For years, the current president and his administration have harped on the dangers of China eclipsing the United State in numerous forms of industry. Perhaps the greatest of these supposed threats is China’s burgeoning technological sector. The tone of panic and us-versus-them mentality of many lawmakers discussing technological globalism raises some questions. In particular, how much of this protectionism is justified? More importantly, is it an effective step towards profit and progress, or is clueless emotional sentiment sending us backwards?
These questions have been on the mind of many readers this week, as the Commerce Department considers a new set of rules which would allow the United States government to bar transactions between American and Chinese technology firms. These rules won’t just effect US tech companies attempting to procure parts from China, either; they also impact American firms seeking to export products abroad. More specifically, they are considering measures such as limiting the number of export licenses that may be held by a company that sells products to, or shares intellectual property with, China. A variety of US technology firms are responding with increased panic to the notion that the government might cut them off from suppliers of parts at any point, without notice or reason besides vague protectionism. Though Trump’s administration has been idly discussing similar proposals for months, the new proposed rules have legislative force behind them that previous discussions of the issue lacked.
In turn, foreign firms are starting to shun American firms and their products, fearing that these rules, if put into place, would prevent their American suppliers from creating their technological products.
In particular, this month, Trump has considered restricting sales of aircraft parts to China. This discussion and potential policy is part of a larger effort on behalf of the Trump administration to keep “sensitive information” out of China. This concern about vague trade secrets is the reason high-tech industries in particular have been the target of the brunt of this scrutiny. Companies such as General Electric, for example, might no longer be able to sell jet engines, because General Electric sells airplane parts to China as part of a larger multinational corporate airfare trade system.
Though these rules might have been drafted in order to keep business within the United States, ironically, the threat of these rules is causing businesses to move more and more of their research and development facilities to locations outside the United States, in order to guarantee timely, uninterrupted access to trade with China in the uncertain future. Investment and planning for new development is increasingly being turned to locations outside the United States, which are safe from these rules.
In fact, the very jobs Trump’s administration may be trying to protect, in the microchip industry and other similar manufacturing sectors of the tech industry, are most threatened by these rules. Because the market for their products is being threatened, US companies are accelerating the speed at which they transfer jobs in manufacturing to facilities overseas. In turn, this lack of US manufacture money ceases to fund research and development within the United States. Individual talented scientists and researchers gravitate towards company centers in other nations, with less stringent trade regulations. Though this brain drain might seem like a small issue at first, when combined with the redirected flow of investment away from the United States, it is nothing to sneeze at.
The most threatening factor of the rules, to the industry, is how broad and far-reaching they are. According to the New York Times, “The proposed rule would allow the commerce secretary to block transactions involving technology that was tied to a “foreign adversary” and that posed a significant risk to the United States.” This is a rule so vague that companies have every right to be worried about how it might be applied. It follows a history of vague and threating trade restrictions with China, such as the one with Chinese telecommunications company Huawei last year, which allowed the US government to block the purchase of technology designed by a “foreign adversary”. With rules so vague already in place, it is possible that technological protectionism could take effect in trade with any number of countries.
Why is it that, despite the outcry from real corporations, policies and rules promoting blind protectionism continue to be developed? What makes people so passionately drawn to economic protectionism and fear around technology? What sorts of misunderstandings drive this fear, and how could our society and government clear them up in order to take economically productive steps in the future? These are all questions to ponder in relation to this issue.
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