Author: Tronserve admin
Thursday 29th July 2021 06:00 PM
Techno-Nationalism: What Is It And How Will It Change Global Commerce?
Beijing recently ordered its public institutions and government agencies to stop using foreign made computers and software. This move appears to be aimed at American companies, as Washington pursues a worldwide campaign to block the adoption of 5G wireless technology made by Chinese telecom giant Huawei.
Japan, meanwhile–which has barred Huawei from its national telecom infrastructure–has also banned its Coast Guard from using Chinese-made aerial drones due to national security concerns. All of these developments serve to highlight a growing trend of ”techno-nationalism,” an emergent mindset that is poised to fundamentally alter geopolitics and global commerce.
Techno-nationalism is a new strain of mercantilist thinking that links technological innovation and capabilities directly to a nation’s national security, economic prosperity and social stability.
The state, therefore, must intervene and guard against opportunistic or hostile state and non-state actors. Techno-nationalism seeks to attain competitive advantage for its stakeholders, both locally and globally, and leverage these advantages for geopolitical gain.
Techno-nationalism is built on the premise that the world has entered a new era of systemic competition between the West’s increasingly short-sighted laissez faire model and China’s state-centric capitalism.
Differences in ideological values are helping to accelerate the adoption of competitive techno-nationalist policies.
Democracies and dictatorships are looking to implement technology-enabled mechanisms that enforce and empower vastly different standards around data privacy, surveillance, censorship, transparency, digital money and intellectual property. The competing ideologies of Techno-nationalism, therefore, could fracture the international system in ways not seen since the rivalry between the U.S. and Russia during the Cold War.
The return of industrial policy
Historically, proponents of free markets have argued that industrial policies are largely ineffective. Bureaucrats do not allocate capital efficiently and centrally planned economies, by definition, suffer from corruption, rent seeking behavior and poor governance. Moreover, centrally planned markets create market distortions and lead to over-capacity issues.
Yet, China’s industrial polices have been producing successful outcomes. In a time-span of about 15 years, for example, Beijing effectively leveraged its FDI policies and aggressive technology transfer and acquisition practices to build the world’s largest high speed rail system, with trains attaining speeds of between 250 and 350 kilometers per hour.
Similarly, China designed, developed and deployed its own navigation satellite system, Beidou, as an alternative to America’s GPS system, the EU’s Galileo system and Russia’s GLONASS. Beidou is said to be the most accurate of the world’s navigation systems.
And then, of course, there is Huawei, which has leveraged state support to become the world’s largest telecom equipment manufacturer, with a global footprint in 170 countries and more than 180,000 employees–including 10,000 engineers. In 2018, Huawei reportedly spent $15 billion on R&D.
The West’s techno-nationalist countermeasures
To counter Huawei’s dominant market position in wireless technology, Washington is exploring ways to fund Nokia and Ericsson, two of Huawei’s competitors, as well as looking at how to incentivize new strategic alliances involving Oracle and Cisco, two U.S. companies with operations in the radio frequency space.
This kind of techno-nationalist rationale is new to Washington. But there is now an urgent consensus to devise countermeasures to the multi-billion dollar credit lines and other financial assistance that Huawei has been receiving from China’s state-owned banks and institutions. This government assistance, for example, has allowed Huawei to offer high quality equipment at highly competitive prices when bidding for contracts around the world and has pumped up Huawei’s R&D war chest.
The EU is also turning to techno-nationalism. Brussels has called for the creation of a U.S.-EU Trans-Atlantic economic model that can compete directly with Beijing and block China’s attempts to influence global standards in 5G and other next-generation technologies.
Specifically, Brussels has stressed the need to join forces to counter efforts by China’s state-backed companies to influence the International Telecommunications Union (ITU) and the International Organization for Standardisation.
The next phase of techno-nationalism
These are the early days of techno-nationalism in the U.S. and the West. So far, American policies have been mostly reactive rather than proactive.
For example, placing Huawei (5G), HikVison (which makes surveillance-tech and its controlling shares are owned by the Chinese government), SenseTime (AI and surveillance-tech) and Fujian Jinhua (semiconductors) on the U.S. Commerce Department’s restricted entity list has inflicted damage. U.S. export controls have exposed China’s massive reliance on foreign technology—especially semiconductors.
But these same policies have wrought collateral damage on U.S. firms such as Qualcomm, Broadcom, Intel and others, which do billions of dollars of business with Huawei, alone.
Thus, as the U.S. and its allies compete with China in the so-called industries of the future, including all 10 sectors defined in the Made in China 2025 plan, they will find it difficult to avoid the “Galapagos Syndrome”— which is a thesis that argues that protecting local industries creates national champions but it inhibits their ability to adapt and compete in global markets.
The logical way to prevent the Galapagos syndrome, therefore, will be to invest massively in public private partnerships around R&D, education and human capital development. This will allow policymakers to build upon the advantages of leading companies and institutions without hampering their ability to participate in global value chains.
As governments roll out techno-nationalist policies, however, there will be substantial trade-offs, with no guarantees of success.