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A Closer Look at the American Tech Ban and its Consequences

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Before it was TikTok, Huawei and WeChat. Now it’s Semiconductor Manufacturing International Corporation (SMIC), which was targeted September by being put on a U.S. government blacklist.

At first, targeting SMIC seems to be a logical extension of the Trump administration’s firm stance on China and appears to send a message to the world that the U.S. is still a leader in global affairs. It would be reasonable to guess that the extension of the ban can be good business for American firms. Banning Chinese firms may mean American firms are theoretically benefitting from less competition at home and more support from the American federal government. But aside from potentially improving national security through increased scrutiny, this extended ban, and all ban on Chinese tech, will cause blowback.

Singaporean diplomat and academic Kishore Mahbubani highlighted in his recent book Has China Won? that one of China’s biggest mistakes in the US-China relationship was alienating the American business community, which until recently had been a strong supporter of engaging with China. Ironically, the major drawback of the Trump administration’s latest escalation is that it makes precisely the same mistake and alienates the Chinese business community, obliterating whatever goodwill that Chinese companies still have towards the United States. And although their friendship may not be critical, it is important. As things are, Washington currently seems steeped in a fog of wilful amnesia, incapable of understanding that although they may not like Chinese tech, Chinese techis here to stay, playing a major role in the global business market.

The blacklisting of SMIC shows that Washington is still desperately attempting to finds its role in the new digital economy. This is a bad image for the America as the world’s leading power because most countries settled on their digital economy policies long ago. Although the Trump administration’s ban on Chinese apps does hurt the chequebooks of Chinese firms, it also hurts American jobs, a vital part of the economy. It isn’t Chinese citizens losing jobs from America bans on Chinese firms. Mostly, it is American job seekers looking for a stable salary who have been robbed of opportunity. For example, in middle of the current economic recession caused by the COVID-19 pandemic, when companies are dismissing workers at an unprecedented rate, ByteDance – the parent company of video-sharing app TikTok – had announced plans to hire over 10,000 staff in the United States. This announcement came before Trump’s announcement of a ban on TikTok, and many Americans laid off in this recession would be delighted to have a job right now, Chinese company or not. Now, this is no longer possible. Yes, the Trump administration has mandated that TikTok be purchased by an American firm, which technically means these jobs are not lost but instead in a process of transfer. However, as recent events have shown, there is still no guarantee of a forced American purchase. Instead, the banning of tech, especially with TikTok, heavily delays the process of delivering these ten thousand jobs to Americans at a critical time.

Much to Washington’s dismay, it is now well documented that the U.S. ban on Chinese tech has hurt America more than it has hurt China. It’s also increasingly clear that an escalating tech war with China is not in Washington’s long-term interests. Although the increasing ban hurts Chinese exports, this isn’t something that’s usually felt directly by the average Chinese consumer. Their American counterparts, however, have been directly affected, with job losses in the manufacturing sector and higher prices for American producers and consumers. Despite mounting evidence, the Trump administration so far appears to be pursuing every avenue to increase bans on not just Chinese tech, but Chinese everything.

Although some have argued that China will have a tough time responding to the increasingly strict bans, China was able to make a decisive move by launching its own global data security initiative. Designed in response to America’s Clean Network Initiative which intends to exclude Chinese network equipment, software and services from internet infrastructure used by the U.S. and other nations, this move puts Washington between a rock and a hard place.

The first thing Beijing’s initiative does is it forces Washington to ask a question: is America willing to further risk losing tech dominance in Asia? This is possible because the Clean Network Initiative erroneously assumes that Asia will automatically side with Washington on this issue. Reality suggest that if America were to economically decouple with China as Trump highlighted in a recent speech, there is no guarantee that the majority of Asia will side with American initiatives. Even American firms in Asia have already made it clear that they will continue doing business with China and Asia regardless of Washington’s diktat.

Both China and the U.S. claim they want to increase data security. Like people who side with thosethey are familiar with in arguments with strangers, countries tend to side with the nations they know best in crises. Geographically, the U.S. has few neighbours of close familiarity compared to China. The geopolitical mood of today is also not favourable. With Washington having alienated key allies, this is not the time for America to be asking anyone, especially those its insulted to pick a side. Outside of America, many remember that the United States, through the National Security Agency (NSA), spied on not just its citizens, but those of its allies and their leaders. As a result, trust in American tech crashed, the United States was condemned, and the European Union passed GDPR as a reaction. This trust has yet to be restored. Although American allies may harbour their suspicions of Chinese tech, to date there is little to no evidence of rumoured backdoors built into Chinese software, and even less evidence that China has engaged in the degree of targeted espionage that the NSA previously did. With this in mind, the recent posturing of the State Department’s Clean Network Initiative comes across as hypocritical at best.

The Clean Initiative, and the increasing U.S. ban on Chinese tech, will most likely fall on deaf ears as watchers of global affairs see this for what it is: posturing to whip American voters into a patriotic frenzy, something ridiculously commonplace in the U.S. during election season. A better initiative coming from the State Department would focus on cleaning up America’s global reputation through unifying bilateral initiatives. As a new secretary of state will be sworn in January 2021, the latest SMIC blacklisting and the Clean Network initiative are last-minute attempts at winning over voters who prefer their tea in one flavour only – American and strong.

Symington W. Smith is a life fellow of the Royal Asiatic Society, a fellow of the Royal Society of Arts, and a Board Member and Political Advisor at Eastern Commerce Group. He is a recipient of Tatler Asia's Leader of Tomorrow Award and is ranked as a key leader shaping the future of Asia.

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Americas

Biden Revises US Sanctions Policy

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Official White House Photo by Adam Schultz

In the United States, a revision of the sanctions policy is in full swing. Joe Biden’s administration strives to make sanctions instruments more effective in achieving his political goals and, at the same time, reducing political and economic costs. The coordination of restrictive measures with allies is also seen as an important task. Biden is cautiously but consistently abandoning the sanctions paradigm that emerged during Donald Trump’s presidency.

The US sanctions policy under Trump was characterised by several elements. First, Washington applied them quite harshly. In all key areas (China, Iran, Russia, Venezuela, etc.), the United States used economic and financial restrictions without hesitation, and sometimes in unprecedented volumes. Of course, the Trump administration acted rationally and rigidity was not an end in itself. In a number of episodes, the American authorities acted prudently (for example, regarding sanctions on Russian sovereign debt in 2019). The Trump-led executives stifled excess Congressional enthusiasm for “draconian sanctions” against Russia and even some initiatives against China. However, the harshness of other measures sometimes shocked allies and opponents alike. These include the 6 April 2014 sanctions against a group of Russian businessmen and their assets, or bans on some Chinese telecommunications services in the United States, or sanctions blocking the International Criminal Court.

Second, Trump clearly ignored the views of US allies. The unilateral withdrawal from the nuclear deal with Iran in 2018 forced European businesses to leave Iran, resulting in losses. Even some of the nation’s closest allies were annoyed. Another irritant was the tenacity with which Trump (with Congressional backing) threw a wrench in the wheels of the Nord Stream 2 pipeline project. Despite the complicated relations between Moscow and the European Union, the latter defended the right to independently determine what was in its interests and what was not.

Third, concerns about sanctions have emerged among American business as well. Fears have grown in financial circles that the excessive use of sanctions will provoke the unnecessary politicisation of the global financial system. In the short term, a radical decline in the global role of the dollar is hardly possible. But political risks are forcing many governments to seriously consider it. Both rivals (Moscow and Beijing) and allies (Brussels) have begun to implement corresponding plans. Trade sanctions against China have affected a number of US companies in the telecommunications and high-tech sectors.

Finally, on some issues, the Trump administration has been inconsistent or simply made mistakes. For example, Trump enthusiastically criticised China for human rights violations, supporting relevant legislative initiatives. But at the same time, it almost closed its eyes to the events in Belarus in 2020. Congress was also extremely unhappy with the delay in the reaction on the “Navalny case” in Russia. As for mistakes, the past administration missed the moment for humanitarian exemptions for sanctions regimes in connection with the COVID-19 epidemic. Even cosmetic indulgences could have won points for US “soft power”. Instead, the US Treasury has published a list of pre-existing exceptions.

The preconditions for a revision of the sanctions policy arose even before Joe Biden came to power. First of all, a lot of analytical work was done by American think tanks—nongovernmental research centers. They provided a completely sober and unbiased analysis of bothха! achievements and mistakes. In addition, the US Government Accountability Office has done serious work; in 2019 it prepared two reports for Congress on the institutions of the American sanctions policy. However, Joe Biden’s victory in the presidential election significantly accelerated the revision of the sanctions instruments. Both the ideological preferences of the Democrats (for example, the emphasis on human rights) and the political experience of Biden himself played a role.

The new guidelines for the US sanctions policy can be summarised as follows. First, the development of targeted sanctions and a more serious analysis of their economic costs for American business, as well as business from allied and partner countries. Second, closer coordination with allies. Here, Biden has already sent a number of encouraging signals by introducing temporary sanctions exemptions on Nord Stream 2. Although a number of Russian organisations and ships were included in the US sanctions lists, Nord Stream 2 itself and its leadership were not affected. Third, we are talking about closer attention to the subject of human rights. Biden has already reacted with sanctions both to the “Navalny case” and to the situation in Belarus. Human rights will be an irritant in relations with China. Fourth, the administration is working towards overturning Trump’s most controversial decisions. The 2020 decrees on Chinese telecoms were cancelled, the decree on sanctions against the International Criminal Court was cancelled, the decree on Chinese military-industrial companies was modified; negotiations are also underway with Iran.

The US Treasury, one of the key US sanctions agencies, will also undergo personnel updates. Elisabeth Rosenberg, a prominent sanctions expert who previously worked at the Center for a New American Security, may take the post of Assistant Treasury Secretary. She will oversee the subject of sanctions. Thus, the principle of “revolving doors”, which is familiar to Americans, is being implemented, when the civil service is replenished with personnel from the expert community and business, and then “returns” them back.

At the same time, the revision of the sanctions policy by the new administration cannot be called a revolution. The institutional arrangement will remain unchanged. It is a combination of the functions of various departments—the Treasury, the Department of Trade, the Department of Justice, the State Department, etc. The experience of their interagency coordination has accumulated over the years. The system worked flawlessly both under Trump and under his predecessors. Rather, it will be about changing the political directives.

For Russia, the revision is unlikely to bring radical changes. A withdrawal from the carpet bombing of Russian business, such as the incident on 6 April 2018 hint that good news can be considered a possibility. However, the legal mechanisms of sanctions against Russia will continue to operate. The emphasis on human rights will lead to an increase in sanctions against government structures. Against this background, regular political crises are possible in relations between the two countries.

From our partner RIAC

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Sea Breeze 2021: U.S. is worryingly heading closer to conflict with Russia in the Black Sea

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On July 10th, the 2021 iteration of the joint military exercise, Sea Breeze, concluded in the Black Sea. This exercise, which began on June 28th was co-hosted by the Ukrainian Navy and the United States Navy’s Sixth Fleet. According to the U.S. Navy, the annual Exercise Sea Breeze consists of joint naval, land, and air trainings and operations centered around building increased shared capabilities in the Black Sea.

This year’s Sea Breeze included participation from 32 countries, including NATO members and other countries that border the Black Sea, making it the largest Sea Breeze exercise since its inception in 1997. All other countries bordering the Black Sea were included in participating in the joint drills, except Russia.

Russia’s exclusion from these exercises is not unsurprising, due to its current tensions with Ukraine and its historical relationship with NATO. However, it signals to Moscow and the rest of the world that the NATO views Russia as an opponent in a future conflict. At the opening ceremony of Sea Breeze 2021 in Odessa, it was made clear that the intention of the exercise was to prepare for future conflict in the region when the Defense Minister of Ukraine, reported that the drills “contain a powerful message – support of stability and peace in our region.”

These exercises and provocations do anything but bring peace and stability to the region. In fact, they draw the United States and NATO dangerously close to the brink of conflict with Russia.

Even though Sea Breeze 2021 has only recently concluded, it has already had a marked impact on tensions between NATO countries and Moscow. U.S. Navy Commander Daniel Marzluff recently explained that the Sea Breeze drills in the Black Sea are essential deterrents to Russian assertions in region. However, these drills have consisted of increasingly provocative maneuvers that ultimately provoke conflict in the region.

These drills have done anything but act as a deterrent for conflict in the Black Sea. In response to the Sea Breeze drills, Russia conducted its own drills in the Black Sea, including the simulation of firing advanced missile systems against enemy aircraft. As the Black Sea is of utmost importance to Russia’s trade and military stature, it follows that Russia would signal its displacement if it perceives its claims are being threatened.   

Sea Breeze followed another rise in tensions in the Black Sea, when just a week prior to the beginning of the exercise, a clash occurred between Russia and Britain. In response to the British destroyer ship, the HMS Defender, patrolling inside Crimean territorial waters, Russia claimed it fired warning shots and ordered two bombers to drop bombs in the path of the ship. When asked about the HMS Defender, Russian President Vladimir Putin described the ship’s actions as a “provocation” that was a “blatant violation” of the 1982 UN Convention on the Law of the Sea. Putin also went on to claim that Moscow believes U.S. reconnaissance aircraft were a part of the operation as well. Despite this, British Prime Minister Boris Johnson responded with a denial of any wrongdoing.

Russia’s actions to provocations by the United States-led Sea Breeze and interaction with the HMS Defender in the Black Sea signal its resolve to retaliate if it feels as its sovereignty and its territorial claim on Crimea is being impeded on. Despite Russia signaling its commitment to defending its territorial claims in the Black Sea, the United States still willingly took actions during Sea Breeze that would bring the United States closer to a clash with Russia.  

Provoking conflict in the Black Sea does not align with the national security interests of the United States. In fact, it only puts the United States in the position to be involved in a costly clash that only would harm its diplomatic relationships.  

As Russia has signaled its commitment to its resolve and scope of its military response in a possible conflict, any potential conflict in the Black Sea would be costly for the United States. Over the past few years, Russia has increased the size and capabilities of its fleet in the Black Sea. Two of these improvements would especially pose a challenging threat to the U.S. and NATO – Russia’s drastically improved anti-access/area-denial capabilities and its new Tsirkon hypersonic cruise missile. This would mean any conflict in the Black Sea would not be a quick and decisive victory for U.S. and NATO forces, and would instead likely become costly and extensive.  

A conflict with Russia in the Black Sea would not only be costly for the U.S. and its allies in the region, but could irreparably damage its fragile, but strategically valuable relationship with Russia. If the United States continues to escalate tensions in the Black Sea, it risks closing the limited window for bilateral cooperation with Russia that was opened through increased willingness to collaborate on areas of common interests, as evidenced by the recent summit that took place in Geneva. After a period of the highest levels of tension between the U.S. and Russia since the Cold War, this progress made towards improving bilateral relations must not be taken for granted. Even if the U.S. and NATO’s maneuvers in the Black Sea do not ultimately materialize into a full-scale conflict with Russia, they will most likely damage not just recent diplomatic momentum, but future opportunities for a relationship between the two powers.

In such a critical time for the relationship between the United States and Russia, it is counterproductive for the United States to take actions that it can predict will drive Russia even further away. Entering into a conflict with Russia in the Black Sea would not only engage the U.S. in a costly conflict but would damage its security and diplomatic interests.  

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Maximizing Biden’s Plan to Combat Corruption and Promote Good Governance in Central America

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Authors: Lauren Mooney and Eguiar Lizundia*

To tackle enduring political, economic and security challenges in the Northern Triangle countries of El Salvador, Guatemala and Honduras, the Biden administration is attempting to revitalize its commitment to the region, including through a four-year, $4 billion plan submitted in a bill to Congress.

In its plan, the White House has rightly identified the root causes of migration, including limited economic opportunity, climate change, inequality, and violence. Systemic corruption resulting from the weak rule of law connects and entrenches the root causes of migration, while the increased devastation brought about by climate change exacerbates economic hardship and citizen insecurity. 

The renewed investment holds promise: previous foreign assistance in the Northern Triangle has shown results, including by contributing to a reduction in the expected level of violence. As the Biden Administration finalizes and begins implementing its Central America strategy, it should include three pillars—rooted in lessons learned from within and outside the region—to maximize the probability that the proposed spending in U.S. taxpayer funds has its intended impact. 

First, the Biden administration should deliver on its promise to make the fight against corruption its number one priority in Central America by supporting local anti-graft actors. The sanctions against officials which the United States is considering  are a step in the right direction, but lasting reform is best accomplished through a partnership involving regional or multilateral organizations. Guatemala’s international commission against impunity (CICIG) model was relatively successful until internal pushback and dwindling U.S. advocacy resulted in its dismantlement in 2019. Though Honduras’ equivalent was largely ineffective, and El Salvador’s recently launched version is marred by President Bukele’s campaign against judicial independence, there is room for learning from past mistakes and propose a more robust and mutually beneficial arrangement. The experience of Ukraine shows that while external engagement is no silver bullet in eliminating corruption, the role of foreign actors can lead to tangible improvements in the anti-corruption ecosystem, including more transparent public procurement and increased accountability for corrupt politicians.

In tandem with direct diplomatic pressure and helping stand up CICIG-like structures, the U.S. can harness lessons from prior anticorruption efforts to fund programs that address other aspects of graft in each country. This should involve empowering civil society in each country to monitor government compliance with anti-corruption laws and putting pressure on elected officials to uphold their commitments. While reducing impunity and improving transparency might not automatically persuade Central Americans to stay, better democratic governance will allow the three Northern Triangle nations to pursue policies that will end up expanding economic opportunities for residents. As Vice President Harris recently noted, any progress on addressing violence or food insecurity would be undermined if the environment for enabling corruption remains unchanged.

Second, the United States should support local initiatives to help reverse the deterioration of the social fabric in the region by expanding access to community decision-making. Given the high levels of mistrust of government institutions, any efforts to support reform-minded actors and stamp out corruption at the national level must be paired with efforts to promote social cohesion and revitalize confidence in subnational leaders and opportunities. In the Northern Triangle countries, violence and economic deprivation erode social cohesion and undermine trust in democratic institutions. The U.S. government and practitioners should support civic efforts to build trust among community members and open opportunities for collective action, particularly in marginalized areas. A key component of this is expanding sociopolitical reintegration opportunities for returning migrants. In so doing, it is possible to help improve perceptions of quality of life, sense of belonging, and vision for the future. While evidence should underpin all elements of a U.S. Strategy for Central America, it is particularly important to ensure social cohesion initiatives are locally-owned, respond to the most salient issues, and are systematically evaluated in order to understand their effects on migration.

Lastly, the U.S. should take a human-rights based approach to managing migration and learn from the pitfalls associated with hardline approaches to stem migration. Policies rooted in a securitized vision have a demonstrable bad record. For example, since 2015, the European Union undertook significant measures to prevent irregular migration from Niger, including by criminalizing many previously legitimate businesses associated with migration and enforced the imposition of legal restrictions to dissuade open and legal migration. Not only did this violate freedom of movement and create adverse economic consequences, but it also pushed migration underground, with individuals still making the journey and encountering significant threats to their lives, security and human rights.

A welcome realignment

Acknowledging the role of push factors is key to responding to migration effectively. Most importantly, putting political inclusion and responsive governance at the center is critical for ensuring vulnerable populations feel rooted in their community. A more secure, prosperous, and democratic Central America will pay dividends to the United States not only in terms of border security, but also in the form of improved cooperation to tackle global challenges, from climate change to the rise of China. 

*Eguiar Lizundia is the Deputy Director for Technical Advancement and Governance Advisor at IRI

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