US President Donald Trump. Photo: AFP
US President Donald Trump. Photo: AFP

Opinion: US readying to take on China on the tech front

US is erecting new barriers on a trade-war-footing against China in areas of technologies

A spectre is haunting the US—the spectre of China. As America’s trade war escalates against China each day, the land of opportunity is filled with despair. Farmers feel the tariff war launched by US President Donald Trump is a body blow for their most assured market for soybeans and pork among others. The automobile industry is facing supply-side hurdles with punitive tariffs on steel and aluminium.

Michael Pillsbury, director of the Center for Chinese Strategy at the Hudson Institute, a think tank in Washington, says China duped the US for the past four decades by presenting itself as pro-America and went on to steal American technological and military capabilities. “It turned out that was just a tactical move, that at that time [1978] the Soviets were their enemy as well as ours," he says. “But who would have thought later that they would see us as a rival for global leadership and turn on us," he said in an interview on Fox News on 12 August.

But, in the deeply divided Trump’s America, China’s gold rush in the Silicon Valley continues to bring the unity of purpose between the otherwise polarized American media and the establishment. Whether it is Fareed Zakaria on CNN or Pillsbury on Fox, there is a consensus about China and its un-American activities. That China has cheated and exploited innocent America by stealing its intellectual properties and technologies has become a daily ritual.

After flexing muscles on the tariff front, the American administration and the lawmakers are now sharpening their arsenal on the technology front. A slew of restrictive investment measures is on the anvil. When they are implemented, then American companies would be cordoned off, including start-ups in areas of frontier technologies, from takeovers and mergers by the Chinese companies.

Consider, for example, the proposed Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA) introduced by senator John Cornyn, and representative Robert Pittenger of the Congress last year. The bill is avowedly directed against the enveloping enemy called China. It intends to add significant changes to the existing powerful Committee on Foreign Investment in the United States (CFIUS) review process.

The CFIUS regulates foreigners, or aliens in the American lingo, from acquiring controlling stakes in areas involving “critical technology" with national security implications. But, the CFIUS left one area un-addressed. Foreign venture funds and companies acquiring minority stakes of less than 50% in start-ups with enormous innovative potential in areas such as robotics, artificial intelligence (AI), biotechnology, 3D printing, and more, are left off the hook.

Over the past several years, a range of Chinese venture funds and investors apparently poured billions of dollars in the start-ups in Silicon Valley by picking up minority stakes. For overcoming this lacunae in the CFIUS which is in operation since 2007 following the Foreign Investment and National Security Act of 2007, the US Congress is now bringing the first update through the FIRRMA.

More important, the new legislation would expand CFIUS’s jurisdiction to cover a number of new types of transactions such as purchases or leases of real estate in close proximity to sensitive US government facilities in the Silicon Valley and other cities, and the contribution of intellectual property and associated support to a foreign person through any arrangement, including joint venture. “Both of these categories would capture transactions beyond the traditional mergers and acquisitions currently subject to CIFUS review," says White & Case, a law firm. “Additionally, FIRRMA provides CFIUS with broader jurisdiction for transactions involving critical technology or infrastructure firms."

FIRRMA was signed into law on Monday. “It will strengthen CFIUS and enhance the Government’s capacity to protect critical technology while keeping the U.S. open to investment," said the US Treasury Secretary Steven Mnuchin in a tweet on Monday.

As the Trump administration steps up its violent campaign against immigrants from neighbouring countries by separating mothers from their children, it is also erecting new barriers on a trade-war-footing against China in the crucial areas of technologies. In fact, the China issue has become a grand theme for Trump to recover his lost ground with Democrats but all those could go upside down should Republicans lose their majority in the Congress in November.

Notwithstanding the ugly tariff and technological confrontation with China, America’s internet behemoth Google is busy building a network of Chinese app developers, manufacturers and advertisers as it presses ahead with its proposed censor-friendly versions of the banned web services. Apple is increasingly worried that it may lose the Chinese market and also the backbone of its supply chain because of the Trump administration’s unhinged trade war. Ironically, China’s campaign for crafting rules for global investment facilitation are now being scuppered by Trump.

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