Opinion

Stoking Innovation in a Trade War: Reestablishing American Leadership in Critical Technologies

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Posted: Aug 19, 2019 1:18 PM
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Stoking Innovation in a Trade War: Reestablishing American Leadership in Critical Technologies

Source: AP Photo/Mark Schiefelbein, File

As the trade war with China continues to run hot—and potentially get hotter—American efforts to reestablish supremacy in core technology areas is more critical than ever.  This is particularly true because—at least for now—America has lost the global 5G race and is on the verge of losing the edge in other key areas like artificial intelligence. With Chinese companies like Huawei and ZTE benefitting from low-to-no interest loans, stolen technology, and an industrial policy designed to burrow their capabilities into the core of the global telecomms infrastructure, the United States needs to move rapidly to correct our government’s history of short-sighted regulatory policies and ambivalence toward investing in innovation.  We also need to avoid making new mistakes that are borne of the same over-regulatory impulse and must act to reward, not constrain, innovation. 

A paradigmatic example of continuing the flawed approach that brought us here can be seen in the battle over the merger of two key players in the domestic 5G marketplace.  Both the Federal Communications Commission (FCC) and the Justice Department now support the merger, in part given the commitments made by the companies to rapidly deploying 5G capabilities across the United States using allied technologies, rather than caving in to the siren song, cut-rate prices, and surveillance capabilities of Huawei and ZTE. And yet even given these concessions, a group of elected state attorneys general—seeking to make political hay out of the issue—have filed suit. This is exactly the wrong answer.

For years, national security experts flagged the strategic threat that these Chinese telecommunications companiespose to our global leadership in technology and to our national security writ large.   American and allied leadership in the core telecom technology provides huge economic benefits to our nation, enabling a global telecommunications infrastructure that supports critical national security and defense capabilities.  Yet when it came to the development of 5G, we fundamentally missed the boat.  We failed to put in place the right policies to provide incentives for industry to innovate rapidly and to make big infrastructure and R&D bets.  From broken tax policies to an overly aggressive regulatory approach, for a crucial decade, we made the wrong calls on  technology policy, preferring to threaten the stick rather than offering the carrot, and failing to make government investments in basic research to help maintain the lead we fought so hard to obtain.  As a result, we are struggling to catch up with a Chinese juggernaut that has already put in place the global infrastructure to undermine American and allied leadership. 

However, not all is lost.  We still have the ability to regain the 5G advantage and, more importantly, to reestablish leverage on successor technologies.  But the ongoing trade war with China won’t fix this fundamental challenge without more work on the home front.  While there are signs that our government is finally figuring out the right next steps—protecting U.S. capabilities from foreign competitors’ predation, establishing redlines on cyber threats, demonstrating our ability and willingness to respond in this new domain of warfare, and supporting 5G innovation—more must be done to ensure that we do not completely lose our hard-fought edge in this critical area.

recent op-ed by a group of former senior national security officials correctly makes the case for reestablishing American leadership in 5G and potential successor technologies. First, changes in the speed and scale of communications will be revolutionary; second, the broad, rapid adoption of high-speed wireless capabilities in the U.S. could generate millions of new jobs and add hundreds of billions of dollars to our economic baseline; and third, the benefits of these new communications infrastructures, combined with the movement to cloud-based computing, have the potential to drive massive new capabilities into the hands of our warfighters and provide us with a decisive military advantage going forward. 

These officials likewise correctly warn that while China recognizes it is on the verge of a Sputnik moment, and is making the investments needed to win that race, the United States remains woefully behind.  Huawei has already locked in purchases of its core switching systems around the world and, having played a central role in the major consortia setting global standards for 5G, has the sole position globally when it comes to 5G roll-out. 

The U.S. has not been doing enough to keep up with China in this space, which is why getting our national policy right is so critical in the midst of the ongoing trade war.  While many decried FCC Chairman Ajit Pai’s announcement in late May that he would support the merger—even provoking that unhelpful state AGs’ lawsuit, the reality is that the FCC’s conditions and the Justice Department's effort—led by Assistant Attorney General Makan Delrahim—to preserve a competitive market, alongside the companies’ public commitments to spend approximately $40 billion using only American and allied technology in their buildout, is exactly what is needed.  It will ensure that the U.S. moves swiftly forward to protect domestic leadership (and competition) in the critical telecommunications battleground here at home and helps drive success in the ongoing trade battle.  What is clear is the nation does not need a return to the past decade of overly regulatory policy, just this time enforced through the courts.  To that end, the state attorneys general considering joining the current lawsuit would be wise to reject a judicially-enforced version of the over-regulation that got us here in the first place.

At the same time, it is worth noting that rapid deployment of 5G relying on American and allied technology is just one piece of a much larger puzzle.  If we are going to roll back the accelerating technological advantage gained by China over the past decade, we must fundamentally rethink U.S. innovation policy.  Historically, the federal government worked closely with the private sector and academia to make big bets on basic research and development programs, particularly on game-changing technologies with national security implications.  Unfortunately, our commitment to this effort has eroded with time.  While Congress has taken initial steps to address this gap when it comes to specific technologies like quantum computing, we need to double down on investment across the board in basic R&D—whether that means development of leap-forward communications technologies like the so-called 6G capability or taking advantage of the potential benefits from advances in artificial intelligence.  A national innovation policy that favors American and allied technological advancement should be embraced on a bipartisan basis.  The government should be encouraging broad innovation—not supplanting private sector capabilities—by accelerating partnerships with academia and the private sector and making smart investments in basic research. 

Finally, the government must also continue its commitment to protecting our private sector against nation-state efforts to siphon off intellectual property.  Nations like China have engaged in a decades-long, concerted effort to sap U.S. innovation by stealing the results of our core investments in R&D and repurposing them to economic gain for their countries.  These issues must continue to be at the core of the current trade showdown and the administration ought not concede on this issue.  In many ways, the current trade battle with China could be a make-or-break moment for our continued technological superiority. And finally, there can be little question that any successful effort to protect our innovation base from these threats will require a much tighter partnership between the public and private sectors than exists today on cyber defense.  The government can no longer take the position that individual companies must defend against these national-level threats standing alone.  If we are to regain the edge that our government has lost for us, the government itself must be a key actor and a ready and willing partner in defending the nation in cyberspace.