Government should take bigger role in promoting U.S. technology or risk losing ground to China, commission says

Advocates of the U.S. government taking a bigger role in industrial policy got a boost Tuesday from a bipartisan commission on China, which said the government should consider getting more involved in promoting U.S. technology or risk losing its edge to Chinese products.

© Ng Han Guan/AP

In its annual report, the influential U.S.-China Economic and Security Review Commission advised Congress to consider establishing a government committee to work with companies and U.S. allies to push their priorities at global organizations that set technology standards.

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U.S. companies have traditionally handled this work themselves, but as the Chinese government orchestrates a wide effort to promote its own standards, the U.S. and its Western allies could lose control of the rules that determine how technology develops, the commission said.

“This trend threatens U.S. influence on the evolution of technology, particularly in competition with a country that seeks to promote standards as a matter of coordinated industrial policy and heavily subsidizes corporate research and development,” the report said.

“We can no longer just sit back and hope for the best. We have to have an activist policy,” Michael Wessel, a Democratic appointee to the commission, said Tuesday as the report was published.

The recommendation echoes growing calls from Republicans and Democrats for the government to shed some of its free-market orthodoxy and take a bigger role in the economy to counter China and its growing high-tech exports.

Since the Reagan years, U.S. conservatives in particular have argued that the government should stay small and out of the way and not engage in what has been derisively referred to as picking winners and losers. But China’s rise is forcing policy makers to rethink that conviction.

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China’s central and regional governments are investing heavily in high-tech fields such as aircraft and electric-car manufacturing, semiconductors and robotics, by some estimates providing hundreds of billions of dollars to domestic companies through subsidies and other support.

China’s aggressive drive to set technology standards has drawn less scrutiny, but carries big consequences.

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Global adoption of Chinese tech standards would make it easier for China to export its goods and secure market share. Widespread adoption of Chinese standards could also have human rights implications, Lindsay Gorman, a technology expert at the German Marshall Fund’s Alliance for Securing Democracy, wrote in a recent report.

Recent Chinese proposals, for example, have advocated standards that would facilitate top-down Internet control, Gorman said, adding that this could be used to “silence activists, journalists, or anyone who runs afoul of the government.”

There are hundreds of standards-setting organizations that discuss and endorse specifications for all types of technology. Their work ensures that a USB stick made by one company fits into a USB port built by another or that any laptop can connect to WiFi anywhere in the world. Some of the main groups are the International Organization for Standardization, the International Telecommunication Union and the 3rd Generation Partnership Project, or 3GPP, which is setting standards for ultra-fast 5G mobile networks.

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While U.S. participants in standards bodies have historically represented their companies’ interests, the Chinese government requires Chinese firms to vote as a bloc to support China’s proposals, and to support Chinese nationals for leadership roles at standards bodies, the report said.

During one 3GPP meeting, Chinese firms all changed their votes to favor a proposal from Chinese telecom giant Huawei after an initial vote showed that many favored a compromise combining Huawei’s plan with one from Qualcomm, a U.S. semiconductor maker, the report said.

The founder of Chinese computer company Lenovo “faced tremendous public scorn in China for initially voting in favor of Qualcomm’s proposal, even after changing his vote to favor Huawei in the final round,” the commission said.

China also offers individuals and companies money and other perks for successfully adopted technical standards, the report said. China has gone from having almost no leadership positions within the International Standards Organization in 2006 to leading 64 of roughly 740 technical committees and subcommittees, compared to 104 for the United States.

Melanie Hart, a tech-industry veteran with extensive experience working in China, says the government could boost U.S. success at standards bodies by subsidizing smaller companies’ participation.

It costs about $300,000 a year for one engineer to work on standards proposals and attend meetings all over the world, a price many small companies can’t afford, Hart said in an interview.

“Chinese companies have support to do this and American ones don’t. You could have grants to cover travel and membership fees so it’s not just the Intels and the Qualcomms showing up” from the United States, said Hart, who is director of China policy at the Center for American Progress think tank, where she detailed her standards recommendations in a recent report.

The commission’s report says a new government committee would include representatives from the White House and departments of State, Commerce and Defense. It would “identify the technical standards with the greatest potential impact on American national security and economic competitiveness,” and would work with industry, academia and allies to promote those standards.

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Congress created the 12-person U.S.-China Economic and Security Review Commission in 2000 to advise it on the national security implications of trade and economic relations with China.

Made up of appointees named by the Democratic and Republican leaders of Congress, the commission has helped spark legislative action through its past recommendations, including bipartisan bills aimed at revising trade, finance, and tax provisions relating to China.

The commission also helped prompt Congress to expand the powers of the Committee on Foreign Investment in the United States, which vets Chinese and other foreign investors. And it worked closely with Congress to implement bans on Huawei telecom equipment in the United States.

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