Restore Federal Funding for Research and Development

Most of the technology breakthroughs underlying U.S. economic and military strength have drawn on federally funded R&D, with work carried out in federal laboratories, universities, and industry. Sufficient federal investment in research is vital to advancing national goals in the areas of health, defense, and the economy. The United States cannot rely on its private sector to make the type of investments in large-scale, risky research projects that lead to new discoveries and breakthroughs in science and engineering. Addressing the challenge from China and other rising science powers requires an ambitious plan of national investment in science and technology.

The White House and Congress should restore federal funding for research and development to its historical average. This would mean increasing funding from 0.7 percent to 1.1 percent of GDP annually, or from $146 billion to about $230 billion (in 2018 dollars). Only the government can make the type of investments in basic science that ignite discoveries; such investments are too big and risky for any single private enterprise to undertake. The heads of the Department of Defense, Department of Energy, NASA, National Institutes of Health, National Science Foundation, and other agencies should submit budgets that restore funding of basic research to historic average levels and maintain it. (For the DOD, this would be “6.1 funding,” meaning basic, as opposed to applied or advanced, research.)

Maintaining these levels of spending is essential. The sustainability of funding for basic research over predictable time spans is as important as raising the total amounts of support. Funding needs to be protected from political as well as budget instability. The Trump administration’s recent reversal on fetal tissue research, for example, is likely to disrupt existing projects and cause delays in launching research programs. China, India, Singapore, and the United Kingdom all conduct research using fetal tissue.

Federal and state governments should make an additional strategic investment in universities. The investment, of up to $20 billion a year for five years, should support cross-disciplinary work in areas of pressing economic and national security interest. The federal government should commit this investment toward a sustained program at universities of supporting fundamental research targeted at critical technologies. Working with academia and the private sector, the federal government should identify national priorities for innovation. These may include AI, machine learning and data science, quantum information systems, personalized medicine, and clean energy. The program should include substantial new funding for research, targeted scholarships and fellowships, fabrication and test-bed facilities, and financing for start-ups. The funding should encourage cross-disciplinary work and simplified university-industry partnerships, with specific plans to bring advances to market.

State governments should provide public research universities with sufficient autonomy. They should also restore and maintain per-student funding for higher education, including public research universities, to the mean level for the fifteen-year period from 1987 to 2002 (adjusted for inflation).

The White House should announce moonshot approaches to society-wide national security problems. This would support innovation in foundational and general-purpose technologies, including AI and data science, advanced battery storage, advanced semiconductors, genomics and synthetic biology, 5G, quantum information systems, and robotics.

Often, the U.S. policy default is to unleash the private sector through deregulation and tax reform. Deregulatory actions are certainly required in many sectors. The United States ranks fifteenth in the OECD in terms of the frequency in which it updates its regulations, and seventeenth in regulatory quality by the Global Innovation Index.112 Patchwork regulations, high compliance costs, and regulatory complexity slow, for example, the development and deployment of autonomous vehicles, blockchain and financial technology, and commercial drones.

But deregulation on its own cannot cope with both the scale of disruption and the intensity of the challenge from other countries, China in particular. Beijing melds top-down industrial policy and massive state investment with strong commercial actors and an entrepreneurial culture. Based on the current state of AI development, China’s ability to combine data collection and analysis across health, industrial, internet, and mobile sectors may give it a competitive advantage in the design of algorithms and the development of machine learning. In addition, Chinese tech firms operate in a blurred space between the state and the private sector, and many of their ambitious technology goals are inherently multiuse, with strategic implications for economic and national security. Defense against Chinese techno-nationalism, transfer of intellectual property, and cyber espionage is necessary but far from sufficient to ensure American technological success. As it has in the past, the United States needs to go on the offense to advance its own technological capabilities.

The United States should not replicate the Chinese model, but the current policy approach is too narrow in scale, uncoordinated, and incremental. The Task Force recommends a moonshot approach to industrial policy, an approach the United States has followed in the past. Special interagency subcommittees representing a number of government agencies and working with academia and the private sector should be organized to coordinate the selection, development, and execution of R&D programs that address society-wide and pressing national security problems such as threat detection networks; commercial, gate-based quantum computers; and carbon-capture technologies. Partnered federal agencies—for example, the NIH and NSF—would provide catalytic R&D support for these multidisciplinary projects, with firms and academic institutions collaborating and cooperating with one another on precompetitive innovation projects. In technology areas with less immediate commercial interest and weak industry investment, the government should fund research and coordinate early purchases.113

Address the AI and 5G Challenges

Two of the technologies high on the Trump administration’s agenda require a more comprehensive and urgent approach: AI and 5G. The Office of Science and Technology Policy should request additional funding, drawn from the increase in federal spending, for AI research and development, and, working with Congress and industry, it should outline clear metrics of success and accountability. The United States continues to lead in the specialized chips essential to AI development, and, through DARPA, the National Institute of Standards and Technology (NIST), and the NSF, the federal government should fund precompetitive basic research in AI hardware. OSTP, in consultation with academia and industry, should form a plan for a national AI R&D workforce.

Federal agencies also need to develop sector-specific AI strategies.114 The Department of Commerce, for example, could oversee a network of institutes that would advance AI in manufacturing, including the participation of industry, academia, and government agencies. The NIH could partner with universities and the private sector on applying machine learning to speed clinical diagnosis, treatment, and therapies.

One of China’s competitive advantages in AI is centralized access to data. U.S. policy should be directed at moving more data from the public sector into shared—but secure and protected—data sets. All government agencies should increase access to government data sources in machine-readable formats. Relevant federal agencies should support the development of shared pools of high-quality, application-specific training and validation data in areas of public interest such as agriculture, education, health care, public safety and law enforcement, and transportation, after ensuring that appropriate privacy protections are in place.115 In January 2019, Trump signed the Open, Public, Electronic, and Necessary (OPEN) Government Data Act, which requires all nonsensitive government data to be made available in open and machine-readable formats by default, but the mandate is unfunded.116 The federal government should also consider creating a National Discovery Database that would allow access to data at scale for problems of unique interest to national security. While considering the potential ethical and privacy challenges involved, state and local governments should also study making nonsensitive data available for use in AI systems.117

Semiconductor Industry

The U.S. government has in the past deployed more interventionist tools in response to new technological competitors. Between 1978 and 1986...

Any successful strategy will require the right regulatory framework. Congress should pass federal privacy legislation that is technology neutral (i.e., that allows companies to adopt the technology that is most appropriate to achieve objectives) and begins by defining obligations and processes for organizations that process data. Perhaps most important, given the U.S. lead in AI talent, the Task Force calls on the administration to ensure that the United States remains the most attractive location for data scientists and engineers by following the recommendations for talent below.

The United States faces a future where Chinese telecom companies deploy a large part of global 5G infrastructure and services.119 China has already made $180 billion in capital expenditures for 5G deployment over the past five years, installing about 350,000 5G-operable base stations, nearly ten times the number currently deployed in the United States.120 Huawei has emerged as a major player in the global supply base for this equipment, while U.S. and European firms have either contracted in size or exited the market entirely. Huawei has signed forty contracts to sell 5G equipment and has shipped seventy thousand base stations to Africa, Asia, Europe, and the Middle East.121

China’s dominance poses economic and security risks for the United States. As an April 2019 DIB report on the 5G ecosystem argues, “The leader of 5G stands to gain hundreds of billions of dollars in revenue over the next decade, with widespread job creation across the wireless technology sector.” Moreover, future 5G networks built on Chinese equipment “would pose a serious threat to the security of DOD operations and networks going forward.”122 Leadership in the next generation of wireless connectivity is an economic and national security concern.

As the DIB report notes, the world leader in 5G is unlikely to be the United States, in part because no American companies manufacture the equipment to transfer signals between mobile phones and the towers or sites that make up the network.123 This reality highlights a longer-term lesson for Washington stressed throughout the Task Force report: policymakers need to provide greater incentives for R&D and domestic manufacturing in technology areas judged to be critical to national security. They also need to block mergers and acquisitions that could lead to equipment being supplied only by a limited number of foreign companies.

In the near term, the United States will need to coexist with Huawei, because many other countries have made it clear they will not follow Washington and implement a complete ban. Hobbling Huawei is not, however, a substitute for meaningful efforts to accelerate the deployment of 5G in the United States. U.S. companies dominated the apps for smartphones and other services provided over 4G, and they can do the same for 5G if it is deployed rapidly. U.S. spectrum policy is, however, focused on the high-band wavelength, making 5G communications slower and more expensive to roll out compared to Chinese and European efforts. The FCC should repurpose mid-band spectrum for new wireless applications and free up low-band spectrum held by the federal government, particularly the DOD. The federal government should also work with municipalities and states to speed small-cell deployment with the goal of accelerating penetration.124

In addition, as part of its investment in universities, the federal government should fund several 5G R&D centers at universities in areas where the United States might lead, including security and merging communications, storage, and computation in 5G. Those centers should also begin research into 6G technologies that are likely to roll out fifteen years from now and experiment with public-private partnerships to develop, license, and commercialize new intellectual property.125

Huawei is supported by government subsidies, has a guaranteed share of the Chinese domestic market, and is innovative both in its products and its business. It has thus been able to offer its services and products at prices significantly lower than its European competitors, Ericsson and Nokia.126 Washington has been trying to convince other countries that they should pay more for greater security, but many have rejected the U.S. risk assessment. For those who do see a threat from Huawei, the United States will need to make these European suppliers more affordable. The United States should, through the U.S. International Development Finance Corporation, provide loans or loan guarantees for telecommunications equipment in developing economies.

For those U.S. allies and partners unwilling to adopt a blanket ban on Chinese telecom companies, Washington should work with them to develop shared standards for inspecting and deploying 5G equipment, similar to the joint statement issued by thirty countries in Prague, Czech Republic, in May 2019.127 Washington should also work with allies such as Japan and the United Kingdom on supply-chain security reviews. Secretary of State Mike Pompeo and other State Department officials have threatened close allies with the loss of intelligence sharing if they do move ahead with Huawei; but this would be counterproductive and endanger U.S. security, since information does not flow just one way.128 In addition, as the Defense Innovation Board argues, the U.S. military should assume that wireless networks dominated by Chinese suppliers are vulnerable to cyberattacks and plan for resiliency and added layers of redundancy.129

Attract and Educate a Science and Technology Workforce

The nations with the best talent will push to the farthest edges of the science and technology frontier. Talent has been at the foundation of U.S. technological prowess, and the United States’ ability to attract the best and the brightest from around the world has provided a competitive edge for most of the last half century. This edge is now at risk.

The United States cannot stand still as others devote new resources to developing human capital. Educational analysts deem a substantial percentage of STEM programs in China to be not of equivalent quality to their American peers, but the absolute number of graduates—1.65 million Chinese science and engineering graduates in 2014, compared to 740,000 in the United States—leads to a strength of its own.130 Government, universities, and the private sector need to cooperate to expand the STEM pipeline and support new pathways into technology and science careers.

The White House, Congress, and academia should develop a twenty-first-century National Defense Education Act, with the goal of expanding the pipeline of talent in math, engineering, and the sciences. A twenty-first-century NDEA would support up to twenty-five thousand competitive STEM undergraduate scholarships and five thousand graduate fellowships. It would also increase the number of graduate fellowships and traineeships supported by existing programs at federal science and education agencies, including the Departments of Defense, Education, Energy, and Homeland Security; NASA; the National Institutes of Health; and the National Science Foundation. For example, Congress and the administration should expand the DOD National Defense Education Program, which provides scholarships and fellowships to students in critical fields of science, mathematics, and engineering in return for a commitment of national service after their studies.

Universities, federal and state governments, and businesses should address the underrepresentation of minorities and women in STEM fields through mentoring, training, research experience, and academic and career advising. They should also provide financial support for room and board, tuition and fees, and books, as well as assessments of job placement opportunities in STEM fields, highlighting employers with clear track records of fairness in hiring, promotion, and pay. The Meyerhoff Scholars Program at the University of Maryland, Baltimore County, which is one of the largest pipelines for doctorates in science and engineering among African Americans, is one initiative that provides these types of support; it also encourages collaborative coursework and cutting-edge lab work. Effective strategies to promote inclusion of women students, scientists, and technologists include on-campus childcare centers, equal opportunities for women and men to lead committees and research groups, mentoring programs to reduce the isolation of women faculty, and pauses in the tenure clock for up to one year for raising children. Within the workplace, flexible, collaborative environments that offer leadership development, mentoring, and networking for women are linked to higher rates of retention. Workplaces that employ women in higher levels of management are more able to attract and retain women at lower levels of employment.

Federal agencies, the private sector, and universities should work together to support debt forgiveness for students going into specialized technology sectors. The Cybersecurity Talent Initiative, launched in April 2019 by MasterCard, Microsoft, the Partnership for Public Service, and Workday, guarantees graduates in cybersecurity-related fields a two-year placement in the CIA, DOD, DOE, FBI, or another federal agency. Afterward, graduates receive opportunities in the private sector and up to $75,000 in student loan assistance.131 Similar programs should be developed in AI, quantum computing, and other specialized technologies.

The United States needs to make it easier for foreign graduates of U.S. universities in scientific and technical fields to remain and work in the country. Congress should “staple a green card to an advanced diploma,” granting lawful permanent residence to those who earn a STEM master’s degree or doctorate. Congress should also pass the DREAM Act, which would provide undocumented immigrants who were brought to the United States as children an expedited path to citizenship if they accomplish academic goals or serve in the military. The administration should reverse measures that have created new obstacles for many foreign students and foreign workers on temporary work visas, such as the H-1B.

Congress should pass legislation that permits immigrants to live and work in the United States if they can raise funds to start new companies.Many immigrants trying to start businesses are also recent graduates of U.S. universities. The Startup Act, which has bipartisan support, would create an entrepreneurial visa to permit seventy-five thousand immigrants annually to remain temporarily in the country if they have raised enough capital to launch a new company, and to remain permanently if the company succeeds.

The federal government should make targeted—rather than sweeping—efforts to prevent the theft of scientific knowledge from American universities. Foreign graduate students bring great expertise to American higher education and are essential drivers of new discoveries. Foreign undergraduate students are often a lucrative source of funding for many universities. Broad bans on Chinese students would hurt U.S. innovation. They would also reinforce a sense among Chinese scientists and students that the bans are motivated by racial hostility, allow the Chinese government to position itself as a protector of Chinese abroad, and thus reinforce Chinese Communist Party propaganda that equates Chinese heritage with the party.132 Some technologies are more sensitive than others, and graduate students are more likely to have access than undergraduates. The most effective measures to stop theft will likely be tighter controls over technology in universities and research labs, accompanied by expanded counterespionage efforts.

Universities should be more proactive in offering proposals on tightening controls over sensitive technologies. They also need to enforce existing rules on disclosure of foreign funding and limits on the transfer of research findings and intellectual property. Congress should provide the FBI with greater resources so agents can review students on a case-by-case basis and zero in on those who trigger significant concern. The ultimate goal should be retaining the openness of the U.S. research system and the longstanding exemption of fundamental research from controls and limitations, enshrined in the Ronald Reagan administration’s 1985 National Security Decision Directive 189.133

Support Technology Adoption in the Defense Sector

The federal government, particularly the Defense Department, needs to move more rapidly to acquire and integrate breakthrough technologies. Processes and bureaucracies developed during the industrial age are not optimized for agility and speed. Moreover, peer and near-peer competitors, such as China, do not have the same legacy systems to overcome and can blur the line between public and private sectors through new industrial-military policies. Although moving to a flexible institutional culture more accepting of risk is a systemic process involving many parts, changes in two areas—finding and funding new technologies and talent circulation—will have a more immediate effect.

Notable experiments have been made with more flexible budget authorities and the consequent acceptance of more risk. For example, at a meeting at which start-ups pitched new ideas to the Air Force, the Air Force brought contracting and payment times down from ninety days each to under fifteen minutes; the contract involved was only one page. The Air Force awarded $3.5 million through a credit card swipe to fifty-one start-ups, half of which had never worked with the U.S. government before.134

These experiments, however, remain small and inadequate to the scale of the challenge. The Defense Innovation Board identifies eighty-one major software development programs in the DOD, with budgets totaling $17.9 billion. Credit card swipes are not going to be enough to change the Pentagon’s acquisition process. Congress needs to find additional ways to help the DOD and other federal agencies find and exploit new technologies at scale in the private sector. Moreover, although senior military and intelligence leadership recognize the need to streamline bureaucracies and adopt a more risk-taking culture, this attitude has not taken hold in the bureaucratic middle, where many operational decisions are made and implemented.

Federal agencies and each of the military services should dedicate between 0.5 and 1 percent of their budgets to the rapid integration of technology. The heads of each agency should also hire a domain specialist deputy for fast-track technologies (for example, data sciences, robotics, and genomics) from outside the government for a two- to four-year assignment. This person would run a program similar to DARPA’s Cyber Fast Track project in cyber and robotics, with an assigned budget to be used only for contract awards with nontraditional commercial partners and a goal of proposal to contract within an average of thirty days. Each agency would be expected to report outcomes, including reduced times to contract.

Congress should also allow the services to reprogram up to 10 percent of their budget in the same year. This flexibility would improve their ability to contract with nontraditional defense companies, including start-ups, which require faster decisions and smaller increments. The funds should champion the emerging defense-tech sector, which includes a new generation of software-driven defense contractors that are developing frontier technologies and want to work with the DOD but do not possess the scale of traditional defense firms. Congress, working with the services, would need to develop new methods of oversight for this high-risk portion of the budget, and the DOD would have to create a venture-oriented advisory board to provide advice on how to further accelerate adoption of advanced technologies from the start-up community.

Changes in budgeting need to be matched with changes in the way talent is developed and acquired. Although the more technologically advanced agencies, such as DARPA and NASA, have recruited and retained strong specialized talent, in general the government’s ability to aggressively adopt new technologies is limited by the number and skill of technical people in government. The government is missing out on young talent. Data supplied by the Office of Personnel Management shows that at the end of FY 2017, less than 3 percent of full-time information technology professionals in federal agencies were under the age of thirty, while 51 percent were fifty or older.135

Congress should establish a new service academy, the U.S. Digital Service Academy, and a Reserve Officer Training Corps for advanced technologies (ROTC-T) to foster the next generation of tech talent. Like the other federal military academies, the new technology service academy would draw talent through a highly competitive process and congressional appointments; offer full scholarships; and require graduates to serve a period in national service, typically five years. Students would pursue studies in mission-critical technology areas such as AI, biotechnology, cybersecurity, data analytics, and robotics, and after graduation they would commission into either the services or the intelligence agencies, Department of Defense, Department of Homeland Security, or other government agencies as civil servants.136

Lifelong career paths should be complemented with more short-term, flexible options.The White House and Congress should bring people from the technology industry into all three branches of the government for temporary rotations. They should also develop new fellowships to encourage circulation of technologists, military officers, and federal officials between the technology sector and the Defense Department. For example, the U.S. Digital Service (currently approximately 185 staff members) and similar programs should be doubled in size. Scholars at Stanford University’s Hoover Institution have suggested establishing a Technology Fellows Program that would select fifty of the most talented American engineering students graduating from college for a one-year, high-impact government placement in which they would work directly for senior leaders like the Air Force chief of staff, the secretary of defense, or the commander of U.S. forces in the Middle East.137 An additional co-op–like program would enable technology graduate students to cycle through government as part of their training. Industry should define and adopt leave policies for civic service to allow tech talent to spend time in government, and technology companies should commit to hiring more veterans and those who have done public service to expose themselves to the national security worldview.

The Defense Department should also expand its programs that place military personnel at private companies. Currently, the Secretary of Defense Executive Fellows program places four or more officers or civilian employees each year in companies and corporations including Amazon, Apple, Google, Intel, and Salesforce. The program should be expanded, both in size and to smaller, less established companies to allow personnel to carry new skills back into their missions.

The Defense Department should maintain the Defense Innovation Board. In June 2019, Trump signed an executive order calling on federal agencies to evaluate advisory committees and terminate at least one-third of the current committees.138 But the work of the DIB has been critical to identifying bureaucratic barriers to software development, technology acquisition, and innovation in the DOD as well as relaying high-level private-sector experience and expertise to Pentagon leadership.

In addition to tech expertise coming to policymakers, Washington should move to technology centers. Other agencies, as well as the armed services, should follow the examples of the Defense Department’s Defense Innovation Unit, Department of Homeland Security’s Silicon Valley Innovation Program, and National Geospatial Intelligence Agency’s Outpost Valley in establishing locations in Austin, Texas; Boston, Massachusetts; and Silicon Valley, California, as well as other technology hubs such as Silicon Alley (New York City), Silicon Beach (Los Angeles), Silicon Prairie (the Midwest), and Silicon Slopes (Utah).139 Government outposts like Sofwerx and Special Operations Works help ensure that eventual end users are involved in the acquisition and development process. They also allow for organizational experimentation: some will succeed in developing outreach to the venture capital and start-up communities and others will fail, allowing DOD leadership to learn what works.

Bringing tech talent into government is a means both to making federal agencies more agile and to shrinking the cultural and political divide between the two communities. Common ground between the technology community and the defense sector could also be found in a push for greater adoption of open-source technologies such as Linux, Hadoop, and Kafka in the defense world. Open-source software and the cloud have been a force multiplier for the consumer internet, providing the benefit of engineers contributing from around the world. The adoption of open-source technology in national security efforts has been slow, with Defense Department managers using and protecting legacy systems. Building open-source projects would not only bring greater efficiency to the Defense Department but would also provide opportunities for cultural cross-pollination.

Bridge building may also be easier when industry and the Defense Department both target transnational risks, such as cybersecurity or election interference. The DOD’s AI strategy, for example, talks of forming “open missions” based on global challenges. Specifically, it suggests operationalizing AI for humanitarian assistance and disaster relief for wildfires, hurricanes, and earthquakes. Other federal agencies should look for similar projects that can energize the tech community around AI.

Bolster and Scale Technology Alliances and Ecosystems

In a globalized system of innovation, friends, allies, and collaborators are a competitive advantage. Assuming current rates of growth, China will pass the United States and become the world’s largest funder of R&D sometime after 2030. But one of the great strengths of the U.S. innovation system is that it is a central node in a transnational network for turning ideas into new products. The United States does not need to outspend China dollar for dollar; it has a slew of alliances upon which it can call. Collaborative science and technology projects are central to long-term competitiveness.

The State and Treasury Departments should create a technology alliance to develop common policies for the use and control of emerging technologies. Membership would be made up of countries with shared concerns about the effects of frontier technologies on international stability and democracies, as well as those with significant technological capabilities. These include the members of the Five Eyes intelligence-sharing alliance (the United States, Australia, Canada, New Zealand, and the United Kingdom), Estonia, Germany, India, Israel, and Japan. At least in the first stage, membership would be limited to ten to fifteen countries to facilitate coordination of positions and development of concrete actions. The group would work to develop norms of state behavior in cyberspace and for AI governance. At issue is not only who will develop and deploy new technologies first, but also the values embedded within these new technologies and whether they will be used to reinforce or undermine democratic societies.

The technology alliance would also develop coordinated national export controls, defense trade controls, and investment review mechanisms to limit the transfer of multiuse technologies. Without support from other technology centers, export controls and investment restrictions will fail and likely damage U.S. commercial interests. European, Israeli, Japanese, and South Korean firms can be expected to replace American companies in selling to third markets. The Information Technology and Innovation Foundation estimates that new export controls could create losses of $14.1 billion to $56.3 billion in export sales over five years, depending on how restrictive the controls are and the degree of international coordination on stopping the flow of technology.140

The United States has a history of uneven results in regards to export controls on China when there is limited agreement on what technologies should be controlled. For example, over the last three decades, the United States has had tight controls on the sales of space technology to China, yet Beijing has become a space power, launching BeiDou, a domestic GPS system; supporting several manned missions to space; and landing a vehicle on the dark side of the moon. During this same time period, American companies’ share of the commercial satellite industry fell from 83 percent in 1999 to 63 percent in 2005 and 40 percent in 2018.

The line around the next wave of disruptive technologies to be controlled should be drawn as finely as possible. For example, much AI research is done collaboratively by scientists around the world. High-tech companies share details of their work, with AI research papers published on sites like arXiv and code published on GitHub and other repositories.141 Alliance partners will need to agree on distinctions between basic and applied research as well as commercial and military applications so that controls are as narrow as possible. Basic or fundamental research should not be subject to control.

To lead effectively in today’s global technology innovation environment, the United States needs to base its technology and related national security strategy on an evolving view of global value chains. The national security legislative and regulatory framework of the United States and its tech alliance partners should address specific concerns related to potential adversaries’ controlling supply chains associated with the design and production of sensitive hardware and software. The tech alliance should establish a clear set of priorities for both investment and defense to avoid wasting time and financial and political capital on technologies or value-chain activities that do not matter at the expense of those with concrete national security implications.

To assist with this effort, the White House should facilitate an ongoing dialogue among private-sector, academic, and government leaders to identify and categorize technologies that truly have national security implications if they fall into the wrong hands. Senators Mark Warner (D-VA) and Marco Rubio (R-FL) have introduced a bill to create an Office of Critical Technologies and Security in the Executive Office of the White House to coordinate policies designed to prevent the transfer of dual-use technologies, maintain U.S. technological leadership, and ensure supply-chain security.142 Others have suggested better policy coordination through the Office of Science and Technology Policy. The goal of both efforts is to enable the creation and communication of a coordinated response across the government and to work with federal regulators, the private sector, state and local governments, and academia, as well as with international partners and allies.143

The Department of Commerce should work with major trading partners to promote the secure and free flow of data and the development of common technology standards. Cross-border data flows are essential to the modern digital economy. A 2016 McKinsey & Company report estimates that global data flows raised global GDP by approximately 3.5 percent over what it would have been without such flows.144 Moreover, one of China’s competitive advantages is the ability to mobilize massive pools of data across industries and uses. The movement and sharing of data among trade partners would allow their firms to achieve needed economies of scale.

But economic and political winds are now blowing away from data sharing. Skepticism and fears about how the major technology platforms collect and use data is high in the United States and Europe. More governments are promoting data-localization policies—regulations requiring companies to store and process data on servers physically located within national borders—in pursuit of privacy, cybersecurity, or economic advantage.145 When the Trump administration withdrew the United States from the Trans-Pacific Partnership it restricted participants’ ability to require data localization and firms to disclose source code, but the administration did secure similar protections for cross-border data flows in the U.S.-Mexico-Canada Agreement (USMCA).

Washington and its partners should look for common principles on privacy that would allow for the secure, privacy-protected flow of data in the near term, with a longer-term goal of developing new multilateral agreements. The United States can build on mechanisms already present in the Asia-Pacific Economic Cooperation forum and the U.S.-EU Privacy Shield agreement, which allow for national-level privacy protections and data transfer. USMCA’s data provisions and protections of source code can also serve as a model. The U.S. trade representative should continue to promote protections for cross-border flows, source codes, and algorithms in all future trade agreements. In the absence of the CPTPP, Washington should also work with allies in the World Trade Organization (WTO) to pressure China to adhere to WTO rules and responsibilities and end discriminatory industrial policies.

Policymakers have also grown increasingly concerned about Beijing’s efforts to shape standards in emerging technologies, especially 5G, AI, and the Internet of Things. In recent years, Beijing has issued hundreds of domestic standards, and Chinese technology companies have become more active and effective participants in international standards-setting forums.146 The standards process in the United States has historically been industry-led, and Washington should not re-create Beijing’s top-down, national-plan approach. But there may be technologies and international forums where U.S. companies could use additional government support. NIST should do a comprehensive study and suggest standards dialogues for emerging technologies where the federal government can play a more active supporting role.147

The Department of Commerce and the U.S. International Development Finance Corporation should encourage American start-ups in AI and data science, genomics and synthetic biology, quantum information systems, and other frontier technologies to invest in, export to, and form R&D partnerships with firms in emerging technology ecosystems. The goal would be fostering early adopters, developers, and customers who will build on U.S. technologies. Most innovation emerges from regional ecosystems made up of networks of technology firms, capital markets, and research universities. Over the last thirty years, new technology hot spots have emerged in places such as Bengaluru, India; Daejeon, South Korea; Durban, South Africa; Hsinchu, Taiwan; Lagos, Nigeria; Santiago, Chile; and Shenzhen, China. U.S. companies and venture capital firms have already developed connections to these hubs. In 1989, for example, U.S. multinationals conducted almost 75 percent of their foreign R&D in five countries: Canada, France, Germany, Japan, and the United Kingdom. By 2014, that number had dropped to 43 percent, with China, India, and Israel in particular becoming important new sources of talent and ideas.148

The Department of Commerce and the U.S. International Development Finance Corporation should develop targeted tax incentives and investment schemes to promote the closer linking of emerging technology hot spots. The goal is not only to accelerate innovation, increase revenues, and push forward product enhancement through the real-world use of technologies. It is also to encourage the adoption of U.S. technologies into these tech hubs and compete with Beijing’s use of the Belt and Road Initiative to create export markets and demand for Chinese digital products. These efforts should be paired with incentives and investments from the federal and local governments to bolster technology corridors outside of Boston and Silicon Valley, in places such as Dayton, Ohio, and Huntsville, Alabama.

The Department of Energy, Department of State, National Institutes of Health, National Science Foundation, Office of Science and Technology Policy, and other relevant agencies should develop a network of international cooperative science and technology partnerships, open to governments and the private sector, to apply frontier technologies to shared global challenges, such as climate change. Federal agencies should not only fund efforts that will include cooperation with other nations’ science organizations but should also provide R&D and tax incentives for tech firms to form international collaborative partnerships. In the past, the United States has used atomic energy, space exploration, agricultural production, and other collaborative technology projects as foreign policy tools. Scientists and scholars worked on projects that not only addressed pressing economic, health, environmental, and security challenges but also strengthened ties between the United States and its friends and allies. As Nina Federoff, former science advisor to Secretaries of State Condoleezza Rice and Hillary Clinton, noted, “Science by its nature facilitates diplomacy because it strengthens political relationships, embodies powerful ideals, and creates opportunities for all.”149

Today, the United States should work with members of the technology alliance to develop projects in artificial intelligence and data science, advanced battery storage, advanced semiconductors, genomics and synthetic biology, 5G, quantum information systems, and robotics. An assistant to the president for science, technology, and global affairs in the OSTP should coordinate these plans. Technology firms and universities should provide guidance to ensure that the agreements serve strategic use and address global challenges. Federal agencies should set aside a percentage of their budget increases to fund efforts that will include not only cooperation with other nations’ science agencies but also incentives for tech firms and universities to form international collaborative partnerships.

The DOD, as part of its effort to source innovative technologies, could also write contracts with companies in Australia, India, Japan, and other allies and partner nations. In 2017, Congress added Australia and the United Kingdom to the National Technology and Industrial Base, which oversees joint R&D and controlled technology transfer. The program, previously limited to the United States and Canada, should be further expanded to other technology alliance partners. Similarly, the Technical Cooperation Program, which currently involves collaboration among the United States, Australia, Canada, New Zealand, and the United Kingdom in research on areas such as electronic warfare and materials processing, should be expanded to other nations.150

When considering the scope of civilian collaborative R&D projects, U.S. policymakers should bear in mind that there are costs to painting all Chinese technological progress as a threat to the United States or its interests. The tech alliance should distinguish between competition over multiuse technologies with national security implications and more cooperative approaches to targeted technologies. Global challenges such as addressing climate change and stopping pandemics require technological collaboration, and all will benefit from breakthroughs in clean energy, carbon capture, and new vaccines against influenza. The alliance should include Chinese agencies, universities, and firms in a new multinational initiative that researches several targeted technologies, including carbon capture and storage, hydrogen fuel from renewables and water technologies, and technologies that make food supplies more resilient.


The United States has a long history of innovation, entrepreneurship, intellectual freedom, and openness. This innovation has powered the U.S. economy and allowed the U.S. military to overmatch potential adversaries. But the United States cannot expect the national security innovation base to automatically reset itself for the new demands of technology competition. Losing the technological edge the United States currently has over its competitors will impose significant risks. The next wave of breakthroughs will generate economic and military advantages for the countries that develop and deploy these technologies first.

Facing the threefold challenge of the accelerating pace of innovation, the diffusion of multiple-use technologies, and the rise of China, the United States must act now to build a national strategy for sustaining American leadership in innovation. As this report has detailed, this strategy has four pillars: restoring public support and funding for science, attracting and educating the world’s best STEM talent, making rapid technological adoption a core competency in the Defense Department, and building an international technology alliance. The strategy will require rethinking traditional approaches to technology development. It will depend on government officials at all levels, the private sector, and universities working together to develop new forms of cooperation designed for agility and speed. In the end, it will require the United States to recommit to science and technology leadership and investment. With renewed dedication to a national innovation security strategy, the United States can ensure its continued and future economic growth and national security.

Up next
Other Views