Jun 13, 2019

The clash of two troubles

Illustration: Rebecca Zisser/Axios

U.S. politics have teed up twin reckonings — one a sudden threat against the gargantuan power accumulated by Big Tech, and the second a challenge to the decades-long rise of China. 

What's happening: The two, launched one after the other, appear to be on a collision course, potentially jeopardizing one or both of the risky U.S. attempts to police the market at home and maintain geopolitical primacy abroad.

The catch: If the U.S. is to capture the commanding heights of future, frontier technologies like AI and quantum computing — which is the aim of both the U.S. and China — it arguably needs Google, Facebook and other Big Tech companies to help pave the way.

"It seems strange that the quixotic political mood in the U.S. Congress makes that body keen to declare the Big Tech firms 'modern day robber barons' that must be broken up just as it’s turning to 'game on' with China."
— Christopher Johnson, a former CIA analyst and now at the Center for Strategic and International Studies

This week has brought the twin issues to a head:

  • On Monday, President Trump again raised the temperature in his 17-month war of tariff brinkmanship with China, threatening to elevate the levies if President Xi Jinping declines to meet with him at the G20 summit June 28–29 in Japan. The Chinese have not yet confirmed whether Xi is attending.
  • And on Tuesday, the U.S. antitrust chief fired a shot across Big Tech's bow, pointedly noting that Standard Oil was once innovative before it became an "entrenched monopolist" and was broken up in 1911. In a hearing around the same time, Congress pounded Big Tech, too.

The big picture: The two issues are among the three or four thorniest today. Critics say Big Tech's concentration of market power threatens democracy and the integrity of U.S. and European society. And while detractors criticize Trump's style, his challenge to Beijing has been largely embraced by both political parties and most U.S. allies, themselves worried about a world dominated by authoritarian China.

That tech power and China have been thrown together is happenstance — criticism of Big Tech is not new, but the administration's decision to investigate it is. At least, it only became public about 10 days ago.

  • But they are melding together. Beijing has warned Western and South Korean tech companies against too willingly complying with a U.S. crackdown against China, such as moving supply chains out of the country, the NYT and WSJ have reported.
  • This is forcing allies and companies to make a difficult choice between the U.S. and China. And unlike the last Cold War, the answer is not clear cut and immediate. So far, for instance, Japan and Australia are the only large U.S. allies to agree to ban Huawei.
  • "Neither the administration nor many in Congress seem to have thought through how they want to coexist with China in the global economy. They may want to vote them off the planet, as if it’s some reality game show, but that’s not an option," said Philip Levy, a senior fellow at the Chicago Council on Global Affairs.
"Instead of a quarantine around China, you may end up with a quarantine around the U.S. Look at Huawei. They essentially got snubbed."
— Philip Levy, Chicago Council on Global Affairs

The way the conflict is playing out is that both countries are retreating in what experts call a "de-coupling." But China, and not Trump, actually set the separation in motion, argues Richard McGregor, a senior fellow with the Lowy Institute. "The ‘Made in China 2025’ policy, announced in 2015, was a form of de-coupling, but enacted with none of the political pyrotechnics of the Trump administration," he said.

The bottom line: Johnson said that what's unique about the conflict is that, for the first time since China's rise began in 1979, the two countries are fighting over the same terrain — "the 21st century knowledge economy." And both appear to see it as zero-sum.

  • "Our companies already are hobbled by the commercial pressures of quarterly earnings statements, (so) kneecapping them still further should give government officials pause." 

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