Take 5: How Nations Protect High-Tech Assets
It's part trade war, part cyber defense — and the rumblings of conflict grow louder as countries (and companies alike) maneuver to protect their high-tech assets. Prime Minister Shinzo Abe recently announced that Japan would tighten export controls for advanced technologies in response to new U.S. trade restrictions aimed at China, writes the Yomiuri Shimbun daily. Both business interests and geopolitics are setting off such chain reactions; for while most Western economists tend to side with the free market, politicians increasingly see the issue as a reason to protect national interests — and put virtual firewalls.
One of the most closely watched cases to spark national security concerns in the U.S., and afterward in several countries in the EU, was the case of Huawei. In 2012, a U.S. congressional committee warned that Chinese telecom giant, together with ZTE, another leading Chinese company, could pose a security threat as the hardware and mobile infrastructure equipment can be used for spying for the Chinese government. The companies denied all allegations, but in 2018 the U.S. passed a bill restricting government bodies from doing business with Huawei, ZTE and several Chinese companies due to security concerns.
U.S. government officials have said that China could order its manufacturers to create backdoors for spying inside their devices. The evolving showdown has also included the high-profile arrest in Canada of Meng Wanzhou, Huawei's Chief Financial Officer and daughter of the company's founder. But the bigger questions go beyond any single case, as nations ask how (and how far to go) to protect sensitive technology beyond its own borders. Here's how the issue looks in five countries around the world:
CHINA
The stakes: In just a generation, China's economy has gone from being driven by gluing sneakers to competing for the most advanced technological innovations. Jeanine Daou, a tax specialist at PwC, put it this way, in an interview with Nikkei Asian Review: "China ... appears to be implementing a longer-term strategy that recognizes its competitive advantage in manufacturing, while building towards competing for control over the real value in the modern supply chain — intellectual property."
Photo: Rishi Deep
Current security measures:
- The export of military items is exclusively allowed for state-authorized trading companies, and dual-use items can only be exported by companies in possession of an export control license.
- According to the new protocols, a foreign-manufactured item can be subject to Chinese export control if the content of that item is of controlled Chinese origin. Yet, the same protocols already run in the U.S. and China seems to be following a good example.
Takeaway: The country is now set to introduce a new Export Control Law, following the first draft released in 2017. The new law will block the transfer of controlled items from China to a foreign country or region, which includes Hong Kong, Macao and Taiwan. The analysis of the draft suggests that the new law will strengthen the government's authority to regulate the export of military, nuclear, biological, chemical and dual-use items.
U.S.
The stakes: China's technological ambitions have run head-on into President Donald Trump's protectionism. When making the list of "emerging technologies' the Commerce Department's Bureau of Industry and Security listed those related to sectors identified in the Made in China 2025 strategy. Also in February, Trump called artificial intelligence potential of "paramount importance to maintaining the economic and national security" and launched the American Artificial Intelligence Initiative. Still, the leading U.S.-based developers in robotics, biotechnology and AI, are powerful multinational private companies that benefit from open global trade.
China-U.S. trade talks on Feb. 21 — Photo: White House/Tia Dufour
Key security measures:
- The U.S. Commerce Department restricts the release of sensitive technologies outside the country or by the non-U.S. persons, including those within the corporation.
- New Export Control Reform Act was signed to impose export controls on emerging technologies, such as biotechnology, AI, position, navigation, and timing technology, microprocessor technology, advanced computing technology, data analytics technology, robotics and many-many others.
Takeaway: The Information Technology and Innovation Foundation (ITIF) warns in a recent report that the U.S. government that new restrictions would harm the country's interest. Additionally, it can also slow product development processes and limit the ability of U.S. companies to attract international talent. ITIF also counted the damage: U.S. firms could lose $14.1 to $56.3 billion in export sales over five years, with missed export opportunities threatening 18,000 to 74,000 jobs.