In June 2021, the US Senate unanimously adopted the US$250 billion US Innovation and Competition Act (USICA) detailing how the US government plans to outcompete China technologically. While generous in its allocation of resources to address domestic challenges, USICA still falls short of protecting critical technology supply chains and generating innovation.
USICA is the new industrial policy of the United States. It provides funding for US government intervention in strategic areas, including a US$52 billion investment in domestic semiconductor manufacturing between 2022 and 2026 and the funding of new executive organs and programs to train a US workforce in emerging technologies.
Since 2018, industries ranging from mobile telephony to laptops and automobiles have struggled to meet semiconductor demand. These struggles have mutated into supply crises caused by COVID-19-induced shortages. Given this outcry, it is understandable that semiconductors are a priority for the Biden administration. While it is true that semiconductors are critical, they are only one of many components needed for the development of strategic technologies. To stay ahead of China, the United States needs to put plans in place to onshore even more of the advanced technological manufacturing ecosystem.
Addressing semiconductors alone is short-sighted if the objective is to build more secure and independent technology ecosystems. Solving for only one component of the supply chain challenge — albeit an important one — simply shifts the bottleneck elsewhere. For certain key products like mobile phones or laptops, there needs to be a reshoring or ‘friend-shoring’ of the entire ecosystem.
Another challenge is the security of ideas. To compete with Chinese rivals in the long term, US industry needs to continue developing, patenting and protecting cutting-edge strategic technologies. The former director of the US Counterintelligence and National Security Center stated that China’s theft of US trade secrets costs anywhere between US$300–600 billion a year. In recent years, certain countries have become more forthcoming about naming the actors behind cyber attacks. Since 2014, the US Department of Justice has been charging officers from China’s People’s Liberation Army for hacking US companies to steal trade secrets.
Deterring future acts of cyber espionage is tricky, and accusations from the US government to date have done little to slow China’s efforts. It is unlikely that any US action would completely curtail state attempts to steal valuable intellectual property. What is clear is that acts of cyber espionage should not be swept under the carpet. Naming and shaming those responsible is a step in the right direction.
The United States cannot compete with China by itself, and the Biden administration’s commitments to working with allies on global challenges shines through in USICA. The creation of a Technology Partnership Office within the State Department will coordinate with allies on technology governance regimes and research and development in key areas. The allocation of US$500 million to support the State Department in its coordination efforts to improve information and communications technology security and semiconductor supply chain cooperation is notable and gives this effort some teeth.
The US government and its allies do not see eye to eye on everything. Whether it’s the bilateral US–EU Trade and Technology Council or the minilateral D10 (the G7 plus India, Australia and South Korea), all oppose China’s growing technological dominance to some degree. But these countries are not all aligned on increasingly tough questions surrounding data governance, including cross-border flows, data localisation and the regulation of big tech.
Before the United States and its allies can work more closely together on the China technology question, they will need to identify specific areas of mutual interest within the global technology competition. Hashing out these issues will preoccupy allied discussions in coming years.
USICA should still be applauded for its attempt to address US–China tech competition and its commitment to bridge domestic divides and diversity challenges. From day one, the Biden administration has sought to unite US foreign and domestic policy to bring US jobs back home, and USICA is part of that effort. While US government investment in research has traditionally focused on elite institutions, USICA plans to build technology hubs in disadvantaged areas, increase STEM scholarships, combat systemic sexism in scientific communities and allocate US$750 million to build research capacity at historically black colleges and universities.
Senate sponsor Chuck Schumer described USICA as an effort to ‘jumpstart American competitiveness and make one of the most significant government investments in American innovation and manufacturing in generations’. While USICA by itself cannot ensure that the United States remains the world’s undisputed technological leader, it is a much-needed commitment of resources to compete with China technologically, economically and militarily.
Julia Voo is a Cyber Fellow at the Belfer Center for Science and International Affairs, Harvard Kennedy School of Government, Harvard University.
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