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Feb. 4, 2019, 3:59 p.m. EST

The true source of U.S.-China trade tension is over technology

Competition is seen as similar to the ‘Space Race ‘in the 1960s with the Soviet Union

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By Patty Nieberg


Getty Images
A shipping container is offloaded from the Hong Kong based CSCL East China Sea container ship at the Port of Oakland on June 20, 2018.

As the U.S. and China engage in a high-stakes negotiation over the future of their trade relationship, experts say it’s technology that is at the heart of the debate.

“The vast majority of the issue is tech, not trade, especially for the U.S. which is not that trade-dependent of a country,” said Marc Busch, professor of international business diplomacy at Georgetown University. “This is a concerted trade agenda to deliver on promises that [President Donald Trump] was going to somehow resuscitate the Rust Belt and manufacturing in the U.S.”

Trump’s $200 billion tariffs on Chinese goods came in response to an ongoing conflicts including a $350 billion trade deficit and cases of intellectual property theft. Most recently, the Justice Department’s indictment of the Chinese tech company, Huawei, increased tensions between the nations before a round of trade talks at the end of January.

Throughout his tenure — and previously on the campaign trail — Trump’s rhetoric has focused on China’s “unfair” trade practices, which he says hurt U.S. business. But Busch believes Trump’s understanding of the Chinese tariffs is incorrect.

“Trump sees a Chinese exporter like Huawei, paying a fee like at an amusement park to get in,” he said. “So they pay this fee at the amusement park gate and then they’re in, then they can sell. The consumers, the people inside the fair, they’re not impacted. The fee is just collected at the door and that’s it.”

But despite trade policy, Busch called tech the “unsung hero” of America’s larger economic and political issues with China.

And the issues over technology may not fit campaign slogans, he said.

“Politically you can run against trade because trade has this one convenient feature of coming with a flag,” Busch said. “So a Trump or an elected official can look competent by identifying the source of all evil as being trade with Mexico. It’s hard to rail against your iPhone.”

Tech experts see this competition with China as a new era.

“The 1960s brought us the global space race. We are now in the next state of the global data race,” said David Logsdon, a senior director for Public Advocacy New and Emerging Technologies at CompTIA at a panel of tech experts on Wednesday. “Those countries that are able to harness data from both an offensive and a defensive perspective for economic prosperity and national security, will be ahead of others.”

A big part of the problem is a lack of attention. In 1995, Congress closed the Office of Technology Assessment which facilitated problems and analysis from tech, science and business communities with policy-makers.

“Having something like the OTA system to do that on the technology side for both defense but also on issues like climate and cyber -- I think would be a huge win for the Congress,” said Andrew Philip Hunter, director of defense-industrial initiatives group at Center for Strategic and International Studies.

Technology entrepreneurs at a panel called on Congress to enable U.S. infrastructure, which Lisa Malloy, head of U.S. government relations at Intel Corporation /zigman2/quotes/203649727/composite INTC +2.48%  , said will help develop a “strong ecosystem of competition.” The talk was hosted by CompTIA, a non-profit trade association for internet technology.

Malloy urged for more support towards spectrum bands and 5G, which would provide increased wireless connections.

Over the past two years, lawmakers attempted to pass bills, which died in committee, with regulations for vendors selling to the federal government. This included requiring devices to rely on standard protocols, and not contain known vulnerabilities or hard-coded passwords.

Steve Hanna is a senior principal at Infineon /zigman2/quotes/204995926/delayed DE:IFX +1.34%  , a producer of semiconductors which provides power and security when installed in devices like vehicles and passports. Hanna pointed to the 2019 World Wide Threat Assessment from the Director of National Intelligence which identified cybersecurity as a major threat to national security.

The biggest threat, Hanna said, are bad actors with tools to attack systems like smart cars, homes and factories. “We have to make sure that we adopt defensive technologies that are appropriate and effective in defending against those capabilities,” he said.

But tech specialists like Hanna believe the United States can lead by “raising the bar for U.S. initiatives” and adopting rules like the International Electrotechnical Commission’s 62443 series standard which established Security for Industrial Automation and Control Systems.

“That will make the U.S. a safer place for all of us and it will encourage the adoption of these standards by manufacturers who will then promulgate theses standards and their products -- which will be more secure into the marketplace,” he said.

Without immediate congressional action, Hanna thinks the U.S. will miss the chance.

“Now’s our window of opportunity to do so,” he said.

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