Trade and Security

Trump’s Techno-Nationalism

By Scott Moore
Thursday, August 15, 2019, 8:00 AM

Among President Trump’s recent tweets was one that has potentially profound implications for American companies: a pledge to “take a look” at tech entrepreneur Peter Thiel’s accusation that Google committed a “treasonous decision to work with the Chinese military and not the U.S. military.” The subtext of the president’s tweet is a new form of techno-nationalism that raises serious ethical, legal and political questions for American firms in an era of rising tensions with the Middle Kingdom. The U.S. government has already expressed concerns that China’s military and intelligence agencies could benefit from the international sale of Chinese tech products, but the tweet seems to go considerably further, suggesting that U.S. companies have an obligation to aid the U.S. government and avoid contracts with foreign countries. This would be a profound mistake: U.S. companies have thrived abroad precisely because they have not been subject to this sort of techno-nationalist interference.

To begin with, Thiel’s allegation appears to have little merit. Google executives have publicly denied working with the Chinese military, and Treasury Secretary Steven Mnuchin admitted that the U.S. government saw no cause for concern. The larger issue is the theory behind Trump’s tweet: that American companies operating in China are implicitly supporting Beijing’s interests while undermining those of Washington. While this particular allegation may be dubious, it is unlikely to be the last time a major American company will stand accused of being a stooge for Beijing.

Perhaps the most important question this new era of Sino-American competition poses for U.S. companies is whether to directly or indirectly support China’s tight restrictions on speech and information. Google has tried several approaches to answering this question, each with unsatisfying results. It launched a Chinese-language search engine in 2006, expecting to compete with homegrown sites like Sina. But just four years later, the company announced a near-complete withdrawal from the mainland Chinese market, citing Beijing’s efforts to “limit free speech on the web.” In 2018, though, news reports indicated that Google was working on a new search engine that would comply with China’s tight censorship requirements. Opponents ranging from human rights advocates to Vice President Mike Pence criticized the plans, and last month Google formally abandoned its search engine project.

These ethical dilemmas will only become more acute for U.S. tech firms as growth slows in other markets and the allure of China’s 800 million netizens builds. It is essentially impossible for U.S. tech firms to operate in China without at least indirectly supporting Beijing’s information control policies. But staying out of China entirely just isn’t an option for many firms if they are to remain globally competitive—apart from the sheer size of its market, China has a rich and innovative tech ecosystem. The best approach is probably something like Microsoft’s, which relies on a set of principles for technologies that could be used in violation of the company’s core values, including nondiscrimination; this policy creates grounds for Microsoft to refuse sales of or partnerships on sensitive technologies like facial recognition. Such policies should, at a minimum, prevent U.S. firms from contributing to the barbaric repression of China’s Uighur minority.

Another vexing question American companies will have to answer in an age of competition with China is what role U.S. headquartered firms can or should play in advancing the interests of the U.S. government. As a matter of law and policy, the answer historically has been not much. A 1993 report to Congress, for example, observed that in contrast to European nations and Japan, Washington consistently resisted the temptation to employ U.S. firms as arms of the state: “It has, instead, continued to define the national interest in terms of the more global objective of promoting free and open trade and investment.” As a practical matter, though, U.S. companies often find good reason to cooperate with Washington on certain national security issues. Documents leaked by former National Security Agency contractor Edward Snowden, for example, show that American tech firms like Google and Facebook were willing partners in the agency’s efforts to snoop on international communications.

But while such cooperation is based primarily on calculated self-interest by American firms, Trump’s techno-nationalism implies a sort of basic patriotic duty for U.S. tech firms to cooperate with American military and intelligence organizations. Indeed, Thiel’s initial accusation seems to reference the fact that, in 2018, Google announced it was pulling out of a Pentagon-sponsored artificial intelligence project because of employee pressure. Although the company continued to bid for Pentagon contracts, the decision sparked widespread condemnation. Taken to an extreme, the implication that private companies have an obligation to serve the interests of the state risks turning America’s custom on its head in favor of China’s. After all, the Trump administration’s legal case against Huawei is largely premised on it being simply an agent of Beijing’s interests.

The biggest reason to be concerned about Trumpian techno-nationalism has to do with economic competitiveness. Excessive government involvement in and control over corporations damages their ability to compete on the world stage. Japan provides a good example. From the 1970s through the 1980s, American observers issued ominous warnings that close ties between its government and corporations would allow it to out-compete U.S. rivals. But that was before Japan’s economic crisis—and even afterward, the most successful Japanese firms turned out to be those that received the least support from the government. In fact, despite being subject to a much lower degree of government direction and assistance than their European, Japanese and Chinese counterparts, U.S. multinational firms are world-beaters. They have contributed over 30 percent of the total increase in U.S. GDP since 1990 and half of its exports. The majority of the world’s largest companies are headquartered in the United States. And though firms like Huawei or State Grid are powerful, they remain well behind American giants like Walmart when it comes to both global reach and revenues.

None of this means that governments shouldn’t regulate multinational companies, or that politicians and activists shouldn’t keep them honest when it comes to human rights violations and environmental and social harms. What it does mean is that it is foolish for the president—or any other American politician—to draw U.S. companies into a crude form of zero-sum competition with China. A much better approach is to view them as engines of economic competitiveness and innovation that sustain America’s ability to project military, economic and soft power around the globe. There can and should be extensive cooperation between Washington and U.S. companies when their interests are aligned—but Google shouldn’t be expected to act as an extension of the Pentagon or the State Department.

Unfortunately, given growing tensions across the Pacific, this probably won’t be the last time that a major American company faces uncomfortable, and misguided, pressure from Washington when it comes to China. But the fact is, nationalism and corporate competitiveness just don’t go together. If translated into policy, Trump’s techno-nationalism could do lasting harm to the ability of U.S. multinational firms to compete effectively around the world.