- The US and China took the first steps toward halting a near-two-year-long trade war raging between the two countries, as President Trump signed an interim trade deal with China on Wednesday
- But although the first phase of the deal addressed intellectual property issues that American tech companies have complained about for years, the broader issues surrounding tech supremacy – which have fueled tensions between the two countries – remain largely unaddressed, according to some experts.
- Issues like China’s emerging dominance in AI and concerns over its human rights record – that was used as justification for some sanctions – were left unaddressed, one expert said.
- We should also expect to see the US push for stricter controls on tech trade with Huawei and China in the future, another expert said.
- In the meantime, expect to see the two nation’s tech industries to continue decoupling, they said.
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President Trump’s interim trade deal with China — announced on Wednesday with great fanfare — raised the prospect of a return to normalcy for technology companies rattled by an 18-month trade war.
But while the pact eases some immediate hostilities, particularly in industries like agriculture and financials, it does little to resolve the underlying tensions around technology that have pitted the two countries against each other, according to some experts Business Insider spoke to.
American tech companies have long complained over the lack of intellectual property rights protections in China. But as technologies like AI and wireless communications have become increasingly vital to everything from national security to economic growth, the rivalry between the US and China has erupted into a full-fledged tech cold war.
Graham Webster, who leads a joint initiative between Stanford university and the think tank New America, focused on China’s digital policy, said that Wednesday’s deal brought good news regarding intellectual property protection. The pact commits China to crack down on the theft of American technology and corporate secrets by Chinese firms and state-owned organizations.
But this was a small concession for China, and in its own self-interest, Webster said. “The Chinese government was already on a trajectory of becoming more rule-based, and [implementing intellectual property rights] has become a matter of self-interest for the Chinese economy as its companies have become more advanced,” he said.
All the missing pieces
More importantly, the deal did not touch on the biggest issues fueling the tech cold war. “Phase 1 just didn’t get to most of the tech issues on the future of supply chain security and the ethical use of advanced security,” Webster said.
Adam Segal, a cybersecurity expert in the Council of Foreign relations, said that little change was coming to the tensions that have fueled the tech cold war.
“The trade deal doesn’t have much of an impact on tensions over AI or Huawei and the race to 5G,” Segal said. “There are still part of the White House that want to slow China’s tech development down and hobble Huawei, and we will continue to see US push for stricter controls on tech trade with Huawei and China more generally.”
Webster agreed with this assessment, and said that the Chinese government’s need to develop independent technology is only going to increase. “None of this is going away,” he said.
Here’s a look at the major battle lines in the China-US tech cold war that are still unresolved:
Huawei and the 5G battle
Last May, the US added China’s Huawei to a so-called entity list, in an effort to block American companies from selling components to it. Huawei is the second-biggest smartphone maker in the world and is dominant in mobile network equipment, so the implications of the blacklist were huge.
Huawei was accused of theft, wire fraud, and threatening to American national security, due to its close links with the Chinese government.
And as American companies like Google cut ties with the world’s second-largest phone maker — blocking its access to Android, for instance — some wondered whether the US had dealt Huawei a fatal blow.
More recently, the US has been pressuring its allies, like the UK, to toe the same line and freeze Huawei out of its 5G infrastructure projects.
The race to dominate artificial intelligence
The US continued to hit Chinese tech companies later into 2019, adding 28 more Chinese companies to its ‘entity list’ in October. Among these 28 were eight major tech companies, including three AI startups valued at over $1 billion (One of the companies, SenseTime was at one time the world’s most valuable AI startup at over $4.5 billion, per TechCrunch).
The Department of Commerce said the companies named were implicated in human rights violations, as their surveillance operations had aided in the oppression of Uighur Muslims and other minorities in China.
But the ban was also linked to a race to dominate the field of artificial intelligence. China accounted for 17 out of the top 20 academic institutions involved in patenting AI, Reuters reported last January. The next month, President Trump had issued an executive order to call on the US to prioritize advancements in artificial intelligence, Axios reported.
China refused to pledge that it would not hack American companies, arguing that the issue was not trade related.
Chinese officials declined to pledge to refrain from hacking US companies and stealing intellectual property, arguing that it wasn’t a trade issue, the New York Times reported.
The issue of hacking and corporate cyber espionage has been a long-running point of friction between the two countries. In 2018, the Trump administration accused the Chinese government of breaking a promise struck with the Obama administration to stop hacking US businesses.
And China’s push to be less dependent on the US technology, potentially disrupting supply chains, seems more likely than ever.
China’s central government told its departments and public institutions to replace existing computers and software with domestic versions, the Financial Times reported December.
Webster says that this is a natural outcome of China’s push to become more independent.
“This is national strategic logic to avoid more dependence on sometimes unfriendly countries,” Webster explained. “What happened with the trade war, especially with the tariffs that threatened to disrupt trade, has only strengthened the Chinese government’s instinct to become more independent.”
A director at the China Computer Federation had similar reasoning, telling the Financial Times that “three years ago, there may have been more people thinking that we could rely on some US technologies … Now if someone is still saying that, I suppose they have just been sleeping for the past three years.”