Editor’s Corner: How Biden may handle China and the electronics trade

pawns depict us china trade war
The transition from Trump's trade policies toward China to Joe Biden's will be important to a broad array of electronics companies. (Getty Images)

 

China will figure large in how President-elect Joe Biden’s policy agenda impacts innovation and technology, including the electronics industry.

President Trump has taken a hard stance on China, which may soften with a Biden Administration. However, the president-elect will still need to oppose China’s treatment of political dissidents in Hong Kong and elsewhere, as well as the abuse of minorities, including 1 million Muslim minority Uighurs reportedly held in at least 85 Chinese government-run detention centers in Xinjiang.

On the technology front, President-elect Biden will be inheriting a complex scenario. U.S. security officials widely believe the Communist Central Party will be able to use Huawei gear, and probably tech from other Chinese companies, to monitor data of private and government customers in other countries.

There is also the recognition by many U.S. companies that the Chinese government supports a strong research program in quantum computing, which could eventually be used to break tough encryption used by the U.S. and other countries, giving China access to vital security information.  Policy groups worry the U.S. is not funding quantum work as much as it should to keep up with China or other nation states.

To satisfy the U.S. electronics industry, Biden also will need to support efforts to prevent theft of intellectual property held by U.S. companies and oppose efforts to exert ownership control over emerging U.S. companies that wish to partner with Chinese firms. 

President Trump and his trade representatives seemingly tried to hold the line on objectionable China trade practices regarding IP and tech partnerships as well as spying, but his tech policy toward China remains muddled.  There hasn’t been a clear end-game in mind, other than to appear worried that China is on a pathway toward becoming the world’s largest economy, reducing U.S. standing.

 Yet, China’s growth seems inevitable, given its enormous size and central Communist control over so many elements of its economy. By contrast, control over the tech trade by many Western democracies, especially the U.S., is spread out among a myriad of companies  and dispersed among seemingly endless government bureaucracies and elected and appointed bodies. The U.S. doesn’t plan for the long term  in such matters, and could take a lesson from China and its 25-year plan.

As an aside: conservatives in the U.S. backed President Trump for getting out of the Paris Agreement on climate partly because the treaty could allow emerging nations to pollute at higher levels than the U.S., which would seemingly give China an economic advantage.  Now, President-elect Biden reportedly wants to rejoin the treaty, which will probably—unfairly—be interpreted by some conservatives as playing into China’s hand.

How about a truly long-term plan?

In the long-term, the U.S. needs at least a clear-cut 25-year plan with financial teeth for growing technology in vital areas like quantum and AI to even begin to match China’s approach.  Congressional bills like the CHIPS Act in Congress could help in that direction by implementing a refundable federal investment tax credit for construction of semiconductor manufacturing facilities and equipment, However, even that doesn’t go far enough or last long enough through coming decades to compete with China.

RELATED:  Chip equipment up 13% in May as industry back CHIPS Act

Intel, the largest chipmaker globally, seems to understand the vital importance of generating electronics production domestically.

RELATED; Small to big, semi makers push for U.S.-based chip production

Meanwhile,  Micron Technology, based in Idaho and the fourth largest semiconductor maker globally, also stands to benefit from U.S. government incentives for chipmakers, since it functions as a big DRAM producer in a sector dominated by Asian companies.

 RELATED: Chip sales climb; China official opposes trade decoupling from U.S.

Thoughts on Biden and tech from ITIF

Some early predictions about how a Biden presidency would treat the tech sector offer a mixed message.  The Information Technology and Innovation Foundation issued a report on Saturday describing Biden as on a very different than Trump. 

“Biden is likely to focus on engaging government as a more active partner alongside industry in spurring innovation—but also as a tougher regulator of many tech industries and technologies,” said Robert Atkinson, ITIF’s president and lead author of the report, in a statement. 

“A simple way to frame the new administration’s likely program on tech, innovation and related trade policy is: more spending, more regulation, more multilateralism.  Biden will most likely push for significant increases in public investment in areas like R&D – particularly in the clean energy segment—along with rural broadband and closing the digital divide, and education and training.”

The ITIF reports discusses how Biden will treat China on tech matters in broad terms.  “When it comes to addressing the significant array of critical international issues related to tech and innovation, including how to approach competition with China, internet governance and cross-border data flows, the Biden administration is likely to engage more international institutions and work more closely with U.S. allies than the Trump administration.”

“But while the Biden administration is likely to be more assertive than the Obama administration was when it comes to confronting Chinese innovation mercantilism, it is likely to be less assertive than the Trump administration has been,” the report adds.

Biden on “Made in all of America”

Biden’s “Made in all of America” plan calls for $300 billion in new funding over four years for R&D and breakthrough technologies like AI and quantum computing.  He has also called for U.S. semiconductor supply chain resiliency, and ITIF believes he is likely to support the CHIPS Act.   

Biden has also called for taking “aggressive trade enforcement actions against China” including by rallying allies in a coordinated effort with the U.S.  Biden appears especially tough on theft of American IP, saying China and other state-led actors “have engaged in an assault on American creativity.” But his plan only leaves it there, saying that he plans to “confront foreign efforts to steal American intellectual property.”

Biden also condemned Trump for letting lapse a 2015 agreement on cyber espionage with China. That in turn has allowed an increase in China’s state-sponsored cyber espionage against U.S. companies, according to Biden’s position paper. At least on this point, Biden is a little more clear, saying that his administration will “develop new sanctions authorities against Chinese firms that steal U.S. technology that cut them off from accessing the U.S. market and financial system.”

So much is unclear in how a Biden administration would deal with China on tech trade, but his election hasn’t even been certified and Trump has filed a series of legal actions objecting to the national vote count.

 Should he eventually get sworn in, as many expect, one can hope that Biden’s foreign policy experience over decades in public office will help him lure U.S. allies into the China wrestling match. And that China, in turn, sees what it is up against.