A law to rein in tech firms: the US is restricting China by emulating it
A law to rein in
tech firms: the US is restricting China by emulating it
WRITTEN BY WENDY CHANG AND ANTONIA HMAIDI
1 June 2023
With the proposed RESTRICT Act, the US is copying Beijing’s style of policymaking, using national security as a blanket excuse to crack down on Chinese companies. By pushing for sweeping legal powers to go after Chinese tech firms operating in the US, Washington is veering towards a style of policymaking favoured by Beijing: broad legislation that can be weaponised at will to crack down on specific targets. The proposed RESTRICT Act risks giving near arbitrary power to the US government to pursue TikTok and other tech companies linked to “foreign adversaries”. By using national security as an excuse for going after foreign companies at will, Washington risks losing the trust it has won as a guardian of the rules-based international order and global trade.
The proposed law has similarities to Chinese ones
Introduced into Congress by Democratic and Republican senators, and backed by President Joe Biden, the “Restricting the Emergence of Security Threats that Risk Information and Communications Technology Act” (RESTRICT Act) proposes to grant the executive branch broad powers to restrict tech products and services from China, Cuba, Iran, North Korea, Russia, and Venezuela. Mandated to “review and prohibit certain transactions”, the Secretary of Commerce would be able to identify national security risks posed by technology from these countries, take “any mitigation measure” to remove dangers, or preempt potential ones.
By expanding the definition of national security to address the newly antagonistic world that China and the US perceive themselves in, both countries seem ready to accept the fragmentation of their ever-more digital economies and societies as inevitable.
Similarly, the Chinese Communist Party (CCP) has a penchant for vague legislation to keep individuals and companies on their toes. Those affected often have to guess the parameters to which they are expected to adhere to and can find the authorities reacting hard and fast if they fail. In July 2021, Chinese ride-hailing service Didi drew the ire of Beijing by listing its shares in the US without the CCP’s blessing. Chinese authorities promptly subjected it to cybersecurity reviews under three pieces of legislation and banished it from app stores for six months.
This arbitrary weaponisation of security laws has also affected international companies operating in China. In April, the Cyberspace Administration of China again invoked the country’s National Security Law, Cybersecurity Law, and Measures for Cybersecurity Review to go after US-owned Micron, placing it under security reviews for alleged data security breaches in China. This came after the US ratcheted up its controls on chip exports to the country, but targeted no other foreign entities or chip-makers whose cybersecurity records are on par with Micron. Such inconsistent application of legislation is a hallmark of CCP governance. The potential for arbitrary retaliation is meant to keep people and companies in line. Adopting a similar approach to national security legislation, like the RESTRICT Act is set to do, is dangerous.
US senators argue broad legal mandates enable quick and decisive action
The US senators sponsoring the RESTRICT Act say that its broad mandate will let the US act quickly and decisively in the interest of national security. Democratic Senator Mark Warner, the main sponsor of the bill, has said his bill seeks a more comprehensive approach to dealing with tech companies from authoritarian countries. It even allows the Department of Commerce to preempt perceived threats. He hopes this will address the current “whack-a-mole” efforts to ban foreign tech companies that could misuse US user data.
However, the proposed legislation has also raised concerns in the US. Some companies are worried they could come under regulatory review even for marginal use of Chinese technology — tech companies in particular are lobbying to narrow the language of the bill. Some conservatives and progressives are united in their opposition to what they view as the government overreach of a “Patriot Act for the Digital Age”, a reference to the infamous post-9/11 law that enabled spying on citizens. Others fear the erosion of internet freedom, and consider the government’s data security worries disingenuous, as Washington has never gone after US-based companies for infractions.
Given the strong bipartisan support in Washington, some experts expect the RESTRICT Act to come into force largely intact. Lawmakers are right to voice concerns about foreign adversaries gaining access to US user data or key infrastructure — before TikTok, there was a big outcry about Huawei’s role in providing key technology for 5G mobile networks. However, this track record also shows that the US attempts to restrict foreign tech may have more to do with its heightened geo-economic and technological competition with China than with protecting its citizens’ data.
Washington is coupling economics with national security
By increasingly using national security as the rationale for laws to enhance the competitiveness of US companies, Washington’s definition of national security has ballooned to include economic and technological security, justifying expansive corrective measures by the government. This mirrors the CCP’s party line and policymaking. The CCP defines national security to cover all areas of life in China and has long yoked it to protectionist tactics to help its rapid economic rise.
The US and its Western allies tolerated these practices in the past, but they now seem unwilling to continue ignoring the asymmetry. By equating economics with national security, Washington is moving into the realm of governmental industrial policy and away from international free trade principles — even if it still nominally supports these. Famously, the World Trade Organisation rulebook includes an exception for members to shirk their obligations on liberalising trade on the grounds of national security, which the US has increasingly invoked to justify decisions such as trade tariffs.
With the Inflation Reduction Act, Washington coupled economic security with national security, making large subsidies available to companies committing to clean-energy initiatives in the US. Among other things, these subsidies are meant to strengthen domestic supply chains and the competitiveness of the US electric vehicles (EV) industry, so much so that even Western partners have called this out as protectionism and a prelude to unfair competition.
With the CHIPS and Science Act, which Congress passed in 2022, Washington committed to investing heavily in the domestic manufacturing of semiconductors. As a follow-up, it enacted sweeping bans on the export of chips and chip-manufacturing equipment to China. Cutting Beijing’s access to the most modern chips is meant to hamper its manufacturing and slow R&D in many key areas. Given their military and economic potential, technologies like quantum computing and artificial intelligence are seen as critical to national security. The US wants to use its technological superiority to curb China’s rise in this field.
US returns to industrial policy over free trade
Amid the great power competition between the US and China, in the wake of supply-chain disruptions during COVID-19, and with the ongoing war in Ukraine, US allies in Europe and Asia are warily watching as the US increasingly reverts to industrial policy. Washington is framing China’s rise as a threat and a reason to re-shore its manufacturing industries with subsidies. US National Security Advisor Jake Sullivan has referred to a “modern American industrial strategy” to build a “techno-industrial base that the United States and its like-minded partners… can invest in and rely upon together”. Yet, much of the world does not want to see the US embrace industrial policy, as it will inevitably also hurt the interests of competing industries outside of the US. While sharing concerns about China’s increasingly assertive behaviour internationally, many countries do not share the threat perception. Washington increasingly sees industrial policy as a necessary step in a changing world in which it is no longer the only undisputed superpower.
The RESTRICT Act can be seen as yet another American effort to combat China’s rise. By wielding the power to restrict or ban any Chinese technology provider, it can discourage Chinese companies from competing in the US market and push domestic manufacturers to further decouple their supply chains from Chinese providers. This decoupling could extend to the digital world, too. Should the US and China succeed in boxing each other out of their respective markets, the ideal of an open and free internet would give way to two closed ecosystems, each with its own hardware and software. The US seems to view a fragmented internet as a better option than maintaining the status quo with China. By expanding the definition of national security to address the newly antagonistic world that China and the US perceive themselves in, both countries seem ready to accept the fragmentation of their ever-more digital economies and societies as inevitable.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biographies
Wendy Chang is Research Assistant at the Science, Technology and Innovation Policy team at MERICS. Her research interests include technological competition between China and the US and Europe, in areas such as generative AI, and its greater impact on geopolitics. She is also interested in the use of disinformation campaigns by state actors to achieve political goals. Before joining MERICS, she worked as a senior software engineer at companies in Berlin and San Francisco. She holds a Master of Engineering in Computer Science from MIT.
Antonia Hmaidi is an analyst in the Science, Technology and Innovation Policy team at MERICS. She works on China’s pursuit of tech self-reliance (especially in areas like semiconductors and operating systems), its internet infrastructure, and disinformation and hacking campaigns. Hmaidi also develops modelling and big data analysis tools. She gained experience as a project manager at the Bertelsmann Stiftung, worked at the German Corporation for International Cooperation (GIZ), as a journalist in Asia and at the German Institute for International and Security Affairs (SWP). Antonia holds a bachelor’s degree in East Asian Politics and Economics from Ruhr University Bochum and Renmin University of China, and a master’s degree in International Relations from the Graduate Institutes of International and Development Studies (IHEID) in Geneva and New Delhi. Image credit: Flickr/Solen Feyissa.