Techno-nationalism vs. the Fourth Industrial Revolution

The next major technology leap is being challenged by a resurgent nationalism. The US, China and eu must work together to find common rules and standards.

Technology is on the cusp of the next major revolution. This will involve a convergence of artificial intelligence, Big Data, the Internet of Things, advanced robotics, nanotechnology, 5G and other cutting-edge innovations that promise to radically transform the very way we live. But at the same time, a seeming relic of the past, nationalism, is vigorously reasserting itself. Indeed, the world appears to be sliding from globalism into techno-nationalism. The US, China and the EU must work together to find common rules and standards for this Brave New World in order to reap the benefits and avoid conflict, writes Robert A. Manning.

what IS The IMPACT of techno-nationalism on global innovation? does it advance, protect or impede it? over the coming two decades, the answers may determine the economic success, competitiveness and geostrategic position not only of Asian nations but much of the world.

we are at a historical inflection point. The international rules-based economic order is under great strain and facing an uncertain future while populist nationalism is on the rise. At the same time, the world is on the threshold of an unprecedented, disruptive technological transformation. dubbed the Fourth Industrial revolution, the convergence and synergy of artificial intelligence and Big data, robotics, biotech, 3d printing, advanced manufacturing, new materials, the Internet of Things, nano-engineering and nano-manufacturing all merge the digital with the physical economy. This second era of the digital revolution will be substantially more transformational than the rise of the Internet and app economy that started in the 1990s. It will transform business models, transportation, healthcare, finance, manufacturing, agriculture, warfare and the very nature of work itself.

In the coming decades, these technologies will drive economic growth, accelerating in the 2020s as they are deployed. For example, using AI, powered by superfast 5G networks — which are 10 to 100 times faster than the current 4G — the Internet of Things (IOT) will monitor “precise agriculture” on farms, performance in factories and smart cities. The increased productivity of Itconnected sensors will warn of factory equipment needing maintenance; monitor energy use in

buildings; give farmers real-time information on soil conditions; maintain and operate driverless vehicles; optimize energy-grid performance; and remotely monitor and diagnose our health. This technology may engineer the demise of malariacarrying mosquitos, and perhaps, with well-regulated gene-editing, erase hereditary rare diseases.1 In the national-security realm, these technologies portend radical changes from logistics and inventory management to surveillance and reconnaissance, with air and undersea drones of all sizes having autonomous capabilities.

the logic of techno-nationalism

If history is any guide, the deployment of the coming torrent of new technologies will not be linear. while the next wave is expected in the 2020-2025 timeframe, it will likely come in bursts, with the commercialization of these dizzying technologies not evenly distributed but geographically clustered.

The hierarchy of nations in the 21st century will be largely measured by their respective capacity to innovate and/or to adapt and absorb emerging technologies — see the panel story on the next page. The degree of success will be the key indicator of their economic growth prospects, their relative weight in the global economic system and geopolitical clout. China and the US loom at the top, with nations like Germany, Japan and South Korea in the first tier. Because the burgeoning knowledge economy is fundamentally about data, not geography, size is not a decisive factor. Thus, small states such as Singapore, Sweden and Israel are leading global innovators.

Against this backdrop, what is the impact of techno-nationalism? Governments, of course, have very important roles to play, from funding basic r&d to pursuing education policies that facilitate a science, technology, engineering and mathematics (STEM) workforce to creating a nurturing regulatory environment. They must also forge conducive trade and financial policies and incentivize innovation. It should be recalled that it was the creation of the Internet — itself a result of the US department of defense’s legendary research arm, DARPA — that spurred globalization, the free flow of ideas, commerce and communication. DARPA funding for r&d on semiconductors sparked the emergence of PCS and Silicon Valley in the 1970s. This catalyzed interchange among scientists, researchers and technologists around the globe instantaneously, facilitating the rapid exchange of ideas and underpinning private sector innovation.

Yet it seems many have forgotten why it is called the world wide web. There is a clear global trend toward techno-nationalism (as opposed to techno-globalism), a set of industrial policies aimed at self-sufficiency, cultivating “national champions” in tech sectors while curbing foreign competition just as a new era of advanced technology is unfolding. Beijing’s Made in China 2025 policy is a classic example, as are its foreign direct investment (FDI) policies that use coercion to force technology transfer as part of the terms of investment. Additional informal mercantilist tactics include using administrative and regulatory measures to disadvantage foreign competitors in China and other countries.

Under donald Trump, the US has become more defensive, nationalist and less open. Some of these tendencies preceded Trump. The stunning, unexpected pace of China’s growth, from an economy of US$1.2 trillion in 2000 to one of US$11.2 trillion by 2016, disrupted the global economic system.2 This was a major factor in the hollowing out of employment in the US manufacturing base, and it flattened the growth of the US middle class as the Chinese middle class grew. That, in turn, has led to growing sentiment against globalization in the US and elsewhere, largely blamed on

trade. Trump skillfully tapped into that anger and frustration in the 2016 US presidential election campaign with his “America First” slogan.

Seeking to correct that economic imbalance has been a hallmark of Trump’s trade and investment policies. But trade policy under Trump is best understood as a device seeking to force relocation of manufacturing to the US in a mistaken hope that it will create new jobs in an era of robots and automation.3 That is a key reason why Trump calls himself “Tariff Man.” his rejection of the Trans-pacific Partnership trade accord during his first week in office, his demands to renegotiate the North American Free Trade Agreement (NAFTA), the South Korea-us Free Trade Agreement (KORUS) and the full-scale assault on what are widely viewed as China’s unfair trade and investment practices, all reflect this view. As a result, the Section 232 “national security” provision in US trade law has been misused to impose sanctions on US allies as well as China. By what logic is steel and aluminum from two close US allies, Canada and Japan (and perhaps next, autos from the eu and Japan), a threat to US national security? Similarly, growing skepticism about Chinese big tech companies such as Alibaba, Baidu, and Tencent acquiring tech startups in the US has led to new laws tightening scrutiny and screening of prospective FDI in sensitive sectors. 4

well, as white house trade advisor Peter Navarro explains, it is about the US “manufacturing and defense industrial base,” because, as the US National Security Strategy says, a “vibrant domestic manufacturing sector and a robust and resilient defense industrial base are national strategic priorities.” Navarro explains: “To be strong and secure 5 our nation must be able to rely on US companies to manufacture products needed for our national defense. [Trump] understands that we must never become dependent on foreign nations to design, produce and maintain the aircraft, ground combat vehicles, ships, munitions, components of our nuclear arsenal and space capabilities that are critically important to our nation’s defense.” 6

This reflects a hobbesian view of the world, a struggle of all against all. As two top white house officials put it in an op-ed piece, “The world is not a ‘global community’ but an arena where nations, non-governmental actors and businesses engage and compete for advantage.” 7

It is sensible, if not imperative, for a great power to want a strong defense industrial base. China is no different. But in a world of global supply chains, with hundreds of patents and licenses held by global firms for autos, airplanes and electronics there are limits to self-sufficiency. where do you draw the line? Complete autarchy? This is where Trump’s dismissive disregard for allies is deeply flawed. Nations do pursue self-interest. But those interests, if not values, can and do overlap, creating a basis for collaboration on shared goals, from open trade and investment to global peacekeeping. A robust, unrivaled, global network of alliances and partners has been one of the secrets of US success in building and sustaining a rules-based order and for its pre-eminence. relying on Japan or Germany for components or computerized machine tools, or Canada for steel and aluminum, is hardly a threat to US national security. And of course, this logic of self-reliance is mirrored — albeit taken to further extremes — by China’s mercantilist industrial policies. The risk of this mindset is a fragmentation, if not an unraveling, of the rules-based trade and investment regimes that have been the foundation of global growth and prosperity for the past 70 years.

what will the rules of the road be?

we are at a pivotal moment not only for sustaining the world economic order, but for updating it, because there is a large deficit of rules/norms/ standards for the suite of emerging technologies