US Needs to Rebuild Indo-Pacific Trade Alliances to Counter Chinese Tech Dominance, Report Says
The U.S. is ceding its strategic and trade advantages in the Indo-Pacific to China, which is expanding its influence through technology exports and outbound technology investments, the Center for a New American Security said in a March 31 report. The Joe Biden administration can reverse the trend through closer cooperation with allies in the region, including Japan and India, which have been willing to deny certain Chinese investments and object to coercion attempts, CNAS said.
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China’s growing influence in the region was exacerbated by the Donald Trump administration's decision to withdraw from the Trans-Pacific Partnership, which “hobbled” the U.S. economically and robbed it of the ability to help “write the trade rules” in the Indo-Pacific, CNAS said. This has helped lead to a proliferation of Chinese technology in the region, specifically Chinese exports of dual-use surveillance technology and other “authoritarian technology norms” to “reshape foreign countries in its ideological image,” the report said. The State Department last year issued guidance on exports of surveillance technology, which was partly intended to educate industry about the risks of sending U.S.-origin surveillance equipment to Chinese end-users (see 2009300056).
China is also encouraging outbound investments by its technology giants but has met resistance in the U.S., which expanded its investment screening tools last year to keep U.S.-origin critical technologies away from the Chinese government (see 2002110042 and 2103240073). Instead, China is turning to other countries across the Indo-Pacific region. “Chinese tech startups, flush with funds from massive government-led investments in cutting-edge [artificial intelligence]-enabled technologies like facial recognition and smart city traffic management, are increasingly marketing their new tools abroad,” CNAS said.
Japan, however, has blocked certain Chinese investments, the report noted, and in 2019 moved to “overhaul its investment screening, export controls, and supply chain resiliency.” Tokyo has “accelerated” those efforts since the start of the COVID-19 pandemic, CNAS said, including by providing incentives for Japanese companies -- including those operating in the medical fields and other “strategic” sectors -- to relocate from China to Japan or other Southeast Asian countries. But Japan is “framing” the incentives as an effort to “strengthen overall economic security” rather than as protective measures against China,” the report said. Prime Minister Yoshihide Suga’s administration “is likely to maintain that cover.”
India is also an important ally as the U.S. attempts to tamp down China’s technology dominance, the report said. An ongoing India-China border dispute -- which intensified last year -- may have contributed to recent Indian measures to ban more than 200 Chinese smartphone applications, suspend Chinese investment contracts, delay Chinese exports at Indian ports and tighten its government procurement rules for bordering nations. Although these steps were India’s attempt at “insulating itself from economic coercion,” it has strong links to China’s market that will be difficult to untangle, CNAS said. The report said Chinese telecommunications and electronics exports to India have “increased manifold over the last five years.”
The Biden administration can take steps to regain influence in the region, including through increased trade and rebuilt alliances, especially with Japan and India, CNAS said. But the report suggested the administration needs to move quickly. “The more that regional countries see China’s rise as inevitable,” it said, “the more likely they may be to accommodate Beijing.”