Ask the executive of practically any American technology company about doing business or competition in China, and you will get an earful about difficulties encountered. The stories all have a common element: the Chinese government coordinating government-controlled and -influenced companies such as Huawei and ZTE. Competition and property rights are blurred and diminished.
Ask the same executives about American government responses to the Chinese government, and you will get diplomatic silence. For decades, American administrations have not recognized the existence of economic warfare with China or other countries, much less mastered elementary techniques of how to succeed. Witness the recently leaked documents from the staff of the National Security Council to Axios
Those documents address potential federal policy towards China and Huawei with respect to new wireless technologies known as 5G and the apparent Chinese government strategy for domination in 5G. In recent days, public commentary has focused on how ill-advised were the ideas in the leaked documents. Little has been said on just what federal policy should be.
Thirty-five years ago at the dawn of the wireless industry and in the early incubation stages of the Internet, governments around the world did not strategize about how to promote the national interests for wireless or Internet technology, much less for national champions masquerading as private companies. Instead, those governments focused on protecting the interests of manufacturing companies in such industries as steel, automobiles, and televisions sets. The techniques were eerily familiar: limit competition and ignore property rights. Today, many of those companies that sought and received government protections no longer exist, or survive as pale shadows of their former selves. The machinations of governments past could not preserve them.
Thirty-five years ago, corporations such as Alphabet, Amazon, Apple, Facebook, Microsoft and countless other American Internet and wireless companies either had not been born or were in early childhood. Today, these companies compete and succeed globally, or at least where competition is permitted. Such American companies were not the creation of the industrial schemes of government bureaucrats. They were the creation of entrepreneurs operating largely outside of the view, and certainly outside of the control, of government.
It would be folly to believe that any government policy can or should by itself preserve the fortunes of a corporation long into the future. But it would be equal folly for our government to stand idly by while other governments harm competition and erode property rights, and with them, the interests of all Americans.
The leaked National Security Council documents published in Axios appear to have addressed the problems associated with diminished markets and reduced intellectual property rights in China. Although identifying the right problem, it prescribed the wrong solution.
China likely always will be better situated than the United States to have grand strategies to use government policies to promote the interests of government-controlled and government-influenced businesses. America should not aspire to such strategies. They are beneath us. America has no government-controlled businesses to champion, nor the statecraft and wherewithal to promote them even if we had such government-controlled businesses.
The economic strength of America is and likely always will be based on competition and property rights. That is the same for 5G and for any other form of technology.
Where competition is eclipsed—in America or abroad–by the power of government interference or the anticompetitive inclinations of a business, consumers lose, and American economic principles are diminished. Federal policy should be simply to protect competition. Our federal antitrust agencies do just that. The concepts of antitrust law, largely American in origin, have been exported to scores of countries around the world. Some countries apply antitrust laws to protect competition. Others use antitrust laws for the transparent purpose of attacking foreign, often American, companies. Just ask many of the technology executives with business in China.
Where property rights—including, and perhaps even particularly so, intellectual property rights—are circumscribed, consumers and American economic principles lose. From Soviet Block countries in the late 1940s, to Iran in the 1970s to Venezuela and other countries in more recent years, tangible American property has been expropriated. But an equally pernicious but less visible form of expropriation is intellectual property theft. Such theft harms not just the owners of intellectual property but the entire fabric of property in America. If one form of intellectual property can be stolen with impunity in one country, other forms might be stolen as well in that or other countries. Intellectual property theft is particularly harmful to the United States because America is, and likely will continue to be, the global center of intellectual property creation. Steal intellectual property, and America is diminished.
Many technology experts claim that the next war will be fought in cyberspace. Perhaps. But there are already many economic wars with far-reaching consequences not just for our economy but for whom we are as a nation. On one side of the conflicts are countries that promote industrial policies to limit competition, to favor one technology over another, to benefit one set of companies, and to erode property rights. On the other side is or should be the United States and other that champions of competition and property rights. The sooner America understands that it must defend these concepts, the better. And the more likely American ideals will prevail.