Expert: Focus on trade deficits, tariffs and immigration not way to address US-China tech race

Focusing on trade deficits, boosting tariffs and restricting immigration are precisely the wrong ways to address the strategic dilemmas raised by the intensifying U.S.-China technology race, according to a new issue brief by an expert in the Center for Energy Studies at Rice University’s Baker Institute for Public Policy.

Credit: 123RF.com/Rice University

Gabriel Collins, the Baker Botts Fellow in Energy and Environmental Regulatory Affairs at the Baker Institute, authored “Brains Versus Grains: U.S. Technological Leadership Faces a Stiff Challenge as Competition With China Heats Up.” He argues that “figuring out how to balance openness to the global flows of people, ideas and money that underpin U.S. technical and economic dynamism with the reality that Chinese government interests will try and leverage this openness to purloin technological edges will be a key strategic challenge for many years.”

A core U.S. position to date – expressed after meetings in May between the Trump administration and a Chinese delegation led by Liu He, the special envoy of China’s President Xi Jinping – emphasizes “meaningful increases in United States agriculture and energy exports” to China, Collins said. “There is an increasing risk that as the trade conflict ramps up, the administration will back down from its tough recent rhetoric and instead settle for a mercantilistic deal under which China agrees to import more U.S. goods and services,” he wrote. “Such an outcome would prioritize small, near-term domestic political gains while failing to appropriately position U.S. policy for a technology race that will determine global influence for decades to come.”

In comparison with commodities such as corn and oil, technology is a much more “winner-take-all” world in which the differences between cost advantage — which is crucial in commodity markets — and technological dominance are highlighted, Collins said. “The country (or company) that establishes technological dominance does not just get the prime corner of the sandbox,” he wrote. “It also determines the box’s shape, the type of sand and, at a basic level, the terms that others must meet if they wish to enter the box and play. A strong technology and innovation system is the economic equivalent of a nuclear ‘breeder reactor’ that consistently generates more fuel than it consumes.”

The “Made in China 2025” policy announced in 2015 clearly reflects one of Beijing’s core objectives: displacing the U.S. as the global technological superpower, Collins said. “U.S. policymakers urgently need to recognize this reality,” he wrote. “And it is not a simple ‘claim victory now and move on’ type of issue, which is worrisome, given the administration’s clear affinity for such a course of action. ‘Reality’ in the context of a tech race also means that goods, money and knowledge should — with proper safeguards — continue flowing back and forth across the Pacific. The benefits of exchange remain significant, despite the fact that each country is preparing for conflict with the other.”

Collins said the U.S. must strive to maintain technological leadership while recognizing that as China’s tech sector, universities and government labs continue to develop, they will contribute significantly to the expansion of global intellectual capital. “Cures for diseases, advanced computer hardware, solutions to the carbon conundrum and other technology-derived goods are increasingly as likely to come from labs in China as they are from research facilities in the U.S., Netherlands and other countries with top-tier scientific complexes,” he wrote.

“The evolving competition is complex and will require an integrated and thoughtful effort on the part of government policymakers and U.S. commercial entities and universities,” Collins concluded. “Moreover, it will likely last for decades. Grains and commodities are vitally important to the foundation of our comprehensive national power, but brain power will drive economic growth forward.”

Collins conducts a range of globally focused commodity market, energy, water and environmental research. His current research focuses on oil field water issues, evolutions in the global gasoline market, shifts in China’s domestic oil consumption structure, water governance and groundwater valuation in Texas and the food-water-energy nexus.