David C. Gompert
The United States and China are racing for superiority in emerging technologies of potentially critical importance in economic and security affairs. These include artificial intelligence (AI), autonomous systems, and quantum computation and communication.
China is unlike previous U.S. mega-rivals: The Soviet Union was an enemy but, as it turned out, poor at innovation; Japan was, and still is, a formidable technological competitor, but an ally. China, with its “state capitalist” system, its ability to concentrate national resources, and its avowed intent to reclaim primacy in East Asia, presents a more complex and difficult challenge.
Though the U.S. lead over China is shrinking, it has two advantages: a robust private sector, rooted in individual initiative, and technologically advanced allies, e.g., NATO, Japan, and Australia. So, U.S. strategy must capitalize on both private-public and U.S.-allied partnerships.
Roughly speaking, U.S. private industry spends twice as much as the federal government and the same as the Chinese state on research and development (R&D). This 2:1 private-public pattern describes investment in the particular technologies just noted. After the United States and China, thirteen of the next fifteen leading countries in R&D spending are U.S. allies; they and the United States combined spend about twice as much as China does. China cannot begin to match U.S. private industry plus U.S. allies in AI and quantum.
Yet, U.S. reliance on both private-public and alliance partnerships presents a conundrum: How can the U.S. government (representing national interests) cause U.S. private firms (representing shareholder interests) to collaborate with foreign competitors? Doing so requires government both to provide incentives and to remove barriers to foster private-sector partnerships with allies. Easily said, but doing so is complicated by national-security classification, proprietary information, trade and investment policies, differing threat perceptions, patchworks of industrial and technology policies, and dissimilar attitudes about the role of government in markets.
Bear in mind, as well, that U.S. titans of information technology (IT) — Apple, Microsoft, Amazon, Google, Facebook — are doing very well as it is; so well, in fact, that some politicians argue they should be reined in or broken up out of concern for market concentration. Unlike many of their foreign competitors, these U.S. companies are not allied with or beholden to government. Rather, they see abundant evidence that government “help” is unhelpful. Adding to the complexity of private-public partnerships in key technologies is that American prowess depends not just on corporate giants but on ventures of all sizes, universities, and national labs.
Yet, at this moment of scientific and strategic flux – not to mention pandemic and political upheaval – the U.S. government should articulate and align its policies and allocation of resources with national technological priorities, namely those in which China seeks superiority. On that basis, it could reduce barriers to corporate collaboration with partners in allied countries. This could include relaxing certain export and import controls, technology licensing, regulation of investment in and from allied countries, and tuning of tax policies. Also, U.S. firms have ways to protect their intellectual property, which government can codify through trade norms.
Many U.S. allies have industrial policies that favor sectors and companies deemed to serve public and national interests. Not the United States, which looks to product and capital markets to determine results. Nothing is to be gained by the U.S. government badgering allies to abandon their industrial policies. Instead, U.S. strategy in technological rivalry with China should include removing barriers and subsidies at home and internationally. It is the blend of competition and collaboration – private-public and U.S.-allied — that can enable the United States to prevail in the race for technological advantage.
Facilitating U.S.-allied private-sector partnerships in critical technologies is made difficult by the fact that these technologies are typically attended by the major security concerns. This difficulty is manageable in the case of “Five Eyes” allies: U.S., U.K., Canada, Australia and New Zealand. Yet, some of the most important and sophisticated work is being done elsewhere — Germany, France, Netherlands, Japan, South Korea – allies to be sure, but with mixed records in protecting secrets, whether from traditional or cyber espionage. The United States can enhance its ability to compete with China in sensitive technologies by helping such allies tighten their control of classified and proprietary information.
Demolishing obstacles is necessary but not sufficient to convince U.S. corporations that the benefits of U.S.-allied collaboration outweigh the costs and risks. As important is offering inducements and, where earned, assistance to U.S.-allied collaborative enterprises. This could include preferential allocation of government R&D funds and contract awards to U.S.-allied teams by the Defense Department, Homeland Security Department, and Intelligence Community.
Do not underestimate the value of networking to share information, innovations, interest in collaboration, and resources in support of U.S.-allied teaming in advanced technology. Domestically, and with Chinese competition in mind, the U.S. Energy Department’s “National Quantum Initiative” fosters such sharing through a growing number of university and corporate nodes. Internationally, NATO’s Science and Technology Organization (STO) just released a superb report (Science and Technology Trends, 2020-2040) on the security effects and uses of emerging and disruptive technologies, including AI, quantum and autonomy. In this regard, NATO could serve as a forum for and champion of U.S-allied collaboration – both public and private – in critical technologies. NATO is deeply concerned about Russian abuse of advanced technology and increasingly concerned about China’s challenge. It has experience in addressing new forms of conflict, e.g., cyber-war, and in reaching out to like-minded non-members.
Lastly, U.S. venture capital can be a catalyst for both private-public and U.S.-allied cooperation, not only by investing but also by promoting contacts across sectors and across oceans.
In sum, U.S. success in technological competition with China depends heavily on U.S. government efforts to encourage collaboration with democratic partners, private-public partnership, and a healthy environment for investment.
The Honorable David C. Gompert is special advisor to the Damazein investment firm Ultratech Capital Partners, and former Acting Director of National Intelligence
