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AS the world watches Trump’s onslaught on the global trading system through his relentless use of tariff barriers on imported goods, I have often wondered why US consumers and firms that will lose money have not been pushing back against their president. One reason, of course, is that the American economy is in excellent shape, with unemployment down to 3.9pc, its lowest level in decades. The stock market is exploring new highs in an extended bull run. Not unnaturally, Trump has taken credit for this economic good news. His tax cuts for large corporation appear to have worked, at least in the short run, but in politics today, there is no long run.
The second reason is that many American and European firms that moved their manufacturing to China have privately complained of Beijing’s insistence that they hand over their technology as the price of doing business. As many of them have spent millions in developing it, they are secretly delighted at seeing China being punished. Apple is not one of them.
According to The Economist, the American tech giant that recently hit a trillion dollars in terms of stock market evaluation, released a letter pleading with the administration to change its tariff policy. For Apple, the ongoing trade war between the US and China threatens to upset its profitability as currently its smartphones are being sold with a 58pc margin over production costs. This kind of profit is something entrepreneurs only dream about, and just goes to show the strength of the brand. But the company will have to decide whether to absorb the cost imposed by Trump’s tariffs or to pass it on to their ever-loyal customers. Apple and other tech firms will also have to decide whether to move parts of their scattered supply chain and assembly operations out of China and other Asian states to the United States permanently.
Apart from blaming China for its huge trade deficit of $375 billion last year, Trump and many in the American establishment view its biggest trading partner as a future military and political threat to its dominance of the Pacific Ocean. And seen through this prism, China’s rise as a global tech player was made possible only by stealing Western — but mostly American — technology. In fact, I recall learning (albeit in a very limited way) to work on computers in the mid-Eighties by using pirated Microsoft software. I sometimes wonder if the developing world’s technological development would have been significantly hindered had this cheap American software not been available to us.
China, although it spends 2.2pc of GDP on research and development, is nowhere near the United States in terms of cutting-edge technology, despite the rhetoric in President Xi Jinping’s claim to transform his country into a world leader by 2025. Although China manufactures or assembles 90pc of the world’s smartphones, it is far from having America’s depth of talent. The reason for this wealth of tech nerds (that include 67,000 AI experts of Chinese descent), of course, is its past open-door policy for brainy people from around the world. This door has now been slammed shut by Trump, and if he’s around long enough, Americans in the future might blame him instead of China for losing their edge in technology.
Recognising the dual-use of Artificial Intelligence and robotics in a wide range of uses, China is focusing on these technologies to close the gap with America. AI requires vast amounts of data for machine learning, and China is unconstrained by privacy laws and other such democratic concerns, and so is making rapid progress. Its face-recognition software is now some of the best in the world, and is reportedly being used in Xinjiang province to keep an eye (or several thousand) on potential Muslim terrorists. Each roadblock — and Uiygur Muslims in Xinjiang have to pass through several each day — has CCTV cameras that identify individuals. Occasionally, they make a mistake and the wrong person is sent to “re-education centres”, but he or she is hardly likely to sue the Chinese state for wrongful arrest.
I recall that when I was Accountant General Sindh in the mid-Eighties, we decided to buy three IBM PCs. For this simple purchase, I needed a No Objection Certificate from the American Embassy before IBM would release these very basic machines. This was designed to stop even remotely hostile states from acquiring high-tech (in those days, the IBM PC AT had less capability than first generation cell phones) computers. But clearly, there was a defined policy to block the spread of modern technology that was torpedoed by the ease with which software could be transferred on to floppy disks (remember those?), and sent around the world.
America’s Intellectual Property Commission, a lobbying group in Washington, reckons that America is losing $600 billion in terms of stolen tech. But can Washington staunch this flow of ideas? Not if the past teaches us anything. In the 18th century, France stole British coal-mining techniques; in the next century, the Americans ripped off British textile secrets to set up their own industry. And during the Cold War, the Soviet Union did its best to steal American military technology.
And so it goes in the world of military and industrial espionage. But thus far, no country has ever been able to completely seal the flow of knowledge. The Chinese tried their best to block the export of their beloved tea plants, and sold only finished tea to foreigners. However, a British botanist in the 19th century, pretending to collect Chinese plants for London’s Kew Gardens, managed to slip out of the country with a few tea shrubs, and planted them first in Sri Lanka, and then in India. The rest is history.
Published in Dawn, September 24th, 2018
