U.S.-China Technological “Decoupling”: A Technique and Coverage Framework

Table of Contents

Foreword

Know-how is the engine that powers superpowers. Because the chair of the Nationwide Safety Fee on Synthetic Intelligence (NSCAI), I led the trouble that finally delivered a harsh message to the U.S. Congress and to the administration: America shouldn’t be ready to defend or compete within the AI period. The actual fact is that America has been technologically dominant for thus lengthy that some U.S. leaders got here to take it without any consideration. They had been improper. A second technological superpower, China, has emerged. It occurred with such astonishing pace that we’re all nonetheless straining to grasp the implications.

Washington has woke up to search out america deeply technologically enmeshed with its chief long-term rival. America constructed these expertise ties over a few years and for plenty of good causes. China’s tech sector continues to learn American companies, universities, and residents in myriad methods—offering essential expert labor and income to maintain U.S. R&D, for instance. However that very same Chinese language tech sector additionally powers Beijing’s army build-up, unfair commerce practices, and repressive social management.

What ought to we do about this? In Washington, many individuals I speak to present the same reply. They are saying that a point of technological separation from China is important, however we shouldn’t go as far as to hurt U.S. pursuits within the course of. That’s precisely proper, after all, however it’s additionally fairly imprecise. How partial ought to this partial separation be—would 15 % of U.S.-China technological ties be severed, or 85 %? Which applied sciences would fall on both aspect of the reduce line? And what, actually, is the technique for America’s long-term expertise relationship with China? The additional I probe, the much less readability and consensus I discover.

In equity, these are critical dilemmas. They’re additionally unfamiliar. “Decoupling” entered the Washington lexicon only a few years in the past, and it represents a dramatic break from earlier assumptions. In 2018, for instance, I remarked that the worldwide web would most likely bifurcate right into a Chinese language-led web and a U.S.-led web. Again then, this concept was nonetheless novel sufficient that the remark made headlines world wide. Now, the prediction has already come midway true. In the meantime, policymakers—who often aren’t technologists—have scrambled to coach themselves concerning the intricate international provide chains that also hyperlink america, China, and lots of different international locations.

In 2019, I used to be appointed to be the chair of the NSCAI, a congressionally mandated bipartisan fee that was charged with “take into account[ing] the strategies and means essential to advance the event of synthetic intelligence, machine studying, and related applied sciences to comprehensively handle the nationwide safety and protection wants of america.”¹ I labored with leaders in business, academia, and authorities to formulate suggestions that may be adopted by Congress, the administration, and departments and companies.

We had been profitable, however this effort didn’t go far sufficient. That’s the reason I proceed to advocate for main laws (reminiscent of america Innovation and Competitors Act and the America COMPETES Act), to develop the subsequent part of implementable coverage choices (by the lately launched Particular Aggressive Research Challenge), to help daring and bold analysis on the toughest AI issues (through my new AI2050 initiative), and to raise public dialogue (in my newest ebook, The Age of AI, with Henry Kissinger and Daniel Huttenlocher).

Nonetheless, there may be a lot extra work to do to safe America’s technological future within the context of a rising China. Given the excessive stakes and dizzying complexity of the challenges, many U.S. leaders are nonetheless looking for a psychological framework—a set of analytical instruments to assist them reply probably the most basic questions of technique and coverage. The China Technique Group, a bipartisan group of thinkers and doers I convened with Jared Cohen in 2020, sought to develop these sorts of frameworks. Certainly one of our key findings was that such profound nationwide dilemmas name for deeper evaluation by a broader vary of unbiased voices.

That’s why I used to be so happy to learn Jon Bateman’s main new report, “U.S.-China Technological ‘Decoupling’: A Technique and Coverage Framework.” Jon is a superb thinker who has written an distinctive guidebook and blueprint for U.S. motion. His report builds on suggestions outlined by the NSCAI and the China Technique Group. It’s a significant achievement, and I strongly hope that policymakers take note of it.

There isn’t any scarcity of study right now on U.S.-China tech coverage, however Jon’s report stands out for its ambition, readability, and rigor. To begin with, he avoids two of the largest and commonest pitfalls: providing hazy strategic concepts with out explaining find out how to implement them, or cataloging a laundry listing of insurance policies with none discernible technique. As an alternative, Jon attracts a straight line from the heights of American grand technique to the trenches of company decisionmaking. With this methodical method he outlines a sensible, achievable agenda for a outstanding vary of U.S. nationwide safety and financial objectives. I significantly appreciated Jon’s prolific use of case research to floor his proposals in technological actuality.

Jon shouldn’t be afraid to stake a place, and a few of my favourite components of his report had been those who I disagreed with. He argues, for instance, that the army significance of AI could also be overestimated—or, a minimum of, that the period of what China calls “intelligentized warfare” might be nonetheless a great distance away. I’ll take the opposite aspect of that guess, however I nonetheless discovered Jon’s evaluation to be evenhanded and thought-provoking. And at this perilous second in U.S. historical past, we merely can’t afford groupthink. With requires a tough “decoupling” getting louder, fewer individuals are keen to say (and even ask) the place all of it ends. Jon is a kind of individuals, and I applaud him for it.

The paradoxes of the U.S.-China tech relationship are usually not going away. America might want to regularly reassess whether or not and find out how to stay interdependent with our main worldwide rival. The selections shall be tough, the debates heated. Jon’s report is among the many greatest guides I’ve seen and can stay a touchstone for years to return.

Eric Schmidt

Co-founder, Schmidt Futures

Chair, Particular Aggressive Research Challenge

Former CEO & Chairman, Google

Government Abstract

A partial “decoupling”² of U.S. and Chinese language expertise ecosystems is effectively underway. Beijing performs an energetic position on this course of, as do different governments and personal actors world wide. However the U.S. authorities has been a major driver in recent times with its elevated use of expertise restrictions: export controls, divestment orders, licensing denials, visa bans, sanctions, tariffs, and the like. There’s bipartisan help for a minimum of some bolstering of U.S. tech controls, significantly for so-called strategic applied sciences, the place Chinese language development or affect might most threaten America’s nationwide safety and financial pursuits. However what precisely are these strategic applied sciences, and the way exhausting ought to the U.S. authorities push to manage them? The place is the accountable stopping level—the road past which expertise restrictions geared toward China do extra hurt than good to America?

America can’t afford merely to muddle by technological “decoupling,” one of the consequential international tendencies of the early twenty-first century.

These are vexing questions with few, if any, clear solutions. But america can’t afford merely to muddle by technological decoupling, one of the consequential international tendencies of the early twenty-first century. The U.S. expertise base—foundational to nationwide well-being and energy—is completely enmeshed with China in a bigger, globe-spanning technological internet. Slicing many strands of this internet to reweave them into new patterns shall be daunting and harmful. With no clear technique, the U.S. authorities dangers doing too little or—extra possible—an excessive amount of to curb technological interdependence with China. Particularly, Washington could unintentionally set in movement a chaotic, runaway decoupling that it can’t predict or management.

Sharper pondering and extra knowledgeable debates are wanted to develop a coherent, sturdy technique. In the present day, disparate U.S. targets are ceaselessly lumped collectively into amorphous constructs like “expertise competitors.” Acquainted phrases like “provide chain safety” typically fail to make clear such fundamental issues as which U.S. pursuits should be secured and why. Essential selections are siloed inside opaque boards (just like the Committee on International Funding in america [CFIUS]), slender specialties (like export management regulation), or particular person industries (like semiconductors), concealing the larger image. The normal considerations of “tech coverage” and “China coverage” obtain outsized consideration, whereas second-order implications in different areas (reminiscent of local weather coverage) get brief shrift. And as China discourse in america turns into extra politically charged, arguments for preserving expertise ties are more and more muted or not voiced in any respect.

This report goals to deal with these gaps and present how American leaders can navigate the huge, perilous, largely unmapped terrain of technological decoupling. First, it provides an summary of U.S. pondering and coverage—describing how U.S. views on Chinese language expertise have advanced in recent times and explaining the various instruments that Washington makes use of to curb U.S.-China technological interdependence. Second, it frames the main strategic selections going through U.S. leaders—summarizing three proposed methods for technological decoupling and advocating a center path that preserves and expands America’s choices. Third, it interprets this technique into implementable insurance policies and processes—proposing particular targets for U.S. federal companies and figuring out the expertise areas the place authorities controls are (or are usually not) warranted. The report additionally highlights many home investments and different self-improvement measures that should go hand in hand with restrictive motion.

The Evolution of U.S. Pondering and Coverage

The U.S. authorities’s curiosity in technological decoupling has risen dramatically for the reason that mid-2010s. Throughout this era, Beijing’s rising energy and extra troubling conduct at dwelling and overseas led U.S. leaders to revise their views of China, deeming it America’s major state menace. On the identical time, techno-nationalist concepts—depicting expertise as an enviornment for interstate battle reasonably than a impartial international market—turned ascendant world wide and ultimately prevailed in Washington. Collectively, these two tendencies produced a brand new American techno-nationalism targeted principally on China. It first took form throughout former president Barack Obama’s second time period, was elevated and applied underneath former president Donald Trump, and has been largely embraced by President Joe Biden.

Early U.S. actions had been primarily “defensive”: restrictive measures geared toward thwarting or containing Chinese language expertise threats. Export and import controls, inbound and outbound funding restrictions, telecommunications and electronics licensing regimes, visa bans, monetary sanctions, expertise transaction guidelines, federal spending limits, and regulation enforcement actions have extra ceaselessly and intensively focused China. Currently, Washington has elevated its give attention to “offensive” measures—optimistic actions to nurture America’s personal technological energy, reminiscent of investments in analysis and growth (R&D) and training. But regardless of this offensive pivot, defensive measures proceed to multiply and lift among the most acute coverage dilemmas. For instance, cracking down on illicit Chinese language expertise switch at U.S. universities can chill useful scientific collaboration, and banning Chinese language applied sciences on nationwide safety grounds could immediate Beijing (or others) to broaden their very own commerce obstacles.

U.S. policymakers should have a agency grasp of the various completely different instruments used to curb bilateral expertise interdependence. Defensive instruments are sometimes described generically as “sanctions” or “blacklists,” however this conflates distinct authorized authorities with a spread of results and implementing companies. For instance, SenseTime and Hytera are among the many Chinese language tech corporations most focused by U.S. controls, but the restrictions imposed on every firm don’t overlap in any respect. Huawei, in the meantime, suffers from almost all the controls positioned on each SenseTime and Hytera, plus others which might be utterly distinctive. To make clear the image, this report gives a primer on key U.S. defensive authorities and the way they’ve focused the Chinese language tech sector.

Underneath U.S. regulation, officers have huge discretion to impose technological decoupling. They want solely invoke pliable ideas like “nationwide safety” or “the general public curiosity” to limit how expertise merchandise, companies, and inputs transfer between America and China. Most restrictive powers have been used to a small fraction of their full decoupling potential. On the identical time, restrictive authorities are fragmented throughout a number of companies and coverage domains. This mixture of nice energy and nice complexity will increase the danger that U.S. expertise controls shall be poorly conceived or work at cross-purposes. It’s subsequently important to develop a government-wide technique that may forestall overreach and align disparate parts right into a coherent entire.

Selecting a Technique

A U.S. technique for decoupling ought to envision the form of expertise relationship that America hopes to have with China, present a rationale for this imaginative and prescient, and clarify how it may be made into actuality. A sound technique would begin with a multidimensional evaluation of U.S.-China tech ties and their wide-ranging results on numerous American pursuits. The truth is, a method for technological decoupling ought to take into account extra than simply tech-specific or China-specific considerations. It ought to be rooted in a bigger U.S. grand technique that reconciles decoupling with different nationwide priorities, from worldwide commerce to home political stability to international local weather change, that is perhaps impacted instantly or not directly. Washington nonetheless lacks such a decoupling technique, even because it regularly imposes new tech controls on China.

Main proposals will be grouped into three common camps. First, a “restrictionist” camp believes that the U.S.-China expertise relationship is zero-sum and that it tends to favor Beijing, necessitating dramatic curtailment of bilateral tech ties. This group—together with China hawks, some human rights defenders, and lots of nationwide safety officers—fears U.S. complacency throughout what it sees as a closing window to forestall China’s technological dominance. Second, a “cooperationist” camp perceives U.S.-China tech ties as non-zero-sum and largely helpful to America, casting doubt on key parts of Washington’s decoupling agenda. This group—together with many enterprise pursuits, techno-globalist activists, and a few progressives—fears U.S. overreaction, inflated menace perceptions, and extreme confidence in restrictive instruments.

Third, a “centrist” camp identifies the U.S.-China tech relationship as advanced and unsure, with each zero-sum and non-zero-sum parts and combined prices and advantages for each international locations. Centrists need targeted, finely tuned defensive measures plus giant offensive investments. This group—together with many mainstream assume tank analysts, average political figures, and a few state and native leaders—fears U.S. incapacity to stability interdependence and decoupling. Key capability challenges embody securing public-private coordination, mapping advanced provide chains, and overcoming Washington gridlock, polarization, and bureaucratic clumsiness.

America ought to undertake a centrist technique. The very existence of a heated debate amongst these three camps is itself an argument for the cautious incrementalism that centrists espouse. We’re nonetheless within the early years of a radically new part in U.S.-China relations and solely on the cusp of far-reaching international transformations promised by synthetic intelligence (AI) and different rising applied sciences. These coming adjustments, though unquestionably vital, stay tough for present-day observers to evaluate. Policymakers ought to play for extra time—preserving and increasing American choices whereas the longer term comes into sharper focus.

The first effort ought to be “offensive”: new investments and incentives to bolster and diversify innovation pathways, provide chains, expertise pipelines, and income fashions in strategic expertise areas. America has much more affect over its personal technological energy than it has over China’s, and such investments act as a hedge in opposition to a number of situations. They’ll put together America for full-scope technological decoupling with fewer prices and dangers, ought to that grow to be needed, or they will place U.S. corporations to compete higher in a still-globalized expertise market.

As a result of offensive investments are difficult to implement and take a very long time to repay, fast-acting “defensive” restrictions ought to be used to purchase time. Washington ought to institute controls in expertise areas the place China appears near securing distinctive, strategically vital, and long-lasting benefits. Defensive measures may help to forestall Chinese language breakthroughs lengthy sufficient for U.S. offensive efforts to bear fruit.

Nevertheless, restrictive instruments ought to be confined to a secondary, supporting position and solely utilized in compelling circumstances. Know-how restrictions will be expensive (harming U.S. industries and innovators), imprecise (chilling extra exercise than supposed), and even futile (failing to treatment the related Chinese language tech threats). Restrictive instruments by themselves can’t guarantee U.S. technological preeminence over the lengthy haul, however they will and may frustrate Chinese language dominance within the brief run, preserving aggressive alternatives whereas America regroups and regains momentum in key expertise areas.

Restrictive instruments by themselves can’t guarantee U.S. technological preeminence over the lengthy haul, however they will and may frustrate Chinese language dominance within the brief run.

A centrist technique of this type will even assist the U.S. authorities preserve its management over the decoupling course of—preserving its tempo and scope aligned with American wants. U.S. policymakers have loved the posh of management throughout latest years, as Washington took the initiative whereas Beijing, different governments, and personal entities world wide had been comparably cautious and reactive in technological decoupling. However as decoupling accelerates, these outdoors actors more and more search to grab initiative for themselves—for instance, preempting future U.S. restrictions by appearing first to scale back expertise interdependence on their very own phrases. In the meantime, decoupling has slowly begun to shift energy inside america towards political figures, business actors, and nationwide safety voices who advocate even stronger restrictive measures.

These dynamics create dangers of unanticipated escalatory spirals. Washington would possibly intention for a modest stage of decoupling however find yourself with one thing broader, sooner, and messier. In a worst-case state of affairs, america might unintentionally set in movement a frenzied, ever-intensifying cycle of decoupling that races effectively forward of what the nation can afford. A centrist technique can decrease this threat by guaranteeing that expertise restrictions are focused and exact. America should then talk this strategic intention, and share extra particulars of particular insurance policies, to assist stabilize expectations in China and elsewhere. Such readability cuts in opposition to the grain for U.S. leaders, who wish to protect their very own discretion and battle to make credible commitments throughout presidential administrations. However in a fancy and interdependent international expertise panorama, silence or ambiguity may very well cede management to others.

Translating Technique Into Coverage and Course of

Any U.S. technique—whether or not restrictionist, cooperationist, or centrist—should be translated into insurance policies and processes to information agency-level selections. That is no easy process. It requires evaluating a number of expertise areas, weighing quite a few prices and advantages by the lens of a number of skilled disciplines. Significant steerage should transfer previous generalities and specific clear coverage selections, even within the face of uncertainty and a fraught home environment. Thus, though many observers say that technological decoupling ought to be bounded and partial, there are few complete, detailed proposals for a way and the place to attract such boundaries.

To develop such steerage, this report unpacks the various U.S. pursuits at stake and proposes 9 coverage targets for technological decoupling. Nationwide safety targets embody sustaining a army edge over China, limiting Chinese language nationwide safety espionage, stopping Chinese language sabotage in a disaster, limiting Chinese language affect operations, and denying help for Chinese language or China-enabled authoritarianism and repression. Financial targets embody countering unfair Chinese language practices and mental property (IP) theft, and competing and main in strategic industries. Then there are ancillary targets—non-technology objectives that additionally affect American decoupling coverage: acquiring common leverage over China, and shaping U.S. home narratives. These 9 targets, though linked, increase many distinct points and dilemmas. They can’t be handled as interchangeable responses to an undifferentiated mass of “Chinese language tech threats”—an all-too-typical method.

The following step, and the guts of this report, is a cautious evaluate of the position U.S. expertise controls ought to play in attaining these coverage targets (see Desk 1). Taking every goal in flip, the report weighs the dangers and advantages of U.S.-China technological interdependence in opposition to the dangers and advantages of U.S. authorities expertise controls. This evaluation results in a collection of proposed dividing traces—implementable requirements for figuring out which applied sciences warrant restrictions and which don’t. Particular examples assist illustrate how these dividing traces would work in follow. Offensive measures important to every goal are additionally highlighted. By contemplating the complete gamut of U.S. pursuits throughout many various expertise areas, the report reveals what a centrist decoupling would possibly seem like and the way companies might implement it.

This step-by-step course of demonstrates a number of factors that bolster the case for a centrist method. First, probably the most strategically vital applied sciences (like 5G telecommunications tools and semiconductors) are few in quantity and already topic to sturdy U.S. authorities controls. A handful of different expertise areas may have tighter China-oriented restrictions—for instance, drone swarms, the U.S. bulk energy system, and applied sciences offered to Xinjiang. But sure China-focused controls appear counterproductive in quite a lot of different high-profile areas, reminiscent of geolocation information, social media platforms, and shopper units like smartphones. Second, official U.S. coverage objectives stay dangerously imprecise and open-ended. To keep away from expensive and quixotic expertise wars, Washington should publicly make clear its imaginative and prescient for the worldwide tech commerce and set extra achievable ambitions for countering techno-authoritarianism, sustaining a army edge over China, and stopping Chinese language espionage, sabotage, and affect operations. Third, offensive insurance policies have the best long-term potential for strengthening U.S. expertise management, competitiveness, and resilience—and thereby attaining safety and prosperity. Though expertise restrictions are the first topic of this report, they can’t be the first focus of policymakers.

Acknowledgements

The writer is deeply grateful to George Perkovich for his affected person steerage and penetrating opinions of this report all through its growth. Particular thanks additionally go to Marjory Blumenthal, Tom Carothers, Mark Chandler, Chris Chivvis, Tino Cuéllar, Doug Farrar, Steve Feldstein, Sarah Gordon, Yukon Huang, Jim Miller, Mike Nelson, Matt Sheehan, Stephen Wertheim, and Tong Zhao for his or her useful written suggestions on drafts. Conversations with many others—in authorities, the non-public sector, academia, and civil society—helped to check and sharpen the report’s underlying concepts. Thanks are additionally owed to Evan Burke, Emeizmi Mandagi, Nikhil Manglik, and Arthur Nelson for analysis help, and to Isabella Furth, Natalie Brase, Jocelyn Soly, and Amy Mellon for modifying and design. This report is the writer’s sole duty and doesn’t signify the views of every other individual or establishment.

The analysis for and writing of this report had been supported by the William and Flora Hewlett Basis. Editorial manufacturing and dissemination had been supported by a grant from Schmidt Futures

Abbreviations

AI: Synthetic intelligence

CBP: Customs and Border Safety

CCL: Commerce Management Listing

CFIUS: Committee on International Funding in america

DHS: Division of Homeland Safety

DOD: Division of Protection

EAR: Export Administration Rules

ECRA: Export Management Reform Act

FCC: Federal Communications Fee

FIRRMA: International Funding Danger Assessment Modernization Act

IC: Intelligence Group

ICTS: Data and communications expertise or companies

IEEPA: Worldwide Emergency Financial Powers Act

INA: Immigration and Nationality Act

ITAR: Worldwide Visitors in Arms Rules

MEU: Navy Finish-Person

NSC: Nationwide Safety Council

PLA: Folks’s Liberation Military

PRC: Folks’s Republic of China

R&D: Analysis and growth

SDN: Specifically Designated Nationals

SEC: Securities and Alternate Fee

STEM: Science, expertise, engineering, and arithmetic

USITC: U.S. Worldwide Commerce Fee

USML: U.S. Munitions Listing

USTR: U.S. Commerce Consultant

WTO: World Commerce Group

Notes

¹ From the Nationwide Safety Fee on Synthetic Intelligence homepage at https://www.nscai.gov/.

² “Technological decoupling” is a contested and typically politically charged phrase. In its strongest kind, it could actually imply a complete technological divorce between america and China—a really grave prospect at the moment favored solely by a couple of radical voices. In its weaker kind, it could actually refer extra typically to the form of marginal discount of technological interdependence seen for the final a number of years. This report makes use of the latter which means. Though “decoupling” can carry conflicting and at instances deceptive meanings, no different single time period has but managed to displace it in frequent utilization.

This report is concerning the decoupling of “expertise.” It doesn’t give attention to the vary of different sectors (reminiscent of medical provides, finance, leisure, agriculture, and actual property) the place U.S. analysts or officers have additionally proposed some partial decoupling from China. That stated, “expertise” is an elusive idea. Whereas policymakers typically converse of a definite “tech sector” (which they often equate with “Silicon Valley”), the reality is that each business sector employs, adapts, and develops applied sciences. Therefore, free speak of “technological decoupling” can typically be complicated or deceptive. Policymakers want extra exact evaluation of particular technology-related U.S. pursuits and targets, as this report seeks to offer.

Throughout the broad class of expertise, this report focuses primarily on digitally oriented applied sciences, whose main worth stems from software program, information, communications, and networks. Examples embody machine studying programs, social media platforms, and enormous information caches. These increase significantly acute coverage dilemmas, reminiscent of find out how to distinguish between dual-use purposes and find out how to handle globalized provide chains and data flows. The report additionally addresses combined digital-physical applied sciences, the place {hardware} innovation is an important supply of worth; these embody semiconductors, drones, and telecommunications tools. Nevertheless, extremely bodily oriented applied sciences—like nuclear reactors, superior supplies, and hypersonics—are usually not an express focus.

Lastly, this report is anxious each with completed expertise (finish services and products) and with expertise inputs. The latter contains parts of what’s known as “the availability chain,” reminiscent of expertise elements, uncooked supplies, information, know-how, and human capital that circulation between america and China. It additionally contains monetary help. U.S. and Chinese language actors have every made vital investments within the different nation’s tech corporations, and U.S. and Chinese language tech corporations obtain vital income from gross sales to the opposite nation’s dwelling markets. These monetary flows will be as essential as the availability chain itself, or much more so, and have grow to be a significant coverage battleground.