To Counter China, Large American Companies Are Calling on the State to Come to the Rescue.

Better coordination between the public and private sectors is needed.

In the United States, the time is ripe for the return of the planning state, and it's a former Google boss who says so. “The United States could lose the competition if dramatic steps are not taken across a broad range of public policies to invest in America's technological advantages, strengthen the techno-industrial base, and deploy disruptive technologies democratically and responsibly,” says a report on “Mid-Decade Challenges to National Competitiveness,” chaired by Eric Schmidt. In the competition with China, “we cannot rest on the laurels of a strong technology ecosystem, a vibrant private sector, or higher ideals to adapt naturally,” the report points out.

Inspired by more than 200 experts and the result of some 30 meetings, the report is itself part of history: called the “Special Competitive Studies Project” (SCSP), the think tank behind this work is a direct reference to the “Special Studies Project” led by Henry Kissinger in the 1950s to think about America's future. It also extends the first report on artificial intelligence (NSCAI), already chaired by Eric Schmidt.

Loss of influence

The challenge is not only to ensure growth or to rank high in the world rankings: failing to dominate technologically, the United States would see the Chinese authoritarian model gradually impose its rules, say the authors. “At the end of this decade, we will know whether we will live in a world shaped by free expression, tolerance, and self-determination or dictated by censorship and coercion,” writes Eric Schmidt. Especially since “many countries make little distinction between a world order led by the United States or by the People's Republic of China.”

And the record is hardly flattering. According to the reporters, China is already leading the way “in 5G, commercial drones, offensive hypersonic weapons, and lithium battery production,” while the United States maintains a “modest” lead in “biotechnology, quantum computing, commercial space technologies, and the cloud." In artificial intelligence, the United States also has a small lead “but China is catching up fast.”

A defensive policy

The loss of American influence has multiple causes. The tech ecosystem has evolved “with relative indifference to the strategic implications” of its projects, the report acknowledges. And if the quest for high margins and cheap suppliers abroad was “judicious” for companies and investors, it “devastated the national industrial landscape.”

On the government side, "the lack of national technology priorities and the decline in the share of government-funded R&D have let commercial priorities drive the technology agenda. All of this is taking place against the backdrop of a “changing geometry of the innovation ecosystem”: “the rise of venture capital has reshaped Vannevar Bush's [American engineer who served as Roosevelt's science advisor] innovation triangle between government, industry, and academia, thereby reducing the influence of government,” the report points out.

If he had not highlighted the weaknesses of the American model, Donald Trump had already launched the confrontation with China, judging that the rules of the game (technology transfer, intellectual property, etc.) were being flouted by Beijing. However, his policy was mainly defensive, from tariffs to tighter controls on foreign investment, including the banning of Huawei. A policy that has not been called into question by Joe Biden, but whose offensive aspect, parasitized by the political divide between Democrats and Republicans, is struggling to materialize in Congress.

Better coordination between the public and private sectors

The passage in August 2022 of the Chips and Science Act, which will fund semiconductor production and R&D in the United States, is the first step. But “we can't continue to rely on playing catch-up, as we did on 5G and microelectronics supply chains,” says Ylli Bajraktari, who leads the SCSP project. “Even with rapid implementation” of the Chips Act, regaining manufacturing leadership and upgrading the workforce “will require more policy action and greater coordination between the public and private sectors,” insists the report, which also calls for revitalizing partnerships in defense.

Just as U.S. funds can no longer invest in certain Chinese companies, the report also calls for tighter controls on sensitive exports and investments, “to ensure that the United States does not invest in its decline.” A message already incorporated by the White House. “If implemented in a robust, sustainable, and comprehensive manner, these tools can be a new strategic asset in the toolbox of the United States and its allies to impose costs on adversaries and even ultimately degrade their capabilities on the battlefield,” National Security Advisor Jake Sullivan said in response to the report.