Abuse of antitrust laws: unilateral disarmament in the face of China’s technological challenge

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Chinese President Xi Jinping on a giant screen in a media center as he delivers a video address during the opening ceremony of the China International Import Expo in Shanghai, China on November 4, 2021. (Andrew Galbraith / Reuters)

There can be no reasonable doubt about the scale and sophistication of the challenge China is mounting against the United States: it will be played out on many fronts.

Among these, one of the most important will be technological.

Xi:

Technological innovation has become the main battleground of the global playing field, and the competition for technological domination will become unprecedentedly fierce.

As I noted the other day, it will and will be, and China is doing pretty well. It is a mixture of wishful thinking and liberal illusion (the two are not mutually exclusive) to assume that China’s rapid evolution towards a fascist state, with “capitalism under control”, will slow this progress, or at least slow it down. enough to help the United States The idea that innovation in the information technology space is an area where free societies necessarily having a decisive advantage is, unfortunately, nonsense.

In a recent capital letter, I discussed a report from Harvard’s Belfer Center showing how well China is doing. It is worth taking the time to read (with a strong drink by your side) both the report and a WSJ article by Graham Allison and Eric Schmidt in which the two discuss it. Spoiler: bad news to come.

Allison and Schmidt called for “a national response analogous to the mobilization that created the technologies that won World War II”. I wasn’t convinced this was the way to go (I’m still not), but what I concluded was this:

Better precedents (for now) can perhaps be found in the actions taken in the United States after the Soviets took a rapid advance in space, and another in cooperation between the public and private sectors which worked so well with Operation Warp Speed. One thing, however, is quite clear (as has been increasingly recognized in Washington). When it comes to China, there can be no room for the status quo.

This, I believe, continues to be the case. There also cannot be a standstill in some areas, such as the aggressive redefinition of antitrust currently being attempted by an FTC led by Lina Khan, a progressive ideologue. Khan’s strained interpretation of antitrust, a device designed to tackle Big Techs for essentially political reasons, risks destroying the very companies that, for all their flaws, are our best chance to keep up with the pace. innovation needed to stay ahead of China. There are plenty of reasons to oppose what Khan is up to, but the geopolitical damage his initiatives would inflict on the United States should indeed weigh heavily.

Sadly, it looks like Congress, partly acting in a bipartisan fashion (something which can depressingly frequently be an indicator of a serious political mistake to come), is on the verge of making matters worse.

Robert O’Brien in the the Wall Street newspaper:

Few issues unite both sides of the political divide more than anger at U.S. tech companies, whether it’s for censoring conservative views or for failing to counter disinformation online. In response to these concerns, legislation introduced in Congress would weaken the US tech industry, apparently in the name of breaking monopolies. Unfortunately, the various bills would hurt the United States and strengthen the hand of our greatest geopolitical rival, the People’s Republic of China. . . .

President Xi Jinping has declared plans to spend $ 1.4 trillion by 2025 to overtake the United States in key technology areas, and the Chinese government is aggressively subsidizing national champion companies. Starting with the “Made in China 2025” initiative, Beijing has made it clear that it will not stop until it dominates technologies such as quantum computing, artificial intelligence, autonomous systems, etc. Last month, the National Counterintelligence and Security Center warned that these are technologies “where the stakes are potentially greatest for the economic and national security of the United States.”

Concerns about China’s growing technological capabilities are not just speculative and extend to the military realm. Earlier this year, researchers at the China University of Science and Technology claimed to have built the world’s fastest programmable quantum computer, a machine that is about 10 million times faster than its closest competitor. If the Chinese Communist Party took the lead in quantum computing, the future of a free and open Internet would be seriously threatened. The US military and intelligence community could lose its ability to communicate securely, as quantum computing can break even the most sophisticated codes in a short period of time.

Similar concerns are justified in autonomous systems and artificial intelligence. . . . As the National Commission on Artificial Intelligence noted, if China were to gain a competitive advantage over the United States in AI, “it would also create the digital basis for a geopolitical challenge for the United States.” United and their allies ”.

Enter our lawmakers, trying, yes, to make it worse (emphasis added).

O’Brien:

The House Judiciary Committee recently approved five bills that would put the U.S. tech industry at a structural disadvantage compared to Chinese national champion companies. The bills would limit the ability of the US tech industry to engage in mergers and acquisitions; actively promote the disaggregation of platforms; and require data interoperability that ultimately gives foreign technology competitors an advantage over US companies.

Despite significant criticism of this approach from national security officials, members of the Senate Judiciary Committee have introduced bills that are almost identical to House legislation. These bills only hit U.S. companies while leaving Chinese tech rivals untouched, including those with major U.S. operations like Tencent and TikTok. Writing laws that directly benefit China and other foreign tech competitors is no way to compete with China.

Dressed in archaic interpretations of US antitrust law, these bills give increased authority to Federal Trade Commission bureaucrats and lay the groundwork for dismantling America’s most successful tech companies – those at the forefront of the race to maintain American dominance. in areas such as quantum and AI. Chinese companies like Tencent, Bytedance, Alibaba, Huawei and Baidu are looking to supplant American companies and would have an open field in the world and in America if these bills are passed.

To pass such a law would be foolishness.

O’Brien goes on to address the issue of “censorship” (and others) by Big Tech. He would be more interventionist than me (low bar – as ludicrous as part of this censorship may be, I remain opposed to any intervention in this area).

He then concludes with this:

If Congress is truly concerned about the Chinese Communist threat, cutting off the flow of Wall Street dollars that funds China’s technological growth should be its top legislative priority.

It’s an interesting idea. In my previous post I quoted a Financial Times Report:

The Biden administration will place eight Chinese companies, including DJI, the world’s largest maker of commercial drones, on an investment blacklist for their alleged involvement in monitoring the Uyghur Muslim minority.

The US Treasury will put DJI and other groups on its blacklist of “Chinese military-industrial complex companies” on Thursday, according to two people briefed on the move. American investors are prohibited from taking financial stakes in the 60 Chinese groups already on the blacklist.

While in general I am strongly opposed to capital controls of any kind, this does not apply where national security is at stake. Prohibition any American investment in Chinese technology companies, a term that should indeed be defined very broadly, must be a priority. The essence of the Chinese corporate model is that there is no clear line between private enterprise and the state. This means that American investors who invest in Chinese technology, whether they are willing to admit it or not, are helping Xi’s technological challenge in the United States.

Lenin may or may not have said that “the capitalists will sell us the rope with which we will hang them”, but, apocryphal as it is, he was right. Helping the “Communists” make an improved version of this rope would have been, so to speak, an extra twist he would have appreciated.

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