The United States is locked into a geopolitical competition  with China over the commanding heights of the 21st century economy. Much of the competition revolves around the nexus of international trade and investment and technology. Washington has very legitimate concerns about China’s pursuit of indigenous innovation through high tech industrial policy, but the situation warrants a smart response. At a time when policymakers are signaling their desire to outcompete  China economically, why are they also rushing to hobble private sector American technology and innovation?
Over the last several weeks, lawmakers have introduced five separate bills in United States House of Representatives aimed at cracking down on “Big Tech.” I’m not an antitrust scholar, but as my colleague Dr. Wayne Brough has written , the bills would, if enacted, “impose the most significant overhaul of the nation’s antitrust laws in our country’s history.” Rather than broad and durable antitrust principles that apply to all sectors of the economy, which have guided our competition policy for more than a century, the legislation under consideration is aimed squarely at large tech companies in the United States.
It is worth considering the geopolitical and international economic ramifications of such a radical departure from existing law.
In 2018, the United States released a report  documenting China’s predatory commercial practices, which served as an indictment of sorts. The overarching theme of the report is that Beijing uses a number of unfair and pernicious methods to acquire American technology with the ultimate goal of supplanting the United States as the global leader in high tech innovation. Specifically, the report alleges that China pressures American firms into transferring technology to Chinese joint-venture partners as the cost of doing business—reaching the 1.4 billion potential consumers—in the country; China abuses intellectual property; engages in targeted foreign investment to acquire strategic American firms and assets; and with pervasive state support, hacks into commercial networks to steal trade secrets. On top of that, China provides massive subsidies  to its leading technology firms to pursue research and development in critical areas. These are very serious problems, and demand a thoughtful and targeted response.
Instead, the United States has flailed at China. The Trump administration imposed tariffs, which triggered predictable retaliation against American exporters, imposed significant costs onto American consumers—both families and firms—and will almost certainly fail to change Beijing’s predatory commercial practices. It is estimated  that the tariffs cost about 300,000 American jobs and lowered market capitalization by about $1.7 trillion through diminished investment, according to the New York Federal Reserve. In other words, the tariffs made the United States weaker and less competitive. Now, some in Congress want to pursue misguided antitrust policies that will unintentionally undermine the United States’ global competitiveness.
The firms targeted by the proposed legislation are among America’s most globally competitive and innovative. They drive significant investment in cutting-edge technologies like robotics and artificial intelligence, the types of research China is pursuing  through its Made in China 2025 indigenous innovation industrial policy. A recent report from the Progressive Policy Institute (PPI) highlights how many of the largest American tech firms—Amazon, Alphabet (Google’s parent company), Intel, Facebook, Microsoft and Apple—were among the top 15 nonfinancial firms driving U.S. capital expenditures in 2020. Together, PPI estimates that these six firms made nearly $90 billion worth of private investment in 2020—up 6 percent from 2019, which is remarkable considering that the U.S. economy was lagging in 2020 due to the outbreak of COVID-19. Cracking down on these firms will mean less investment in research and development.
These American firms already must compete with heavily subsidized foreign competitors and face discriminatory foreign practices, particularly in China. Despite these hurdles, the American tech industry pushes the envelope on exactly the type of research and development that policymakers in the United States should welcome. These firms lead the world in current and next-generation technologies. Instead of embracing this type of American global commercial and technological leadership, or at least staying neutral toward it, the legislation under consideration would favor foreign competitors by kneecapping our domestic technology firms with heavy-handed regulation, which will almost certainly benefit their foreign competitors.
The American tech industry is the envy of the world. That’s why China, the European Union and others are trying to mimic it through subsidies and discriminatory practices against foreign competition. Yet those policies are no match for a relatively free and dynamic economy fostered by existing competition policies. It simply belies common sense that the way to outcompete Beijing is by making the United States weaker, less efficient and less dynamic through misguided efforts to single out our most globally competitive and successful firms.
- “geopolitical competition”: https://www.rstreet.org/2021/03/08/outcompeting-beijing-a-roadmap-for-meeting-chinas-commercial-challenges/
- “signaling their desire to outcompete”: https://www.cnbc.com/2021/06/08/senate-passes-bipartisan-tech-and-manufacturing-bill-aimed-at-china.html
- “has written”: https://www.rstreet.org/2021/06/15/washington-wants-to-weaponize-antitrust-law-to-attack-big-tech-and-it-is-going-to-backfire-horribly/
- “report”: https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF
- “provides massive subsidies”: https://www.wsj.com/articles/chinas-trillion-dollar-campaign-fuels-a-tech-race-with-the-u-s-11591892854
- “estimated”: https://www.cbsnews.com/news/trumps-trade-war-squashed-an-estimated-300000-jobs-so-far-moodys-estimates/
- “according ”: https://libertystreeteconomics.newyorkfed.org/2020/05/the-investment-cost-of-the-us-china-trade-war.html
- “China is pursuing”: https://www.wsj.com/articles/chinas-trillion-dollar-campaign-fuels-a-tech-race-with-the-u-s-11591892854
- “recent report ”: https://www.progressivepolicy.org/wp-content/uploads/2021/06/PPI-Investment-Heroes-2021.pdf