April 10, 2021

Technological Cold War explodes | Economy

Technological Cold War explodes | Economy

Earlier this week, the US Department of Justice filed criminal charges against technology giant Huawei for stealing trade secrets, obstruction of justice, bank fraud and for skipping US sanctions against Iran. Accusations that may lead to the extradition to the US of the vice president of Huawei, Meng Wangzhou, held in Canada since December 1.

It is the last chapter of an increasingly open confrontation between the US and China on account of technological development and that has been gaining intensity as the months go by. What began as the first steps of a trade war between the United States and China in 2018, with the imposition of tariffs on a growing number of products, has evolved to reveal the complexity of the confrontation between the two powers, where the US has put the big Chinese companies in the sector as ZTE, Tencent or Huawei, in the spotlight of their actions. The new Cold War is technological.

"The big difference is that 2019 is the year in which all that happens before the public eye"Explains Zvika Krieger, director of the center of the World Economic Forum (WEF) in San Francisco and technology expert. "Until now, only the experts of the sector or the authorities involved in these issues were aware of this technological war but now the confrontation is open," he reflects in a break between meetings and meetings at the Davos Forum. So much so that the technological war became the elephant in the room of the summit of Davos, the subject not included in the official program that everyone was talking about. "The confrontation between the US and China has emerged in 90% of the meetings that I have attended, "confessed in the Swiss station Carlos Pascual, former US ambassador and vice president of the risk consultancy IHS Markit, who warned that something has changed forever in the relationship between the two powers. "Even if the trade war is resolved throughout this month – the ultimatum expires on March 1 – and China promises to buy many more US products and open up access to its economy to foreign investment, the technological war will not disappear ", Sentenced.

Huawei, immersed in a global public relations campaign unprecedented in its more than 30 years of history, defends its independence from the authorities in Beijing. "We are a company that is 100% owned by its employees and every year we submit to an audit by the hand of KPMG," claimed its current president, Liang Hua, in an unusual meeting with the media in Davos. But it is hard to imagine that Huawei or any other Chinese company can resist the pressure of a regime like that of Beijing, especially for the sake of national security.

The emergence of Chinese technology companies in the global economy threatens the dominance that until now they hadas American companies of the sector. Huawei has already overtaken Apple as the second-largest maker of smartphones in the world, behind only Samsung. Moreover, the Palo Alto company has also had to lower its revenue forecasts for the first time since 2001, in the middle of the bursting of the technology bubble, due to the impact that the Chinese slowdown has on its sales.

Antagonistic systems

The dimensions of this confrontation go beyond the purely sectoral and enter fully into geopolitics. The Silicon Valley model, the Santa Clara Valley near San Francisco where innovation and technological development have been supported in abundant private financing able to take risks, can succumb to the Shenzen model, the Chinese city that houses some of those technological giants grown under the protection of state, the forced transfer of technology of multinationals who want to do business in the country and a large hand of cheap and formed work. They are two opposed models, one based on private initiative and the other driven by the public sector, of an authoritarian regime, it should be remembered.

To give a definitive boost to this model, in 2015 Chinese Premier Li Keqiang launched the Made in China 2025 plan to give a definitive boost to the country's industry. Three years later, President Xi Jinping reformulated the plan to turn China into a technological superpower – in the aerospace, robotics, biotechnology and computing industries – on that horizon, with an estimated budget of some 300,000 million dollars ( about 260,000 million euros). A program that, as recognized by the US Council on International Relations in a recent report, represents "an existential threat to American technological leadership." And Washington, hand in hand with its president Donald Trump, has gone on the attack. "The Americans are not going to give up the global technological supremacy without a fight and the Huawei case shows that this battle has already begun," Michael Pillsbury, director of the Hudson Institute's China Studies Center and adviser to the Administration, said in a recent interview. Trump. Pillsbury has just published a book on the subject The marathon of one hundred years. China's secret strategy to replace the US as a global superpower.

"Throughout 2018 the technological competition it became extremely political. This year, investors and markets are going to start paying the price of that change, "warned Eurasia Group risk manager Ian Bremmer in early January. For Eurasia, in fact, one of the ten main risks for this exercise is that winter in the innovation derived from the tensions between the US and China, which will force the rest of the world to take sides on one of the two sides and that they will cause a brake on investments and technological development at the global level.

A Huawei employee at the Dongguan factory (China).
A Huawei employee at the Dongguan factory (China).

This time the brake can occur in the development of 5G mobile networks, a technology that experts define as quantitatively and qualitatively different from the previous generations of mobile Internet and that "will be radically different from anything that has preceded , in terms of the innovation that will lead, "explains Paul Triolo, head of Geotechnology at Eurasia Group. If we ignore the theory that holds that each industrial revolution has been preceded and associated with the development of a specific technology that changes society radically, in the case of the fourth industrial revolution that technology is 5G. The development of cars without the need for a driver or smart cities, for example, requires a huge amount of data, with almost immediate availability, that only 5G networks can make possible. "The implementation of 5G is the key to the development of the digital economy, the Internet of things and will determine the evolution of the industry. It's a technology in a generation, "says Zvika Krieger.

That is where we must frame the campaign launched last year by the US authorities to persuade its international partners to ban Huawei from the development of 5G networks. Members of the Five Eyes Alliance [Five Eyes], an intelligence agreement signed by the United States, Canada, the United Kingdom, Australia and New Zealand, have committed to veto in their countries the Chinese technological giant, leader in the development of components to implement these networks, as a threat to their national security . To that veto they evaluate adding Germany, France and Norway for fear that China can carry out espionage operations through the teams of Huawei. The British Vodafone has announced that it would postpone the installation of new Huawei basic network equipment in all its European operations, with great impact in Eastern countries. Previously, British Telecom had declared that it would eliminate in two years all the equipment of the Chinese company used in the basic network of the mobile operator. The German operator Deutsche Telekom has warned, however, that these decisions may cause a delay in the development of 5G in Europe, scheduled for 2020, of at least two years.

"As the trade and technology confrontation between the US and China has been escalating over the past year, driven by the economic and national security fears of the United States and the ambitious goals of China's industrial, technological and economic development, each The decision associated with the development of 5G networks has become politicized, "explains Paul Triolo, in his latest report La geopolítica del 5G.

In these circumstances, more and more voices in the sector have an impact on the need to address this issue from a multilateral and supranational point of view. At the same Forum in Davos, Chancellor Angela Merkel defended the need to create a multilateral organization, a kind of technological NATO that addresses both cybersecurity issues, such as data processing, the ethics of Artificial Intelligence or biogenetics. "There is no type of international architecture in this area and I can not imagine that each country will go there on its own," said the foreign minister. "We have been [Europa] lag behind in the development of technological platforms, but the European Union has laid the foundations to regulate the treatment of data and that should be the European standard to advance in digitalisation, "he assured before a packed plenary session of the center. Congresses

Merkel was referring to the implementation of the General Data Protection Regulation (GDPR), which came into force at the end of 2018. A decision aimed at to protect the processing of data of consumers that was initially rejected by the technological giants but now see as a lifeline to recover consumer confidence. "Personally, I think it's a fantastic start to start treating privacy as a human right. I hope that in the United States we will do something similar and that the world will advance towards common standards in this area, "confessed the first Microsoft executive, Satya Nadella, in one of the debates held in the Swiss city. California has launched its own GDPR but there is no initiative at the state level in the United States to guarantee the privacy of users and more and more voices admit that self-regulation does not fit in this area.

"The market does not discriminate on the correct or erroneous use of technologies. For example, the use of facial recognition by the New Delhi Police has identified almost 3,000 missing children in just four days. In other cases, the use of facial recognition can be used to invade privacy and with political bias, "Nadella admitted. "We support any type of regulation that helps the market does not become a race to the bottom," he said.

For Krieger, there are issues that must be addressed without delay: "There is no transparency in how data is collected, nor in how they are used by companies. You can not monitor their subsequent use or you can withdraw money. " Two years after setting up the WEF center in San Francisco, for this technology expert, who was the first representative of the Department of State in Silicon Valley, companies are now the most urgent in establishing clear rules for its operation, online with Merkel's claim.

Added concern

Although the chancellor had in mind the need to protect the privacy of users and respond to the increasingly common and devastating computer attacks when appealing in Davos to the creation of a NATO cybersecurity, companies have another concern. The creation of some kind of global architecture that meets the challenges of the new technological reality can be decisive in avoiding what experts call the balkanization of the Internet, the fear of a fragmentation of the network that makes some systems incompatible with others. And the risk grows in the current scenario where the confrontation between the US and China converge and the development of a disruptive and revolutionary technology such as 5G.

"A divided 5G ecosystem will increase the risk that global technology will be divided into two separate spheres of influence, divided politically and with no possibility of operating among them. One, driven by the United States and developed technologically in Silicon Valley, and another, led by China and supported by its efficient network of digital platforms, "says Eurasia's report on the geopolitics of 5G.

A concern of the first magnitude for the sector and that Zvika Krieger ratifies. "The most worrying thing is that the interoperability of the Network is maintained and there the public sector, governments, must take responsibility and leadership." In his opinion, China is the first interested in protecting Internet interoperability and has shown its willingness to cooperate in this field.

But not at any price. In the same scenario in which Merkel had appealed to international cooperation, Chinese Vice President Wang Quishan defended the Chinese model of technological development shortly afterwards. "It is essential to respect national sovereignty and avoid technological hegemony, interfering in domestic issues of other countries and carrying out technological activities that undermine the national security of other countries," he told the audience. "We have to respect the independent choices about the technological management model and the public policies that each country makes and the right to participate in the global governance system as equals." The technological Cold War is still standing.


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