Techno geopolitics: global trends
19.01.2022
In his classic work "Democratic Ideals and Reality", Halford Mackinder pointed out that the development of the economy of Britain and Germany in the 19th century and the subsequent actions of the governments of these countries that led to the First World War were influenced by the same source - this is Adam Smith's book "The Wealth of Nations".
Just because of different cultural attitudes, different conclusions were drawn and different methods were used. Britain was an island nation and used its maritime power to protect interests, often to the detriment of colonised peoples. Although Germany also had colonies in various parts of the world, it set the tone more for continental projects - hence the emergence of the customs union and railway construction projects.
With the current change in the global technological order, we see a similar phenomenon in different regions - despite the previous 30 years of active globalisation, there are obvious signs of national protectionism both in the industrialised countries and in those states that are still catching up with them. Only the emphasis is now on other technologies.
According to a report made by the Boston Consulting Group and Hello Tomorrow, deep technologies can "transform the world as the Internet did”. Investment in this area in the US has quadrupled since 2016 in sectors such as synthetic biology, advanced materials, photonics and electronics, drones and robotics, and quantum computing, in addition to artificial intelligence. Although the report claims that there is no such thing as deep technology, and there is only a deep technological approach. [i]
Deep technology companies have four common characteristics: they are problem-oriented (they don't start with technology and then look for opportunities or what can be solved); they are at the intersection of approaches (science, technology, and design) and technology (96% of deep technology businesses in the US use at least two technologies, and 66% use more than one advanced technology); they are centred around three clusters (matter and energy, computing and cognition, and sensing, i.e. sensors and motion); and they inhabit a complex ecosystem; 83% produce a product with a hardware component, including sensors and large computers.
They are part of a new industrial era. These entrepreneurial ventures rely on an ecosystem of closely connected participants. They involve hundreds or thousands of people in dozens of universities and research laboratories. For example, Moderna and the BioNTech alliance with Pfizer used genome sequencing to bring their respective COVID-19 vaccines to market in less than one year.
These companies have benefited from the efforts of many others from academia, large corporations, and the support of the public sector. All of them, along with nation states, are major players in this wave of big technologies that is already underway in the US, China and other countries, as well as in the EU and its member states. [ii]
As for technologies, the components necessary for their implementation, such as rare earth metals and semiconductors, as well as the products themselves, such as quantum computing and artificial intelligence, unmanned and automated systems - now this is at stake in the geopolitical confrontation of large (and not only) powers.
Mackinder's formula for power over the world can now be interpreted somewhat differently. The owner of the world is not the one who controls Eastern Europe, but the one who controls critical and new technologies.
The clash between China and the United States
In October 2021, the Office of the Director of National Intelligence of the United States issued a certificate on new critical technologies. It says that "with a more level technology playing field anticipated in the future, new technological developments will increasingly emerge from multiple countries and with less warning. While the democratisation of such technologies can be beneficial, it can also be economically, militarily, and socially destabilising.
For this reason, advances in technologies such as computing, biotechnology, artificial intelligence, and manufacturing warrant extra attention to anticipate the trajectories of emerging technologies and understand their implications for security.” [iii] US intelligence agencies pay special attention to semiconductors, bioeconomics, autonomous systems, and quantum computers.
Earlier, in July 2021, US President Joe Biden issued a decree on encouraging competition in the American economy. [iv] It came amid discussions about the need to dominate the growing strength of large technology platforms, whose power is crippling competition in the US economy, and the need to help maintain the United States' position as a global technology leader given growing competition from China.
In an April 2021 White House press release, the president recognised the importance of leadership in critical technology areas such as wireless technologies and fifth-generation (5G) standards, announcing a new public-private partnership between the National Science Foundation and the Department of Defence to support research on next-generation networks and systems. [v]
Nevertheless, researchers from the Renewing American Innovation Project believe that the decree supports China's leadership in 5G and thereby creates an unnecessary risk to national security, putting the American leadership in this space in a vulnerable position. At the same time, China recognises both the power of strengthening intellectual property (IP) rights to encourage its inventors, and the power of antitrust laws as an industrial policy tool, while preserving the capacity of its own companies. [vi]
Patents are recognised as one of the only tools available to startups, small businesses, and inventors to protect their ideas, while large technology platforms have various other means to protect and monetise their ideas, such as vertical integration and conglomerate formation, where both drive the economy for large platforms.
According to research, this is precisely the reason why large technology platforms have traditionally opposed artificial intelligence in Congress and the courts, lobbying for their position. [vii] Small firms and individual inventors often do not have the investment and capital necessary to translate their intentions into large-scale commodity products and services or to monetise them in related markets.
Rather, they often create prototypes, hoping to find other developers to further manufacture and market their inventions and recoup their investment in research and development (R&D) by licensing their inventions to these developers. And this is true not only for the United States, but also for other countries, including Russia.
The current trend is that patent regulation will help China in the long run, as it will deter investment by American firms and allow Beijing to gain leadership in critical 5G (and future 6G) standards.
According to the US intelligence community, if more global networks in the world work on Huawei and other Chinese technologies, then China will have the opportunity to steal trade secrets, collect intelligence, and influence competitors by disabling communication infrastructure and punishing critics.
This can be attributed to Washington's anti-China policies and manipulation of data reflecting China's growing involvement. However, if we look at objective statistics, the number of delegates associated with Chinese organisations participating in the 3rd Generation Partnership Project (3GPP) has grown significantly in recent years.
This project was launched back in 1988 and is a standardisation body whose members are the world's largest telecommunications firms. Having gained more influence over time with the introduction of 4G, and now 5G, 3GPP has found itself at the centre of a geopolitical debate over the importance of 5G to the global economy.
Currently, China has the largest number of representatives from other countries. And as of November 2021, Huawei had the largest 5G portfolio and announced the presence of the most patent families (a set of patents obtained in different countries to protect one invention), becoming the leader and leaving behind players such as Qualcomm in the United States, Samsung in South Korea and Nokia in Finland.
No single company or country can bridge the gap in technology leadership so quickly, although at the moment the US and EU continue to maintain leadership in participating in standards and some technologies. While the number of contributions and patent disclosures are not indicators of relevance or quality, these models illustrate China's growing investment in cellular technology to close the gap with competitors.
The US is trying to counter China both directly and indirectly by creating new initiatives with its partners.
The Trade and Technology Council was launched at the US-EU summit in June 2021. [viii]
Its stated goals are:
- Expand and deepen bilateral trade and investment;
- Avoid new technical barriers to trade;
- Cooperate on key policies on technology, digital issues and supply chains;
- Support collaborative research;
- Cooperate on the development of compatible and international standards;
- Facilitate cooperation on regulatory policy and enforcement;
- Promote innovation and leadership by EU and US firms.
The Council will initially include the following working groups, which will operationalise the political decisions into deliverables, coordinate the technical work and report to the political level:
- Technology standards cooperation (including AI and Internet of Things, among other emerging technologies);
- Climate and green tech;
- Secure supply chains, including semiconductors;
- ICT security and competitiveness;
- Data governance and technology platforms;
- The misuse of technologies threatening security and human rights;
- Export controls;
- Investment screening;
- Promoting SME access to and use of digital technologies;
- Global trade challenges.
In parallel, the EU and the US have established a Joint Technology Competition Policy Dialogue, which will focus on developing common approaches and strengthening cooperation on competition policy and enforcement in the technology sectors.
On December 3, 2021, a joint statement was issued by the US State Department and the EU External Action Service regarding high-level consultations on the Indo-Pacific region. In addition to statements about shared values and interests, including current trends related to the coronavirus pandemic and climate change, there are a number of technical aspects, such as labour standards, infrastructure, critical and emerging technologies, cybersecurity, etc.
Also mentioned is the deepening of cooperation with Taiwan and the integration of regional infrastructure initiatives Build Back Better World and EU Global Gateway. The former is driven by the US, and the latter by the EU, respectively. [ix] Of course, all this is done to contain China, including the Belt and Road Initiative.
There are also examples of explicit confrontations that lead to so-called decoupling, i.e. a break in trade and economic relations.
On November 24, 2021, the US Department of Commerce announced the introduction of export controls for eight Chinese quantum computing companies. A week earlier, Bloomberg reported on new import controls created by a quasi-state Chinese industrial group known as the Xinchuang Committee, which effectively blacklisted technology companies that are more than 25% owned by foreign companies that supply sensitive industries. [x]
In a press release, the Commerce Department said it added eight Chinese quantum computing companies to the list to “prevent the use of new US technologies for [Chinese military] quantum computing efforts”.
US companies are prohibited from exporting certain products to companies on the list of legal entities without applying for a special license from the Department of Commerce, and such licenses are rarely issued. The list was created in the late 1990s to address the problem of weapons proliferation, but since then it has become a general tool of pressure from the United States under the guise of protecting its economic interests.
And this led to a corresponding reaction from China, as in the case of sanctions against Russia. Chinese analysts say the creation of the Xinchuang Committee and China's push for technological independence are a direct result of US export controls. The Chinese Internet research company iResearch said that "the US policy of containment, as exemplified by the list of organisations, was a direct catalyst that pushed China to create the Xinchuang sector.... [the list of organisations] highlighted the urgent need for China to invest more in technological innovation and produce key technologies in China”.
It is also claimed that Chinese President Xi Jinping's call for greater technological independence was partly motivated by the fact that he saw the impact of US export restrictions on Huawei.
In November, it was reported that China's central Internet regulator asked top managers of the giant Didi Chuxing to propose a plan to delist the company from the New York Stock Exchange for data security reasons. These moves indicate that the technological divide between the United States and China will continue, despite the statements made by the two leaders that they are ready to resolve disputes.
US NATO partners from Europe are also getting involved in the anti-China policy. "China represents a threat not only from a defence perspective but also from an economic one, as well as creating short- and medium-term problems for the post-pandemic recovery and the clean-energy transition process. This area is the security of supply of critical raw materials and, in particular, rare earth elements (REEs),” the website of the International Centre for Defence and Security from Estonia says. [xi]
There is a group of 17 elements of the periodic table that are used in the production of high-tech goods, superconductors, magnets and weapons (and recently in the production of environmentally friendly energy), so the use of these minerals has significantly increased demand for them, but their extraction and supply largely depends on China.
The European Commission has already developed a raw materials information system and will continue to update and improve it, but more needs to be done. The Commission will strengthen its work with strategic forecasting networks to develop reliable evidence and scenario planning for raw material supply, demand and use in strategic sectors.
These networks provide long-term policy coordination between all Directorates-General of the European Commission. The methodology used to assess the criticality of certain resources may also be revised in 2023 to integrate the latest knowledge. [xii]
Overcoming challenges
Mitre, a high-tech company that is one of the Pentagon's contractors, released a report in August 2021 on the growing rivalry between the United States and China. It talks about preparing for national-level action - that is, joint efforts involving government, industry, and academia - to respond to the technological challenges posed to the United States by Chinese achievements and ambitions. [xiii]
We have identified three recommendations that are universal in nature, that is, they can be applied to any state, including in Russia, adjusted for domestic realities.
1. "Don't overreach. Rather than presuming that anyone can identify and manage the many factors that go into catalysing technology innovation and adoption across the entire U.S. economy, a wise federal S&T policy should focus upon what is most needed in order to ensure national competitive success in the hightechnology arena—including remedying actual, identifiable market failures…
We also need to address under-funding in the middle-ground ‘valley of death’ in the technology life cycle between basic research and late-stage commercialisation: that is, the phases in which new technological insights are validated and demonstrated in a relevant environment. This zone loosely corresponds to the area in between the traditional academic ‘sweet spot’ of basic research and private industry’s comfort zone in prototyping and deploying new applications.
2. Ensure a ‘technosystem’ focus. Effective technology strategy needs not just to cover the development of new widgets in themselves, but also to address broad legal-regulatory, institutional, policy, and even sociological factors related to effective technology uptake and the development of new use cases.
This requires ‘system of systems of systems’ thinking that also embraces more practical questions of how the technology economy works in the broadest sense. Through this prism, technology governance—e.g., technical standards, tax incentives, supply chain security, technology controls, oversight and auditing of R&D funding, and workforce quality issues—can be as important to success as the cleverest technical insights.
Within the framework of a national S&T strategy, there is a special role for the government here, for such ‘technosystem’ questions often involve issues and factors—or purely national-level or systemic concerns, such as national security or climate change—to which private sector actors may have little incentive (or ability) to direct attention and resources.
3. Keep it consistent with our values.” The publication says that when faced with huge economic and technological challenges from China, the United States cannot apply an analog of Beijing's "military-civilian merger" strategy, because American leaders should not use state coercion for intersectoral cooperation and the use of market mechanisms for state purposes (in fact, such methods were used in US history, in particular, during World War II - author's note).
There is a call to ensure that all forms are taken to coordinate national efforts to enhance innovative and voluntary cooperation between the public, private sector, and educational process, as well as federal funding for corporate research and development, with the crucial role of non-profit brokers who promote cooperation and manage differences among competing interests.
In addition to political decisions, an ideological approach can also be used. Eileen Donahue, executive director of the Stanford-based Global Digital Policy Incubator and former US Ambassador to the United Nations, believes that digitalisation and, in particular, artificial intelligence can help strengthen liberal democracy and, consequently, the power of the United States. She suggests looking at competition in cyberspace through the lens of systemic rivalry, where China is seen as an authoritarian regime that poses a threat.
She says that "the tech practices we showcase in our domestic context, the norms for which we advocate in international tech fora, and the investments we make in emerging technologies and democratic information infrastructure will be mutually reinforcing. If this complex set of tasks is embraced and tackled with the sense of urgency and purpose it deserves, a prosperous, secure democratic future can be solidified.
These are the essential elements from which we can build a democratic digital society.” [xiv] Although, given the huge number of contradictions within the United States, it is not clear how to implement this in practice.
Energy, semiconductors, and cloud storage
Another promising area in technology is clean energy.
A study carried out by the American CSIS centre on clean energy generation in the United States says that serious analysis and evaluation of energy and economic diversification is needed to optimise current strategies. [xv]
Currently, carbon-free sources - renewable and nuclear - provide a small percentage of the electrons that power buildings and the transportation sector. But as time passes and energy demand increases, carbon-free energy sources will account for a larger share of production. Already, 21% of private companies and 61% of national governments have set ambitious goals for decarbonisation or zero emissions.
According to the International Energy Agency, by 2040, with strong growth in wind and solar power generation, renewables will account for about 47% of the global electricity market, up from 29% today (see chart). By 2050, renewable energy sources will account for more than 90% of all energy production, while fossil fuels will account for less than 10%. [xvi]
And the transition to new types of energy will inevitably lead to the creation of a new technological landscape for global energy flows. Currently, complex and powerful supply chains connecting production and consumption consist of oil and gas pipelines and shipping routes with infrastructure for oil and gas tankers.
There are already discussions about exporting green hydrogen to Europe from places where cheap renewable electricity is plentiful, such as the Middle East and Iceland, or from Australia to Japan. There are already projects to build electricity transmission networks from areas with huge opportunities for renewable electricity generation to demand centres, such as the Australia-ASEAN transmission line, which will connect Australia to Singapore.
Cloud technologies that provide more computing power and data storage capacity are another critical area.
Currently, the US accounts for almost 40% of the major cloud and Internet data centres, but Europe, the Middle East, Africa, and Asia-Pacific have higher growth rates. Today, China, Japan, the United Kingdom, Germany, and Australia collectively account for another 29% of the total. Global hyper-scalable cloud data centre vendors operate in just a handful of major emerging markets, such as Brazil and South Africa.
They are mostly located in high-income and upper-middle-income countries. Among hyperscale operators, Amazon, Microsoft, and Google collectively account for more than half of all major data centres, along with other key players including Oracle, IBM, Salesforce, Alibaba, and Tencent. The largest cloud service providers manage data centres around the world, segmenting customers into different regions that can span many countries or even entire continents.
Semiconductors are also on the list of mission-critical technologies. Recently, a special term "chipageddon" has appeared, which reflects the global shortage of computer chips that has arisen over the past year. [xvii]
As noted, it all started with the fact that the demand for consumer electronics increased due to the lockdown, as many were forced to work and study at home.
Semiconductor chips are also used in household appliances, monitors, and automobiles. For example, a modern car can have more than a hundred chips.
And Taiwan produces 60 to 70% of the world's semiconductor chips and 90% of the most advanced chips. In 2021, the resulting deficit was attributed to a variety of circumstances. But in fact, the reason was the drought that occurred on the island in 2020. The fact is that the manufacture of computer chips is quite time-consuming - it takes about 8000 litres of water to produce a single plate with a chip.
Although the most severe restrictions in 2020 affected Taiwan's agribusiness sector, semiconductor chip companies also reduced production volumes.
In this context, the surrounding geographical environment becomes a techno-strategic environment. Taking into account the use of dual-use technologies in the military sphere and the importance of innovation in defence, the armies of leading countries also emphasise technological priorities.
The US Department of Defence has identified eleven such areas - fully networked combat management systems, 5G, hypersonic technologies, cyber warfare/information warfare, directed energy, microelectronics, autonomy, AI/machine learning, quantum science, space and biotechnology, where investments are actively attracted. [xviii]
Russia should also draw certain lessons from technological competition. Proper protectionism, promotion of our own developments, and support for the scientific and technical sector are no longer issues of the domestic economy, but of global geopolitics.
[I] https://hello-tomorrow.org/bcg-deep-tech-the-great-wave-of-innovation/
[ii] https://www.bcg.com/publications/2021/deep-tech-innovation
[vi] https://www.csis.org/analysis/promoting-competition-american-economy
[vii] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3909528
[viii] https://ec.europa.eu/commission/presscorner/detail/en/IP_21_2990
[xi] https://icds.ee/en/chinas-rare-earth-dominance-is-a-security-risk-for-nato-and-western-supply-chain-resilience/
[xii] https://hcss.nl/report/energy-transition-europe-and-geopolitics/
[xiv] https://www.justsecurity.org/78381/system-rivalry-how-democracies-must-compete-with-digital-authoritarians/
[xvi] https://www.strategy-business.com/article/State-of-flux
[xvii] https://www.abc.net.au/news/2021-05-07/what-does-chipageddon-have-to-do-with-climate-change/13327926
[xviii] https://cimsec.org/the-influence-of-technology-on-fleet-architecture/
