The current dispute between the US and China goes far beyond trade tariffs and tit-for-tat reprisals: the underlying driver is a race for global technological supremacy. This paper examines the risks of greater strategic competition as well as potential solutions for mitigating the impacts of the US–China economic confrontation.
Summary
- The underlying driver of the ongoing US–China trade war is a race for global technological dominance. President Trump has raised a number of issues regarding trade with China – including the US’s trade deficit with China and the naming of China as a currency manipulator. But at the heart of the ongoing tariff escalation are China’s policies and practices regarding forced technology transfer, intellectual property theft and non-market distortions.
- As China’s international influence has expanded it has always been unlikely that Beijing would continue to accept existing global standards and institutions established and widely practised by developed countries based on ‘the Washington Consensus’.
- China’s desire to be an alternative champion of technology standard-setting remains unfulfilled. Its ample innovation talent is a solid foundation in its quest for global technology supremacy but tightening controls over personal freedoms could undermine it and deter potential global partners.
- It is unclear if Chinese government interventions will achieve the technological self-sufficiency Beijing has long desired. China’s approach to macroeconomic management diverges significantly from that of the US and other real market economies, particularly in its policy towards nurturing innovation.
- Chinese actors are engaged in the globalization of technological innovation through exports and imports of high-tech goods and services; cross-border investments in technology companies and research and development (R&D) activities; cross-border R&D collaboration; and international techno-scientific research collaboration.
- While the Chinese state pushes domestic companies and research institutes to engage in the globalization of technological innovation, its interventions in the high-tech sector have caused great unease in the West.
- The current US response to its competition with China for technological supremacy, which leans towards decoupling, is unlikely to prove successful. The US has better chances of success if it focuses on America’s own competitiveness, works on common approaches to technology policy with like-minded partners around the globe and strengthens the international trading system.
- A technically sound screening mechanism of foreign investment can prevent normal cross-border collaboration in technological innovation from being misused by geopolitical rival superpowers.