Morici: Donald Trump’s long game with China

Peter Morici

As President Donald Trump takes trade actions aimed at China, it is important to focus on the long game. Those aren’t about cars costing $125 more and surely not about the United States going protectionist.

America has been in a trade and ideological war with China for years, and artificial intelligence will be the final battleground.

Beijing orchestrates a pervasive web of mercantilist tools – regulation of imports and foreign investment, forced technology transfers and subsidies – to target industries for dominance – aluminum, solar panels, electric cars and soon, AI.

Those policies create huge trade surpluses and a trillion dollar war chest that its multinationals may use to fund R&D and buy foreign technology companies.

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Geely Automotive purchased Volvo in 2010, which will only sell electric vehicles starting next year. U.S. auto makers must take joint venture partners in China and through those, its indigenous manufacturers gain access to American driverless vehicle technology.

As importantly, Beijing is corrupting core American resistance to authoritarian state-directed capitalism by co-opting American multinationals.

Apple recently agreed to store sensitive encryption keys in China, and actively campaigns against a more realistic trade policy toward China. Marriott is shaping global communications, corporate education and employee screening in line with Beijing’s propaganda strategies.

Google is establishing an AI development lab in China that will develop local talent and transfer knowhow to private developers.

AI-enabled devices and software power through huge troves of behavioral data and physical observations and distill vast bodies of scientific and social research to dramatically accelerate or replace human decision making.

AI is IBM’s Watson teaming with H&R Block HRB, +1.03 percent to prepare tax returns to avoid IRS audits, and assisting rural oncologists treating rare cancers, replacing time-consuming collaboration with highly specialized colleagues at faraway teaching hospitals.

AI is a personal assistant tailoring office music and temperature settings, drafting an itinerary for the day, setting up meetings, and booking restaurant reservations.

AI is the brains behind self-driving vehicles, drones overhead, and ultimately traffic management systems in cities with millions in operation.

More ominously, AI is the software behind Chinese facial scanners that identify the movements of Uighur dissidents in Xinjiang and track the everyday activities of citizens elsewhere to identify those embracing unwanted political ideas antithetical to the Party order.

In 10 years, it will not be possible to design, make or sell most anything without super-fast microprocessors and dazzling software that make today’s smartphones and apps look like John Bull’s locomotive and illuminated manuscripts.

AI will be the backbone of democratic nations’ capacity to defend their borders, communications and transportation infrastructure and civic institutions from invaders. For repressive states, AI will be the means to control citizens and what corporate leaders do, say and think.

China has targeted global dominance in AI by 2030 with hundreds of billions of dollars in government and private capital and its most ambitious young talent – all reminiscent of American efforts to build the 19th century transcontinental railroads and 20th century aircraft industry.

Beijing and local governments, with the collaboration of its technology giants, are funneling hundreds of billions of dollars into startups and big company projects that enjoy notably more freedom than Western companies. They are not bothered by privacy rules, hectored by politicians about employment practices, or a liberal press calling for the breakup of large players.

China provides not merely a rich, legitimate market for commercial applications but also the analog to our defense market in aircraft for the AI instruments of social control. It will be able to export these systems to other repressive regimes in Asia and elsewhere, further boosting the revenue base that supports its R&D.

China has a vast pool of engineering talent, much of it trained by American universities sympathetic to Beijing’s socialist/anti-democratic agenda and assisted by American multinationals with wavering allegiance to flag and country.

The U.S. and other governments have blocked some proposed Chinese acquisitions of Western technology companies. And now the Trump administration is crafting a much broader, systemic approach to these acquisitions and Beijing’s decidedly aggressive industrial policies.

But with U.S. universities hungry for full tuition-paying foreign students and technology leaders like Apple and Google increasingly co-opted, the real threat to America is a reflexive, anti-Trump response to a more rational U.S. policy and corruption within the factories of American technology.

Peter Morici is an economist and business professor at the University of Maryland, and a national columnist. © 2018, The Washington Times, LLC.

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