The US is winning the tech race now but must enforce innovation standards in order to maintain its position

China systematically extracts advanced technology from the West. It does so legally, by mining open source databases, investing in our most advanced companies, and compelling technology transfer as a condition for doing business in China, as well as illicitly, through cybertheft and industrial espionage. How we choose to react will define whether the United States continues to lead in—and reap the benefits of—technical innovation and whether we will be able to set the global norms and standards for technology development and use. Previous U.S. presidents of both parties engaged China in dialogue on IP theft and market access for U.S. firms, among other issues. They were unable to correct China’s behavior. So far, the Trump Administration has focused on trade negotiations and on “defensive” measures: from Congress reforming CFIUS in 2018 and a proposed tightening of export controls, to scrutinizing and slowing cross-border collaboration, and discussing restricting Chinese student visas to the United States. i Yet instead of closing the U.S. system, as we are beginning to do, we can and must compete with China, and in some cases, find ways to collaborate. Defense is important but it alone will not solve the problem. While the government is erecting barriers to cross-border trade, investment and knowledge flows, U.S. technology companies see the world as mostly global, integrated and stateless. These companies innovate globally 1 Disclaimer: The views and opinions expressed in this paper are solely those of the authors and do not necessarily reflect those of Stanford University, the Geopolitics, Technology and Governance Program, or the Technology and Public Policy Project. Cyber Policy Center Geopolitics, Technology, and Governance 2 The Technology and Public Policy Project | Freeman Spogli Institute for International Studies at Stanford University and cooperate across borders, and they do not necessarily share the government’s view that U.S. national security is at stake, and that ending collaboration is the best way to protect it. This paper is designed to give the administration, Congress and/or the incoming President a firm grasp on the tools that are available to win the technology race with China. It proposes a three-prong approach to addressing China’s rise—contest, compete, and collaborate—with concrete recommended policy actions under each prong. We support continued engagement with China; that engagement cannot succeed if China pays no costs for bad behavior. We outline a narrowly tailored set of defensive measures below. Offensively, we must augment the U.S. innovation system so that we can compete with China or any other challenger nation. We propose doing so via substantially increased investment in talent and R&D, and in diplomacy to proactively set the international norms and standards that govern technology development. Finally, where possible, we should collaborate with China on technologies—such as clean tech and specific healthcare technologies—that do not implicate U.S. national security and where technical advancements would help humanity as a whole. The Challenge What’s at stake? There is nothing wrong with China’s desire to grow, and in fact, the U.S. and its allies should welcome the contributions China can make to future technological innovations. But China does not play fair. Chinese mercantilism undermines the norms and basic trust that support the global economic order. If the United States does not act, we risk ceding technological leadership and influence to set the norms, values and standards for technology, with three potentially disastrous consequences.