TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIA - BRENDAN THOMAS-NOONE | JUNE 2020 - AWS
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TECH WARS:
US-CHINA TECHNOLOGY
COMPETITION AND WHAT IT
MEANS FOR AUSTRALIA
BRENDAN THOMAS-NOONE | JUNE 2020
The United States Studies Centre at the University of Sydney is a university-based research centre, dedicated to the rigorous analysis of American foreign policy, economics, politics and culture. The Centre is a national resource, that builds Australia’s awareness of the dynamics shaping America — and critically — their implications for Australia. The Foreign Policy and Defence Program is committed to providing policy-oriented research and analysis on American strategic policy and the United States-Australia alliance, with a focus on developments in the Indo-Pacific. Drawing on the expertise and networks of its researchers, the Program delivers insights and recommendations to a range of stakeholders through policy reports, dialogues, simulations, and outreach. It aims to deepen Australians’ understanding of American policy, analyse the alliance in an evolving strategic order, and shape Australian, allied, and partner responses to shared regional challenges. The Foreign Policy and Defence Program receives funding from the following partners: UNITED STATES STUDIES CENTRE Institute Building (H03), City Rd The University of Sydney NSW 2006 Australia +61 2 9351 7249 us-studies@sydney.edu.au USSC.EDU.AU Research conclusions are derived independently and authors represent their own view, not those of the United States Studies Centre. Reports published by the United States Studies Centre are anonymously peer-reviewed by both internal and external experts.
TABLE OF CONTENTS Executive summary 02 Introduction 03 The transformation of US-China relations 06 Continuous competition in innovation: The US policy response 07 Australia and the evolving US-China struggle for technological advantage 16 Endnotes 21 About the author 27 This report may be cited as: Brendan Thomas-Noone, “Tech wars: US-China technology competition and what it means for Australia,” United States Studies Centre at the University of Sydney, June 2020. Cover photo: A “Mistral” supercomputer (Getty)
EXECUTIVE SUMMARY
Technology is now the defining element of the Trump administration’s self-professed “strategic
competition” with China:
› Washington is highly attuned to the long-term consequences and links between scientific
progress, technological adaptation and national power in burgeoning US-China competition.
› Policymakers are attempting to balance efforts to maintain the open and
global foundations of US and allied research and development systems,
while deterring those that abuse its accessible and integrated nature.
› While President Donald Trump has been highly inconsistent on technological issues,
Congress and the executive branch have slowly moved forward in executing the 2017 National
Security Strategy and protecting what it termed the US National Security Innovation Base.
Congress and the Trump administration have embarked on a ponderous — and at times heavy-
handed — effort to protect America’s technological advantage across multiple domains and
through actions by several branches of government:
› Congress has expanded the powers of the Committee of Foreign Investment
to review non-controlling investments in technology companies.
› New export controls are being rolled out which feature vastly more expansive definitions of
“foundational” and “emerging” technologies, broadening their scope and potential reach.
› The Department of Justice has launched a major criminal justice campaign
labelled the “China Initiative”, with the goal of prosecuting technology
theft and enforcing existing regulations in every US state.
› Draft bills indicate the likely expansion of Congressional reform to halting the flow of
US government funds flowing to overseas partners also involved in joint high-tech
research and development (R&D) with China, affecting third parties like Australia.
Australia will be significantly affected by Washington’s unravelling of the US-China technological
relationship, owing to its deep enmeshment with America’s scientific infrastructure. To navigate
these changes in the national interest, Canberra must consider the following:
› Australia will face growing pressure to limit its science and technology
interaction with China in critical dual-use fields in order to maintain technological
collaboration with the United States in some emerging technologies, and
may even be required to adopt restrictive export control policies.
› Australian research by universities, defence industry, business and government agencies
will be seriously impacted by the United States’ expanded export control reform.
Canberra should continue to lobby US policymakers on solutions, such as providing
exemptions under the National Technology and Industrial Base framework.
› As the global technological ecosystem becomes more nationalised, securitised and difficult
to navigate for industry and governments alike, Australia should implement a national
research and development strategy that builds its own technological ‘counterweight.’
UNITED STATES STUDIES CENTRE
2 TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIA
INTRODUCTION
Technology is the defining element of the United providing oversight of foreign direct investment
States’ growing strategic competition with China in critical industries. Immigration controls have
which Donald Trump first announced in 2017. The made it more difficult for foreign students study-
slow disentangling of technological integration ing STEM subjects.4 Finally, a concerted criminal
between the United States and China that this justice campaign has begun to better enforce
competition entails will have significant conse- laws governing the disclosure of foreign ties in the
quences for allies like Australia, who are closely science and technology industry. These elements
coupled with the United States’ scientific and make up the initial stages of what Federal Bureau
technological infrastructure. While many have of Investigation (FBI) Director Christopher Wray
focused on the manufacturing and supply chain has labelled a “whole-of-society response” to
aspects of this competition, the US Government protect the United States’ economic competi-
has also set about expanding its definition of what
tiveness and technological edge.5
constitutes the industries, individuals and knowl-
edge of its national security innovation base. This While the eventual extent of these policies is not
enlarged understanding, and the beginnings of a yet known, it is clear the way Australia’s science
whole-of-government approach through various and technology ecosystem currently operates
reforms and initiatives, will transform the terms will be increasingly under strain in a “world of
of globalisation, international supply chains and technologically driven compe-
even the US-Australia alliance.1 The likely result tition.”6 America’s policies are
will be a further step in the transformation of the
THE WAY AUSTRALIA’S
aimed at its strategic rival. But SCIENCE AND
alliance from a purely geopolitical arrangement they will nonetheless have TECHNOLOGY
to a geoeconomic one as well.2 long-term global implications ECOSYSTEM CURRENTLY
for close allies like Australia. OPERATES WILL BE
Washington and, to a lesser extent, Canberra INCREASINGLY UNDER
are attempting to tackle the same problem: Allies will face growing pres-
STRAIN IN A “WORLD
how to maintain the open and global founda- sure to limit their science and OF TECHNOLOGICALLY
tions of the research and development and technological interaction with DRIVEN COMPETITION.”
innovation systems that have ensured techno- China in critical dual-use fields
logical competitiveness in the past, while at the and may be required to adopt restrictive export
same time deterring Chinese efforts that seek to control policies in order to continue technologi-
abuse their accessible and integrated nature. The cal collaboration with the United States in some
United States has responded to this problem by emerging technologies. Australians on the fore-
gradually implementing an updated regulatory front of strategic technology include compa-
framework for its technological industrial base. nies, universities, scientists and entrepreneurs.
Washington now considers actors like universi- In interacting with the United States they will be
ties, academics and technology entrepreneurs confronted with new rules, regulations and barri-
who contribute to the development of science ers erected around funding sources, international
and technology essential to its national security. collaborations and further legal oversight. While
New rules, regulations and policies have been competition-driven challenges to supply chains,
crafted to guard against intellectual property (IP) intellectual property protection, foreign invest-
theft and the exportation of critical technologies. ment and export controls will be spread widely in
Some Chinese critical technology companies, the US economy; the impact will be more acute
like Huawei, have been specifically targeted by
for countries that are relative “takers” of technol-
being placed on restrictive oversight lists.3 New
ogy, such as Australia.
powers have been given to bodies charged with
UNITED STATES STUDIES CENTRE
TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIA
3
Australian universities are on the frontline of The Australian Government will need to incor-
this shift. As the producer, partner and location porate the acceleration of these trends into its
of much of Australia’s scientific, technological assessments and planning, consider the conse-
and commercial intellectual property, research quences for Australia’s technology base and what
universities are the most exposed to systemic avenues it can pursue to ameliorate them. The
changes in the US-China economic and tech- government should continue to work on current
nological relationship. This is due to both the frameworks that allow for exemptions for close
nature of the security and economic relationship technological partners like Australia, such as the
between Washington and Canberra as well as National Technology and Industrial Base (NTIB).
Australia’s reliance on international students and Finally, Australia’s current approach to funding
global research collaborations to cross-subsidise R&D will no longer be sufficient in a technolog-
domestic R&D activity, a weakness which the fall- ical world that is more nationalised, securitised
out of COVID-19 has exposed.7 The longer-term and competitive. Canberra must work to build its
impact for Australia’s greater technology base own technological ‘counterweight’ as a bulwark
will be new American rules redefining US export against global fragmentation allowing it to engage
controls around technological “end use” from the with strategic competition on its own terms.
ones currently based on specification.8
US President Donald Trump speaks on his national security strategy in Washington, DC, December 2017 (Getty)
UNITED STATES STUDIES CENTRE
4 TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIAQUICK REFERENCE GUIDE
NATIONAL SECURITY INNOVATION BASE (NSIB)
Agency: The White House
Defined in the 2017 National Security Strategy, the NSIB expands the understanding of
the US defence industrial base from large defence companies to include a wider network
of stakeholders, including academia, National Laboratories, and the private sector.
COMMITTEE ON FOREIGN INVESTMENT IN THE UNITED STATES (CFIUS)
Agency: US Department of the Treasury
CFIUS is an interagency committee that reviews select foreign investment transactions
in the United States.
FOREIGN INVESTMENT RISK REVIEW MODERNIZATION ACT (FIRRMA)
Agency: US Congress
FIRRMA expanded CFIUS’s powers to review non-controlling foreign investments in
technologies, companies and real estate that may have national security implications.
EXPORT CONTROL REFORM ACT (ECRA)
Agency: US Congress
Passed as part of the 2019 National Defense Authorization Act, the ECRA expanded US
export controls to cover “foundational” and “emerging technologies.”
THE CHINA INITIATIVE
Agency: US Department of Justice
The China Initiative is the name for a Department of Justice program focused on
increasing investigations and prosecutions of intellectual property theft and espionage.
IMMIGRATION MEASURES
Agencies: US Immigration and Citizenship Service (USICS)
US Department of State
USICS has introduced harsher consequences for foreign students overstaying their visas.
Greater discretionary power has been granted to adjudicators processing foreign student
visas, allowing them to deny applications or petitions without first notifying the applicant
if necessary evidence is missing.
The State Department has begun actively restricting the visa applications of Chinese
graduate students studying “aviation, robotics and advanced manufacturing” in the United
States.
UNITED STATES STUDIES CENTRE
TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIA
5THE TRANSFORMATION OF US-CHINA RELATIONS
The change in the United States’ China policy Chinese Communist Party, the militarisation of
under President Trump has deep roots. As the South China Sea and the internment of the
suggested in the administration’s 2017 National ethnic Uyghur minority in Xinjiang — has resulted
Security Strategy (NSS), there is a broad — and in a broad bipartisan shift on China within the
largely bipartisan — perception that China’s United States.13 Human rights, trade imbalances
growing economic, military and technological and China’s growing military power have united
power has to a degree been built on years of a diverse array of interests in the United States,
intellectual property theft through cyber oper- including in Congress and the private sector,
ations, exploitation of open scientific and tech- which has supported the administration’s shift to
nological collaboration with the West, and unfair “great power competition” as laid out in the NSS
trading practices with the United States and its and the 2018 National Defense Strategy (NDS).14
allies.9 Numerous cyber operations targeting
At their heart is the growing recognition within
US companies, universi-
Washington of the long-term consequences and
THE 2017 NATIONAL ties and government agen-
links between scientific progress, technological
SECURITY STRATEGY, cies, attributed to Chinese
AND SPEECHES adaptation and national power in its competi-
national security agencies
AND COMMENTS tion with Beijing.15 In other words, both Republi-
and state-sponsored actors
CONSISTENTLY MADE BY have been well documented,
cans and Democrats increasingly place technol-
SENIOR ADMINISTRATION ogy and its potential application at the centre of
with the 2014 indictment of
FIGURES SINCE, FRAME US-China competition.16 For instance, the Trump
THE SOURCE OF five Chinese military officers
Administration 2017 NSS, and speeches and
NATIONAL POWER AND for cyber espionage. This
ECONOMIC PROSPERITY comments consistently made by senior adminis-
was the first time criminal
AS BASED UPON tration figures since, frame the source of national
charges were filed against
MAINTAINING AMERICA’S known state actors and is a
power and economic prosperity as based upon
TECHNOLOGICAL maintaining America’s technological superiority.17
notable example.10 An agree-
SUPERIORITY. While the strategies state the need for further
ment between President Xi
investment in R&D in emerging technologies as
Jinping to President Barack
a main element of this competition, no major
Obama to halt economic cyber espionage in
government initiatives have materialised since
2015 lasted only a short time, with cyber-attacks
the previous administration’s 2014 Third Offset
attributed to actors based in China growing in
Strategy, which sought to leverage Department
2016 (Australia forged a similar agreement with
of Defense (DoD) investments to offset the dete-
China in 2017).11 Further, in contrast to Austral-
riorating US military position in the Indo-Pa-
ia’s sparse history of prosecutions for IP theft
cific.18 Bipartisan draft legislation, The Endless
and defence export control infringements, the
Frontiers Act, has been introduced which could
US Justice Department has documented a long
invest up to $100 billion in the National Science
history of economic espionage and targeted
Foundation to “maintain US global leadership
attempts to skirt defence export controls by indi-
in innovation.”19 But until then, a more ponder-
viduals and companies linked to the People’s
ous and at times heavy-handed effort advanced
Liberation Army (PLA) and the Chinese govern-
by Congress and the Trump Administration has
ment and has brought multiple cases to court.12
advanced across multiple departments and
This history — along with targeted high-tech domains aimed at protecting the United States’
industrial policies such as ‘Made in China technological advantage.
2025’, the growing authoritarian nature of the
UNITED STATES STUDIES CENTRE
6 TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIACONTINUOUS COMPETITION IN INNOVATION:
THE US POLICY RESPONSE
Since 2017, Congress and the Trump Administra- connected and financed universities, colleges
tion have proceeded with a number of reforms and start-ups the NSS argues that protecting
first hinted at in the NSS, including expanding the the NSIB will need to be both international and
idea of what needs to be fostered and protected domestic.21 This, in part, laid the foundation
concerning innovation networks and technology, for the US Government’s expansion of export
foreign investment review, export controls and controls to entire fields of technology, Committee
immigration. This collection of policy changes on Foreign Investment reform, renewed investi-
and enforcement represents a halting, but gation and prosecution of IP theft and disclosure
increasingly wholesale, effort to shield the United laws, as well as coordination with allies.
States’ technology base from IP theft, industrial
Committee on Foreign Investment in the
intelligence collection and other threats:
United States (CFIUS) reform: The first major
National Security Innovation Base: As defined reform the NSS proposed to protect the NSIB
by the NSS, the National Security Innovation Base was CFIUS reform. The equivalent to Austral-
(NSIB) comprises all the inputs and actors critical ia’s Foreign Investment Review Board (FIRB),
to maintaining the United States’ technological CFIUS is an interagency committee that reviews
qualitative edge and global competitiveness. This select foreign investment transactions in the
definition laid the framework for the more all-en- United States. In early 2018, Congress passed
compassing approach the Trump Administra- the Foreign Investment Risk Review Modern-
tion has pursued in protecting the United States’ ization Act (FIRRMA), expanding the powers
technological edge. Notably, the NSIB expanded of the Committee and the President to review
the understanding of the US defence industrial non-controlling foreign investments in tech-
base from large defence companies and more nologies, companies and real estate that may
traditional industrial inputs to the “network of have national security implications. Principally,
knowledge, capabilities, and people — including CFIUS’s expanded jurisdiction and review powers
academia, National Laboratories, and the private focus on the technology sector, with filings now
sector — that turns ideas into innovations, trans- required from foreign investors in “critical tech-
forms discoveries into successful commercial nologies, critical infrastructure” and businesses
products and companies, and protects and that may have access to “sensitive personal
enhances the American way of life.”20 The NSIB data.”22 While investors from Australia, Canada
effectively redefined universities — including and the United Kingdom are exempt from filing
those that may be conducting basic research — with CFIUS in non-controlling transactions, they
small start-ups and the individuals which make are still required if investing for a controlling stake
up those organisations as part of the national in sensitive companies or real estate.
security enterprise.
Transactions will only be subject to CFIUS review
The NSS argues that maintaining a technological if they meet the definition of a “covered invest-
lead — critical to both US national security and ment.” To meet this requirement, the transaction
economic advantage — requires a whole-of-gov- must afford a foreign person:
ernment effort which is beyond the scope of
› access to non-public technical information;
any “individual company, industry, university or
government agency.” Recognising many tech- › membership or observer rights on, or
nologies which are beginning to form the basis the right to nominate an individual to
of next-generation military systems and capabil- a position on the board of directors
ities increasingly originate in inherently globally or equivalent governing body; or
UNITED STATES STUDIES CENTRE
TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIA
7› any involvement, other than through the purchase of hotel management software
voting of shares, in substantive company StayNTouch after the group was
decision making regarding sensitive acquired by China-based Beijing Shiji Information
personal data of US citizens, critical Technology Co. in 2018.25 In other cases, CFIUS
technologies, or critical infrastructure.23 has approved certain deals only after national
Sensitive personal data has a broad scope, security issues were resolved. Officials report-
encompassing such things as health-related edly recommended the Trump Administration
data and financial data, and a business qualifies block German company Infineon Technologies
for CFIUS review if it relates to US Government AG’s proposed acquisition of Cypress Semicon-
personnel or maintains data on more than one ductor Corp. due to the companies large amount
million individuals.24 The new FIRRMA rules also of revenue from Chinese sources.26 However,
require mandatory CFIUS filings for transactions the decision was approved by CFIUS after the
in which a foreign government would acquire German chipmaker entered a national security
a “substantial interest” — or a voting interest of agreement with the US government.27 The case
25 per cent or more — in a relevant business. is an example of both the expanding range of
FIRRMA also expanded CFIUS control over real factors CFIUS is considering when reviewing
estate transactions when the property is located foreign investment, as well as the pressure it can
within or in close proximity to military installa- bring to bear on companies seeking transac-
tions or other government property related to tions in the United States. In addition, a number
national security. of Chinese companies have withdrawn or sold
their investments in the United States following
As of April 2019, the Trump Administration has CFIUS recommendations, even before an official
blocked three deals as a result of CFIUS recom- decision is announced from the Trump Admin-
mendations. The administration reversed istration.28
IBM Q System One quantum computer (Getty)
UNITED STATES STUDIES CENTRE
8 TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIAThe expansion of US export controls: The The second category of foundational technolo-
second set of major policy reforms since the gies — potentially a broad list as it is understood
NSS has been the passage of the Export Control as “existing technology already integrated into
Reform Act (ECRA) of 2018.29 This set of policy commercial products’” — is still being formulated
changes to US Government export controls will but could include basic research and impact filing
likely have the biggest direct impact on Australia. for patents and transferring technology between
Passed as part of the 2019 National Defense universities and industry.33 For instance, founda-
Authorization Act, the ECRA modified the existing tional technology could range from semiconduc-
US Export Administration Regulations to cover tors that form some of the basic components of
“foundational” and “emerging technologies” as electronic circuits to the tech behind CRISPR,
part of US export controls. These changes are a novel and powerful tool that can be used to
significant in that they largely reframe and expand edit genomes. Reports indicate that ongoing
US export controls from managing specific prod- debates within the Commerce Department
ucts to entire technological fields, an idea first revolve around whether to define technologies
flagged in an influential 2018 Defense Innovation by their specifications, as most export controls
Unit report.30 These specially designated techno- are currently structured, or their applications, a
logical dual-use fields include robotics, 3D print- much broader understanding and classification.34
ing, quantum computing, advanced materials,
While the Bureau of Industry and Security within
surveillance technologies, synthetic biology and
the US Commerce Department is still working on
machine learning among others.31
what exactly will be included in these new cate-
While the US Commerce Department is still gories, the export controls will be extraterritorial
formulating most of the rules laying out how in the same way as existing US export controls
these new controls will work in practice, it could operate. This means technologies in these cate-
mean that research and collaboration with, and gories are subject to US law, whether it is used
within, any US-based organisation in many of by a US-based company or by “any company
these emerging dual-use fields may now fall anywhere that is re-exporting American goods
under US export controls. The level of control or technology; incorporating technology previ-
and regulation on specific technological fields ously exported from the United States; and by
may vary and can range from applying for a persons subject to the jurisdiction of the United
license for any instance of export or retransfer States.”35 As an example, geospatial imagery soft-
of controlled knowledge to requiring a complete ware, one of the first technologies to be classified
separation of workforces if persons are from under the new rules, now requires companies
an “embargoed” country, which includes China. who wish to export it to apply for a license with
In effect, the way many defence companies the Commerce Department.36
have structured themselves and operated for
Reportedly, the Bureau of Industry and Security
decades — under the auspices of strict and vari-
is still undertaking consultations with industry
ous export control regulations — could potentially
and is likely to release rules on other technol-
be extended to other areas of the economy. In
ogies in the coming months. In the meantime,
anticipation of the roll-out of the new regula-
the bureau is moving ahead in other areas. In
tions, some US-based technology companies
April 2020, the bureau amended existing export
have begun to draw up plans that would separate
control regulations, removing exemptions that
their workforces based on nationality.32
UNITED STATES STUDIES CENTRE
TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIA
9existed around some dual-use technologies like and espionage under what it terms the ‘China
semiconductor equipment but also expanded Initiative,’ originally announced by then-Attor-
the list of actors that would require licenses to ney General Jeff Sessions in 2018. Since the
export to, such as civilian companies that can announcement of the Made in China 2025 indus-
be linked to supporting military applications, trial policy, Attorney General William Barr noted
in China, Russia and Venezuela.37 Critically, the department has brought trade-secret theft
the changes also require US companies to “file cases “in eight of the 10 technologies that China
declarations for all exports to China, Russia is aspiring to dominate.”39 As of February 2020,
and Venezuela regardless of value,” giving the the FBI has “about a thousand” ongoing investi-
administration substantial data into what exactly gations into the attempted theft of United States
is being exported to strategic competitors.38 The intellectual property and technology; so far it
rules state supporting the objectives of the NSS has also made 19 arrests. DoJ officials expect
as the reason for their rollout. that number to increase over the course of the
financial year.40 Compared to the 15 individuals
The Department of Justice’s China Initia-
arrested for intellectual property-related cases
tive: Over the past three years the Department
over the previous six years, the rise in prosecu-
of Justice (DoJ) has stepped-up investigations
tions reflects a concerted and focused criminal
and prosecutions of intellectual property theft
justice response to the rising threat of intellectual
A TIMELINE OF THE US DEPARTMENT OF JUSTICE’S CHINA INITIATIVE
April 2019 — May 202041
23 APRIL 2019, NEW YORK 11 JULY 2019, ILLINOIS 21 AUGUST 2019, KANSAS
Economic espionage Theft of trade secrets Wire fraud; program fraud
Former engineer charged with Chicago software engineer at Kansas University associate
stealing General Electric trade a locomotive manufacturer professor indicted for lying about
secrets relating to its turbine charged with allegedly stealing his employment for China’s Fuzhou
technology with intention of proprietary information University while receiving research
passing information to China. and taking it to China. funding from the US government.
9 MAY 2019, INDIANA 23 JULY 2019, NEW JERSEY
Conspiracy to commit fraud; conspiracy Violating the International Emergency Economic
to commit wire fraud; intentional Powers Act (IEEPA); conspiracy to violate IEEPA
damage to a protected computer and defraud the United States; conspiracy to launder
monetary instruments; among other indictments
Chinese national allegedly part of
hacking group that targeted large Chinese company charged for obscuring illicit financial
businesses in the United States. dealings on behalf of sanctioned North Korean entities.
UNITED STATES STUDIES CENTRE
10 TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIAproperty theft presented by China.42 The goal, as projects, is an example of the department’s
stated by DoJ officials in early 2020, is to have more aggressive stance on academic disclo-
each of the country’s 94 US federal district attor- sure. Another recent fraud case in West Virginia
neys to bring cases as part of the overarching involves a professor claiming time off to care
initiative.43 for a newborn, when in fact he used the time to
take part in China’s Thousand Talents program.45
New investigations seek to more strongly enforce
The department has also brought cases against
existing regulations and target actors not previ-
Chinese-born faculty members at the Univer-
ously of interest to the Department of Justice,
sity of Kansas, University of Texas MD Anderson
particularly in the higher education sector. For
Cancer Center, and Emory University, in each
instance, existing policies requiring research-
case for failing to disclose foreign ties.46 Cases
ers to declare all potential conflicts of interest
involving universities, national laboratories and
or foreign government affiliations are being
even hospitals, reflects the department’s focus
more stringently enforced.44 The recent high
on prosecuting IP theft in every sector of the
profile arrest of the head of Harvard’s Depart-
NSIB.47
ment of Chemistry, Charles Lieber, for failing to
disclose his links to Chinese research institutions The Pentagon and the defence industrial base:
while also working on US government-funded The 2020 National Defense Authorization Act
16 SEPTEMBER 2019, OHIO 30 SEPTEMBER 2019, CALIFORNIA 1 NOVEMBER 2019, FLORIDA
Theft of trade secrets Acting as an illegal agent Conspiring to violate
of a foreign government firearms law
Ohio researchers
allegedly stole exosome- US citizen allegedly shared Four individuals charged
related trade secrets classified information with on a conspiracy to smuggle
while establishing a Chinese officials via dead military-style inflatable
business in China. drops in the United States. boats to the PRC.
16 SEPTEMBER 2019, NEW YORK 14 NOVEMBER 2019, CALIFORNIA
Conspiracy to commit visa fraud Conspiracy to violate the FCPA internal
controls provisions; perjury; destruction
Individual allegedly sought to
of records in federal investigations
illegally obtain US research
visas for PRC government Two Chinese citizens allegedly offered bribes to
employees seeking to recruit Chinese government officials to promote and
US experts to China. expand their company’s business in China.
UNITED STATES STUDIES CENTRE
TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIA
11(NDAA) includes provisions designed to protect base and manufacturing in the United States, the
national security academic researchers from Department of Defense began to make strategic
foreign interference, including measures aimed investments in critical national security compo-
at streamlining gathering information on individ- nents.50 For instance, in recent years the Defense
uals involved in defence research and develop- Microelectronics Activity has awarded contracts
ment activities.48 The FY2020 NDAA introduces to semiconductor manufacturers IBM Global
a new interagency group tasked with identifying Business Services and SkyWater Technology in
potential cyberattack threats and vulnerabilities an attempt to make up for production shortages
in relation to research. The group will also offer in certain commercially unviable chips.51 Through
policy guidance and recommendations on how March 2019, seven Presidential Shortfall Deter-
best to secure research information from attacks, minations were issued, identifying production
and how United States science and technology shortfalls in lithium sea-water batteries, alane fuel
researchers may better be able to assist in federal cell technology, sonobuoys production, and crit-
missions.49 ical chemicals production for missiles and muni-
tions, materials and technologies, all critical for
The Pentagon has also been concerned about
military operations.52 The determinations granted
weaknesses in the US defence industrial base
the DoD through the DPA Title III the authority to
itself. Following a 2018 White House-directed
expand the domestic industrial base capabilities
study into the status of the defence industrial
in these critical areas.
21 NOVEMBER 2019, MISSOURI 28 JANUARY 2020, MASSACHUSETTS
Conspiracy to commit economic espionage; Making a materially false, fictitious
economic espionage; conspiracy to commit and fraudulent statement
theft of trade secrets; theft of trade secrets
Harvard University professor Dr
Monsanto employee allegedly recruited to Charles Lieber charged with making
the Thousand Talents Plan and sought to false statements regarding the
take proprietary farming software to China. Thousand Talents Plan and his work
for Wuhan University of Technology.
28 JANUARY 2020, MASSACHUSETTS 28 JANUARY 2020, MASSACHUSETTS
Smuggling goods from the Visa fraud; making false statements;
United States; false statements acting as an agent of a foreign
government; conspiracy
Cancer researcher allegedly
stole 21 vials of biological J-1 visa holder allegedly falsely identified
research and attempted to as a student while lying about military
smuggle them out of the service at the National University
United States to China. of Defense Technology in China.
UNITED STATES STUDIES CENTRE
12 TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIADepartment of Justice’s China Imitative:
The Arrest of Harvard Professor Dr Charles Lieber
On 28 January 2020, the Department of Justice charged Dr Charles Lieber, Chair of the Department
of Chemistry and Chemical Biology at Harvard University, on two counts of making false statements
in relation to his involvement in the People’s Republic of China’s Thousand Talents Program.53
A world-renowned chemist, Lieber has been working at Harvard since 1991 and is the Principal Inves-
tigator of the university’s Lieber Research Group.54 The group specialises in nanoscience technology
and has received more than $15,000,000 in grant funding from the National Institutes of Health (NIH)
and Department of Defense since 2008.55
The Department of Justice alleges that Lieber had performed work as a “strategic scientist” for Wuhan
University of Technology (WUT) as early as 2011. According to the details of a three-year contract
intercepted by the FBI, Lieber was allegedly paid US$50,000 per month and was required to work for
WUT for no less than nine months a year. Lieber was also awarded more than $1.5 million to establish
a research lab at WUT.56
In order to secure NIH funding, non-NIH groups are required to disclose all foreign collaboration and
foreign sources of research support, as well as potential financial conflicts of interest provided by
foreign universities or governments. The Department of Justice alleges that Lieber repeatedly lied to
both Harvard officials and federal investigators when asked about his connections to the Thousand
Talents scheme, claiming that he had never been a participant in the program.57 If found guilty, Lieber
could face up to five years in federal prison and a quarter-million-dollar fine.58
10 FEBRUARY 2020, GEORGIA 11 MAY 2020, GEORGIA 14 MAY 2020, OHIO
Computer fraud conspiracy; Filing a false tax return False claims; wire fraud
computer fraud and abuse; economic
Emory University Ohio medical researcher
espionage; among other indictments
professor allegedly allegedly made false claims
Members of the Chinese People’s worked at Chinese about his participation in
Liberation Army charged with universities and did not Thousand Talents Program
hacking into the computer systems report foreign income while receiving National
of credit reporting agency Equifax. on federal tax returns. Institutes of Health funding.
13 FEBRUARY 2020, NEW YORK 27 FEBRUARY 2020, TENNESSEE 11 MAY 2020, ARKANSAS
Conspiracy to steal Wire fraud; making Wire fraud
trade secrets false statements
University of Arkansas
Huawei and subsidiaries University of Tennessee professor allegedly
charged on a 16-count professor charged with hiding failed to disclose ties to
indictment including a his relationship to Beijing Chinese government
charge of conspiracy University of Technology while while accepting grant
to steal trade secrets. receiving funding from NASA. money from NASA.
UNITED STATES STUDIES CENTRE
TECH WARS: WHY STRATEGIC TECHNOLOGY IS THE LATEST
TECH WARS:FRONTIER
US-CHINAINTECHNOLOGY
US-CHINA COMPETITION AND
COMPETITION WHAT
AND THIS
WHAT IT MEANS FOR AUSTRALIA
13Detrimental reform: Cracking down on to deny any application or petition without first
“non-traditional intelligence collectors:” The notifying the applicant if “evidence in the record
2017 NSS also flagged immigration as another does not establish eligibility.” These expanded
area requiring action to protect the NSIB. Specif- powers were eventually blocked by a court
ically, it saw foreign students studying science, injunction but have since been added to public
technology, engineering and mathematics regulatory agenda plans for September 2020.62
(STEM) subjects from “designated” countries as
Even as aspects of the administration’s immi-
potential “non-traditional intelligence collectors”
gration efforts have been held up in court, early
and foreshadowed the need to implement visa
indications are that they have impacted the
reviews, restrictions and other policies to deter
number of foreign students seeking to study
the transfer of IP to strategic competitors.59 The
STEM subjects in the United States. A National
first step the administration took occurred in
Foundation for American Policy analysis found
May 2018 when the US Immigration and Citi-
denial rates for H-1B visa petitions had risen from
zenship Service delivered a policy memoran-
six per cent in FY2015 to 24 per cent in the third
dum laying out new consequences for foreign
quarter of 2019.63 Further, the total number of
students overstaying their visas, with single-day
foreign students studying in the United States also
overstays resulting in three to ten-year bans.60
declined by 10 per cent during the same period.64
The following month the State Department
In response, China’s Ministry of Education issued
began actively restricting visa applications of
a notice warning potential applicants that visas
Chinese graduate students studying “aviation,
had been restricted for Chinese students wish-
robotics and advanced manufacturing” in the
ing to study in the United States, as “the visa
United States. Five-year visas for these programs
review period has been extended, the validity
were reduced to one year, with the requirement
period has been shortened and the refusal rate
to reapply every year.61 In July 2018 improved
has increased.”65 These policies, while attempt-
discretionary power was given to adjudicators
ing to deter economic and technological espio-
processing foreign student visas, allowing them
Getty
UNITED STATES STUDIES CENTRE
14 TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIAnage, are likely to be highly detrimental to the US these programs.68 More specifically, identical
research base.66 For instance, while the policies bills introduced in the Senate and House in May
appear to be based on the assumption that these 2019 by Senator Tom Cotton and Representa-
students return to China after completing their tive Mike Gallagher would ban the issuance of
studies in the United States, the vast majority certain academic visas to researchers associated
of students apply for further visa pathways to with the PLA.69 In May 2020 Republican Senators
remain and work in the United States, primarily Tom Cotton and Marsha Blackburn went even
in STEM fields.67 further and introduced the SECURE CAMPUS
Act, a bill that would ban Chinese nationals from
These efforts are likely not the last from the
receiving any visas to student science and tech-
Trump Administration. Additional policies
nology subjects for graduate or post-graduate
and Congressional bills have been proposed,
studies.70 Later in the same month, the admin-
including expanding the Department of Home-
istration officially announced a more targeted
land Security’s vetting of university and school
policy: students affiliated with PLA-universities
officials in charge of collating data on foreign
studying in the United States would have their
students and persons on exchange, which would
visas cancelled, impacting an estimated 3000
“prevent potential criminal activities or threats
students.71
to national security” that may result through
China-Taiwan semiconductor joint venture indicted for
economic espionage
In November 2018 the Department of Justice brought indictments against the Chinese state-owned
company Fujian Jinhua, the Taiwanese semiconductor manufacturer United Microelectronics Corpo-
ration (UMC), and three Taiwan nationals. The Department of Justice accuses those involved of engag-
ing in a conspiracy to steal trade secrets from Micron Technology, Inc. — a semiconductor company
based in Boise, Idaho.72
Micron is the only producer of dynamic random access memory technology in the United States — a
leading-edge memory storage device used in a wide range of computer electronics — and the company
controls between 20 to 25 per cent of the DRAM industry.73
Until recently, China did not possess any DRAM technology, but in 2016, Fujian Jinhua and UMC signed
a technology cooperation agreement under which UMC would produce DRAM technology for the
Chinese firm. The DoJ alleges that two former Micron employees stole DRAM related intellectual
property from the company prior to being hired by UMC.74
One defendant is accused of having downloaded more than 900 Micron confidential and proprietary
files while working at Micron and storing them on USB external hard drives or personal cloud storage,
which allowed him to access the information while working at UMC.75
Following the indictment and subsequent US government sanctions, Fujian Jinhua ceased operations
in March of 2020.
UNITED STATES STUDIES CENTRE
TECH WARS: WHY STRATEGIC TECHNOLOGY IS THE LATEST
TECH WARS:FRONTIER
US-CHINAINTECHNOLOGY
US-CHINA COMPETITION AND
COMPETITION WHAT
AND THIS
WHAT IT MEANS FOR AUSTRALIA
15AUSTRALIA AND THE EVOLVING US-CHINA
STRUGGLE FOR TECHNOLOGICAL ADVANTAGE
Washington’s initial policy changes constitute these bills are in draft form at present and may
a significant shift in the structural nature of the not pass, senators and members continue to
US-China technological relationship, which will introduce legislation — with more than 200 bills
have consequences beyond one-off and highly reportedly in Congress relating in some way to
public cases like Huawei or ZTE. The ongoing US-China economic decoupling — indicating the
crackdown on Chinese technology theft along future direction the US legislature is likely to take
with the raising of regulatory barriers will accel- in regulating America’s technological relationship
erate the establishment of increasingly distinct with China.78
technological domains.
As opposed to export controls, these meas-
Australia is particularly exposed to this trans- ures would be intended to stop US government
formation. Australian research universities — funding going to institutions also conducting
often collaborating with both US and Chinese joint-research with certain Chinese government
government agencies, state-owned enterprises organisations. For instance, the China Technol-
and defence companies — could face significant ogy Transfer Control Act of 2019, which was
disruption and limitation in who they partner introduced in the House and Senate last year,
with, how they structure their laboratories and would expand the powers of the State and
the way they source funding. In terms of national Commerce Departments to restrict the flow of
security, Australia will face growing pressure from funds to foreign entities collaborating on projects
the United States to go further in protecting IP, that aligned with Beijing’s Made in China 2025
particularly if Canberra continues to seek greater industry policy. In fact, the bill goes further to
access to and collaboration with America’s also encompass agricultural machinery, loco-
defence industrial base. Lastly, the largely open motives, advanced construction equipment and
and laissez-faire way Australia has structured and civil aircraft. The US House version of the bill was
invested in its science, technology and innovation introduced with both Democratic and Republi-
ecosystem over the past decades will no longer can signatories, but the US Senate version has
suffice in a more competitive world. only been backed by three Republican senators:
Senators Josh Hawley, Rick Scott and Marco
Rubio.
Draft legislation an indication
of things to come If passed, the bill would have significant implica-
tions for Australian entities — primarily universi-
A number of bills have been introduced in
ties — who have projects funded by US govern-
Congress that would, if passed in their present
ment-linked grants and are simultaneously
form, give substantial new powers to the US
collaborating with Chinese state-owned enter-
Commerce Department to directly regulate the
prises. For example, Monash University, which
collaborations between US government funding
signed a $10 million research agreement with
agencies and third parties involved in research
China’ state-owned aerospace company, the
on critical technologies with Chinese partners.76
Commercial Air Corporation of China (COMAC),
With China recently overtaking the United States
in October 2019 would likely come under scru-
as Australia’s “leading international collaborator”
tiny. The Monash-COMAC partnership report-
of co-authored articles in peer-reviewed scien-
edly focuses on joint R&D into the targeted fields
tific journals, such legislation will present signifi-
of robotics, advanced manufacturing, artificial
cant consequences and dilemmas for Canberra
intelligence and big data, all areas of priority
and for Australia’s scientific ecosystem.77 While
under Made in China 2025 and identified in the
UNITED STATES STUDIES CENTRE
16 TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIAdraft US legislation.79 Existing funding Monash tions, but Australia and the United Kingdom
receives from the US government would come were not. This irregular application of exemp-
into question. In 2018 Monash reported that its tion rules to some members of the NTIB and
academics contributed to 1,533 co-publications not others further undermines the framework,
with US-based researchers and had $7.7 million creates growing opportunity costs for Australia
in funding from the US National Institutes of and works against US interests to leverage
Health and the US Defense Department.80 allied defence industries to bolster its own mili-
tary-technological edge.87
As these bills have languished since being intro-
duced to the House and Senate in mid-2019, For Australia, the expanded export control
it is unlikely they will progress in their current reform now being implemented by the US
form. However, they are indications of the legis- Commerce Department could have a serious
lative direction Congress will take in protect- impact on universities, defence industry, busi-
ing the NSIB.81 Republican senators have also ness and government. The NTIB could be a vehi-
introduced bills targeting improved screen- cle for Australia to seek
ing of visa applications for researchers linked exemptions from these
to PLA-linked research institutes and universi- new regulations. Ameri-
FOR AUSTRALIA, THE
EXPANDED EXPORT
ties and have called specifically on Australia to ca’s shift from ‘specifica- CONTROL REFORM NOW
introduce similar legislation.82 Other introduced tion’ based export control BEING IMPLEMENTED
bills increase the scope of the Department of standards (and currently BY THE US COMMERCE
Commerce’s Export Control List to include all the way Australia writes DEPARTMENT COULD
10 of the ‘core technologies’ identified in China’s its own defence export HAVE SERIOUS IMPACT ON
Made in China 2025 plan.83 Republican senators controls) to a system based
UNIVERSITIES, DEFENCE
INDUSTRY, BUSINESS
have also proposed sanctions on foreign entities instead on the end-use of AND GOVERNMENT. THE
and individuals that commit cyber-espionage.84 the technology, may begin NTIB COULD BE A VEHICLE
to capture partnerships FOR AUSTRALIA TO SEEK
and research that currently EXEMPTIONS FROM THESE
Novel export controls, Australia NEW REGULATIONS.
does not touch the export
and the National Technology control system. For exam-
and Industrial Base ple, specification export controls are based on
For Australia, the issue of rising barriers around a technical signifier or characteristic of a certain
America’s advanced technology industry and technology. A computer chip larger than a certain
research institutes could be solved with a func- size can be exported, but not if it is smaller and
tional National Technology and Industrial Base made of more durable material.88 However, the
(NTIB).85 The NTIB is a legal framework that was looming regulations in the United States move
expanded to include Australia and the United towards targeting general end-use or application
Kingdom in addition to Canada in 2017. It is an of the technology such as the recently released
ambitious legislative agenda in the United States rules on geospatial software that aims to control
which aims to create a “defence free-trade area” any software “specifically designed” for training
between America and its closest allies.86 It is neural networks to analyse satellite images for
notable that in the rules issued so far, Canada specific purposes.89
— the longest-running member of the NTIB and Further, many of the technologies targeted under
America’s most integrated defence industry these reforms — like artificial intelligence, big data
partner — was exempt from the export restric- and some biotechnologies — are still in the early
UNITED STATES STUDIES CENTRE
TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIA
17stages of discovery. As basic or fundamental China is known to systemically exploit open-
research — meaning they are not developed for source publications to reverse engineer products
specific technological applications — they would and circumvent the cost and risk of indigenous
usually not fall under export controls. Maintaining research. This adds to growing concern as to the
the openness of the US basic research system effectiveness of the current export control and
and not regulating the majority of fundamental classification system.91
scientific exploration has been a long-standing
These broad changes in export policy will add to
policy of the US government.90 But many of these
the regulatory burden for businesses, research
emerging technologies, like the inherently soft-
institutes, start-ups and other organisations in
ware-based development of machine-learning
Australia wishing to import emerging technolo-
algorithms, can blur the easy distinction between
gies or collaborate on research with entities in the
what is fundamental scientific research and what
United States. With only one rule officially issued
can be immediately applied to real-world capa-
by the Department of Commerce on satellite
bilities. The majority of computer-vision software
imagery analysis software so far, it is difficult
research, for instance, may still be considered
to judge the full impact of these changes for
exploratory.
Australia.92 However, it is likely that companies,
But the gap between the laboratory and applying defence contractors and researchers integrating
it to real-world scenarios, potentially for security emerging technology into Australian defence
or military capabilities, is increasingly narrow systems, experimenting with products or capa-
in some fields. Basic research revolves around bilities in the Australian environment and market,
the publication of discoveries in open and glob- or looking to collaborate on research projects,
ally accessible scientific and technical journals, will need to eventually apply for approval with
US Attorney General William Barr delivers a keynote address at the China Initiative Conference,
Center for Strategic and International Studies (Photo: CSIS)
UNITED STATES STUDIES CENTRE
18 TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIAthe US Department of Commerce. Entities used revenue grew as an export market for Australia,
to following an export regime that was relatively successive governments have tapered spend-
clear in what was and was not allowed will have ing on domestic innovation. For instance, total
to engage with a much wider and somewhat Australian research spending as a share of GDP
more ambiguous system. With no exemption fell to 1.79 per cent in 2017-2018, down from a
carved out for Australia, like there has been for historical high of 2.25 per cent in 2008-2009.93
Canada with satellite imagery analysis software, This is far below the OECD average of 2.37 per
broad categories of technology including data cent. Similar results can be found in Australian
science, robotics, and biomedical science will be business investment in R&D.94 While Australia
more difficult to access in Australia. The regula- has pioneered several technologies that have
tion may be particularly complex for the numer- had global impact, uninterrupted underinvest-
ous start-ups, research labs and defence compa- ment in R&D spending — the basis of technolog-
nies working on emerging technologies that have ical capability — has cemented the country as a
offices and personnel located in both Australia relative “taker” of new technology rather than an
and the United States. exporter.95
This decrease in national R&D funding has
Building Australia’s occurred even as the global technology land-
technological ‘weight’ scape has become more competitive and volatile
for Australia. For instance, even the United States
As the global technological ecosystem becomes as the source of much of Australia’s defence and
increasingly nationalised, securitised and difficult national security IP and capability has found
to navigate, even with close economic and secu- its traditional technological dominance chal-
rity allies like the United States, Australia should lenged as its global share of R&D spending fell
work to build its own technological ‘counter- from 40 per cent in 2000 to 27.9 in 2015.96 More
weight.’ This should be done through both estab- importantly, the centre of global innovation and
lishing new non-US and non-Chinese R&D and research spending has shifted to Australia’s region
scientific partnerships throughout the region and while Canberra’s policy has remained static. In
with other Five Eye partners, as well as rethink- 2015 R&D investment in East and Southeast Asia
ing how domestic technological innovation accounted for 40.3 per cent of the worldwide
and research is financed. A more self-sufficient total, while North America’s total was 27.9 per
and dynamic R&D base will allow Australia to cent and Europe’s 21.6 per cent.97
better weather the growing fragmentation of the
technological world, make Australian partners While there are lessons from several countries
more attractive for both US tech companies and Australia could build upon, such as Israel or
research while simultaneously providing more Germany, South Korea stands out as a nation that
ballast for Canberra’s lobbying of Washington has applied industrial policy to its R&D capacity
for export control exemptions. with notable success. Back in 1999, South Korea
published a national scientific and R&D strategy
Generally, for the past several decades, succes- with a vision to build the country into a techno-
sive Australian governments have taken advan- logical powerhouse by the year 2025.98 Updated
tage of the efficiencies globalisation has provided every five years, Vision 2025: Korea’s Long-term
in terms of R&D. As R&D became more globalised Plan for Science and Technology Development,
over the past thirty years, and foreign student
UNITED STATES STUDIES CENTRE
TECH WARS: US-CHINA TECHNOLOGY COMPETITION AND WHAT IT MEANS FOR AUSTRALIA
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