that instead of buying a US$1 million helicopter they could buy a US$1,000 drone or a US$25,000 drone.”

Today, there are an estimated 450,000 drones operating in the US, a good number of which come from DJI. The US military was buying them like hot cakes too until the US Navy put out a memo in May 2017 titled “Operational Risks With Regards to DJI Family of Products”.

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Interestingly, the report at the time did not attack DJI as a national security threat. Instead, the Navy had two reasons for banishing DJI drones: that their “open source” software made them vulnerable, and that they were “not highly reliable when employed in typical military environments”. But in the space of two years, DJI drones have become a threat to US national security. As with Huawei, pride prevents anyone acknowledging that DJI simply makes highly sophisticated stuff very cheaply.

The paranoia about China has meanwhile spread. Every ethnic Chinese professor or researcher is a potential burglar of intellectual property. Every Chinese entrepreneur might be in the pocket of Chinese spymasters. Chinese telecoms companies should be barred from using undersea cables to heighten US data security. And as the Post unveiled last week, even Chinese exports of ibuprofen and paracetamol could be deemed a threat to US national security.

The alarming reality is that “national security” is less an empirically testable fact than a condition of paranoia which is being wilfully stirred up by the current US administration. A Pandora’s box has been opened, and until someone finds a way to close it, the free and open trade that has driven so much growth over the past four decades is in grave danger.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view

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