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.
