- Blog Post
- Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.
Technology cold war. Decoupling. Weaponized interdependence. Whatever you call it, the U.S.-China science and technology relationship is being violently remade. While a tightly linked technology system benefited the United States and China over the last two decades, there is now widespread concern on both sides of the Pacific that the economic and security risks outweigh the gains. President Xi Jinping has embraced and accelerated policies designed to increase the innovativeness of the Chinese economy and reduce dependence on foreign suppliers. The Trump administration has put Chinese technologies policies front and center as a danger to U.S. economic and national security. The eventual outcome of this contest may be two distinct technology systems, with other countries forced to choose if they are going to plug into American or Chinese technology platforms and standards.
Over the last year, the Trump administration has pressured Beijing to roll back Made in China 2025 and worked to prevent the flow of American technology to China. Congress passed the Foreign Investment Risk Review Modernization Act, which expands the Committee on Foreign Investment in the United States’ ability to investigate foreign investment in “critical technologies”, and the Department of Commerce is expected to introduce new export controls on “emerging and foundational technologies.” In November 2018, then Attorney General Jeff Sessions announced a China Initiative to identify priority Chinese trade theft cases and evaluate whether additional legislative and administrative authorities would be required to protect U.S. assets from foreign economic espionage. The Department of Justice indicted two alleged hackers from the Ministry of State Security in December 2018 for stealing secrets from the banking, finance, telecommunications, health care, energy, and automotive industries.
Huawei, the Chinese telecom manufacturer, sits at the center of this new cold war. 5G, the next generation of mobile communication technology, promises greater speed and capacity, and will enable the internet of things, automated vehicles, and other innovations. It will also introduce new cybersecurity vulnerabilities. While U.S. officials have never publicly provided evidence that Huawei equipment has backdoors or been tampered with, they warn that allowing the company to be involved in the build-out of 5G networks raises unmanageable security risks, and they have steadily increased pressure on the company at home and abroad. In January, after scrutiny from U.S. regulators, AT&T walked back from a deal to sell Huawei smartphones in the United States. The Federal Communications Commission proposed making it harder for smaller carriers to use the Universal Service Fund to pay for future purchases of telecom equipment from Huawei. In August, President Trump signed a bill that prohibited any carrier with any substantial amount of installed Chinese telecom equipment from federal government contracts.
Washington has pressured its allies not to use Huawei. In August, Australia effectively banned Huawei from supplying equipment to develop the country’s 5G wireless infrastructure. In November, the New Zealand government rejected a local telecom's proposal to use Huawei equipment in its 5G network upgrade. In December, a major British telecom announced that it would remove Huawei equipment, and UK intelligence officials have flagged security shortfalls in Huawei software. Canada, Czech Republic, Germany, India, and Japan are reportedly considering banning or limiting Huawei. While not directly connected to the cybersecurity concerns of Huawei products, the detention of CFO Meng Wanzhou in Canada on charges she misrepresented subsidiary relationships in order to deceive U.S. banks into conducting business with Iranian telecommunications companies in violation of U.S. sanctions has raised the tensions around the company considerably.
The United States is also working with its allies to slow Huawei’s expansion in third markets. Australia objected after the Solomon Islands signed a deal with the company to explore building a link between it and the Australian mainland, and the government eventually stepped in and will pay for the bulk of the construction to keep Huawei out. Efforts by the United States, Japan, and Australia to stop Huawei in its efforts to build a submarine telecommunications cable to Papua New Guinea were not as successful when the country decided that it could not afford to walk away from a project that was more than half finished. As one minister put it, “Whatever views Australia or the U.S. might have in relation to cybersecurity, as far as Huawei or China are concerned, those are for the big boys to worry about.”
The race for 5G is far from over. U.S. companies hold a strong position in patents and technological development. Chinese telecoms are rapidly developing competing technologies, benefit from government support in roll out and implementation of 5G services, and often offer their products at prices twenty to thirty percent cheaper than their competitors. The challenge for Washington is to create an environment that supports innovation at home and a shared approach to 5G security with its friend and allies. The competition is likely to pick up in 2019, and the end result increasingly looks like separate spheres of technology influence.