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Anja Manuel, a former diplomat, is a director of the Aspen Security Forum and co-founder and principal of the strategic consulting firm, Rice, Hadley, Gates & Manuel LLC, with former Secretary of State Condoleezza Rice, former National Security Advisor Stephen Hadley and former Secretary of Defense Robert Gates. Manuel, a former State Department official, writes extensively about Asia and China’s rise as a technology power. She is the author of This Brave New World: India, China and the United States, and multiple articles and reports on the technology competition with China. She is a graduate of Stanford and Harvard Law School. What follows is a lightly edited interview.

Q: For the past few years, we’ve been hearing a lot about the great power competition between the U.S. and China. What’s that all about when it comes to technology? 

A: If you look at empires across history, the country with the best technology tends to lead: gunpowder and the compass for the Chinese; steamboats and repeating firearms for the British. The United States has been the dominant technology power for the past five or six decades. Now, that is beginning to be called into question. China has not yet caught up in many advanced technologies, but it’s like that sign in your rear view mirror: “Objects may be closer than they appear.” That’s where China is today. 

There are six areas that I think we need to be watching carefully: 5G and 6G, fintech, semiconductors, A.I., quantum, and different aspects of biotechnology, especially the ones that can bleed into biological weapons. 

In fintech and international payments, with the innovations Alipay, WeChat Pay and others have made, I would argue China is well ahead of the U.S. and Europe. The Chinese are moving toward a digital yuan. In the U.S., well-meaning regulators don’t see this bigger picture and are hobbling some of our most innovative companies in these spaces. One area where it particularly matters is international payments: the U.S. enforces most of its sanctions regimes through international correspondent banking relationships. Increasingly, western banks don’t want to bother with these, due to heavy regulation, so people turn to fintech, like Alipay, which will make sanctions much harder to enforce. If the West doesn’t wake up on this issue, we’re going to have another 5G situation on our hands. 

In semiconductors, the Chinese are still behind. This is the most important technology in my view, because it is the building block that powers everything else: whoever has the most advanced chips has the processing power for A.I., self-driving cars and so many other technologies. China has put $100 billion or more into catching up. 

China has not yet caught up in many advanced technologies, but it’s like that sign in your rear view mirror: “Objects may be closer than they appear.” That’s where China is today. 

In artificial intelligence, many of the best academics are in the U.S., Canada, and the UK, but the tinkering and the application of A.I. is increasing very rapidly and impressively in China. Chinese especially excel in visual recognition artificial intelligence. Quantum isn’t quite there yet, but in five years, we’ll want to make sure that we’re in the lead. We need to watch all of these areas carefully. And we need to make sure that the U.S. and our allies stay competitive. 

Let’s turn to the issue of American research universities and the federal government’s multi-year crackdown on what they see as spying or theft from American universities by students or faculty who apparently have ties to the Chinese government. Some say the FBI’s focus on campus spying and intellectual property theft is long overdue; others see it as rash and even racist in its nature, that the government is unfairly targeting faculty of Chinese descent, and that they are not actually stealing campus secrets. You recently served on a commission studying the issue. What should we be doing? 

I believe we need to take a risk management approach. Artie Bienenstock and I collaborated with several others to write on this in fall 2020 under the auspices of the UC San Diego 21st Century China Center. 

It is vital that the U.S. remain a leader in fundamental science research. With the U.S. only performing about one-quarter of the world’s R&D, international collaboration is an important part of that. There are enormous benefits to the United States and the world if research is done internationally. If you look at the most cited papers, they tend to be international collaborations. China is, by far, the primary nation with which U.S. researchers collaborate, and we should keep doing so, particularly in areas of common concern like climate change and pandemics. 

Yet there are real risks to our open system. There have been a lot of indictments of Chinese researchers, some for stealing intellectual property here in the Bay Area, and some, of course, are at universities. As you know, China has a huge state dominated economy, and the CCP has sometimes questionable intentions. So there are issues here. But we don’t want to implicate every Chinese researcher, every Chinese student working at an American university. Our view, and this comes out of the UCSD report, is that there are some things you can do to defend the nation against inappropriate action while keeping our basic research institutions essentially open. Here are a couple things we can do.

We believe that the visa vetting system can improve. The government has to be primarily responsible for blocking those who shouldn’t be studying here, while welcoming those with positive intentions. Universities can’t be intelligence agencies. So the intel agencies need to decide: Is this person a threat or not? 

We believe — and this is a little controversial — that highly sensitive research in dual-use areas should be classified and transferred from universities to national labs, because they’re much better equipped to vet researchers and protect intellectual property. 

Shouldn’t universities also be required to do more? 

Yes. Openness requires honesty, transparency, and integrity. Universities should strengthen and rigorously implement conflict of interest and conflict of commitment policies as well as their vetting of foreign-funded projects. When you dig into some of these cases where universities have gotten into trouble, it was because they were naive and not enforcing the policies that were already in place. 

And finally, universities need much more training for their faculty and senior researchers to distinguish between what’s an appropriate or inappropriate collaboration. They should regularly instruct all foreign and domestic students and visiting researchers. For those getting grants, they need to say, “Here’s our conflict of interest policy — follow it.” And for students, especially all those from overseas, they need to train each of them regularly to raise awareness about illegal spying, saying essentially: “If you’re caught spying for a foreign government, you could go to jail. And here’s how this happens.” Just make the lines very clear. Those are the four things we propose. 

Is this just a U.S. problem? What about the rest of the world? 

You are right; the U.S. can’t do this alone. We must cooperate with our friends and allies (in Europe, Australia and beyond) to ensure that they implement a similar risk-mitigation strategy. We need to have similar criteria in place when we work with Australia, Japan, South Korea and Europe. 

How do you handle dual-use technologies with military applications, everything from A.I. to surveillance equipment to drones?

Yes, that is a concern: it’s increasingly hard to distinguish a “military” technology from a civilian one. There was a tendency among some in the Trump administration to put more technologies in the bucket that America should protect, rather than fewer. It was a wide net. 

What you’re likely to see with the Biden administration is an attempt to rationalize but not entirely get rid of those Trump administration policies. I have heard that they are starting to look at the various export control measures, and the vast number of executive orders related to China that came down in the last few weeks of the administration. They’re thinking through that. I hope that, instead of making these difficult determinations single handedly, the federal government works with an outside advisory group of technologists and scientists, trying to think that through rationally. 

Manuel gave a TedX talk on U.S.-China tech competition in 2019.

Is it too late? For years, the U.S. and China have been collaborating on technologies that can apply to some of the most crucial things we worry about now, such as computing and A.I. and tracking devices, and high-powered surveillance cameras and satellite imagery. How can we really pull the brakes on this? Is that even possible? 

Well, during the Cold War, you could contain a lot of these technologies; you could contain nuclear, and even some of the most advanced semiconductor chips really went just into missiles, right? That was one of the origins of Silicon Valley — close collaboration between Varian, Fairchild Semiconductor, HP and other tech companies and the U.S. military. 

Now, the most advanced chips are being used to power A.I. algorithms, and they’re not produced in the United States. They may be designed here, but are manufactured in Taiwan, South Korea and elsewhere. So the idea that you can export control your way out of the tech competition with China, I think, is fanciful. 

What should the U.S. do? After 20 or 30 years of integration, and hundreds of thousands of Chinese students and leading scholars, many of whom were born in China, now teaching and doing research on American campuses, it seems like an impossible task to decouple parts of this work or international collaboration, or to patrol what is happening. China is already a global power, and cross-border research and investment have been taking place for decades. Is a new paradigm really possible? 

Instead of playing mostly defense, which is what I believe the Trump administration has done, I would make some different decisions. They called attention to the problem, and they should get credit for that. Now, it’s time for the United States to play offense, and that means compete — rather than just a futile attempt to keep U.S. tech “in” and Chinese collaborations “out.” Together with our friends and allies, we’ll have to retain the innovation lead. We might do the following: boost federal research and development funding​ on the technologies I outlined above. At the height of the Cold War, it was something like 2 percent of GDP. Now it’s 0.7 percent, depending on how you count. An MIT study recently found that each $10 billion a year in federal R&D funding creates 400,000 high-value new jobs. Chuck Schumer has come out with a bill called the Endless Frontiers Act, which proposed $100 billion in R&D spend over five years, and a complete overhaul of the National Science Foundation. This is a great idea, but I hear from friends on the Hill that it is unlikely to pass. 

We can give smart tax credits to the most important technologies — currently I think you can get roughly the same R&D tax credit for developing a new craft beer and a new microchip. 

We should shore up our U.S. digital infrastructure to make sure everyone in the country has broadband. The pandemic showed us just how critical this is. About $6 billion a year would get every American connected by the end of the decade, and there is increasing bipartisan movement on this front.

Finally, we can shore up science and technology education, for example, by giving grants and partial student loan forgiveness for university students in STEM fields. A model could be the program that (President) Eisenhower put in place under the National Defense Education Act after the Soviet Sputnik success in 1958. It would cost only between $1 and 3 billion per year — a great investment in our future. 

What about the semiconductor industry, isn’t that particularly challenging? 

The Trump administration had a lot of “sticks” for the semiconductor industry — for example, export controls on selling chips to particular Chinese enterprises like Huawei, and broader controls on selling chip manufacturing equipment. They did try to get some subsidies for TSMC to put a new fab in the United States. People are starting to think the industry might need some incentives too. There’s something out there called the Chips for America Act, which gives a bunch of subsidies. (Note: House Bill 7178, introduced in 2020) The basic point is: there is a small but growing bipartisan group of legislators on the Hill who are starting to think about this. The Biden administration is starting to think about it. The goal should be to lift ourselves up rather than pushing the Chinese down.

You have also talked about doing this with our allies, instead of just alone. What do you propose here? 

I and others like Martijn Rasser and Rich Fontaine at CNAS, (Center for a New American Security in Washington D.C.), have called for a “Tech 10” group of technology powers to work together on all the issues we talked about above. Instead of creating a cumbersome new international organization, the U.S. would create a flexible structure that would convene senior officials, technology leaders and academics in closed-door meetings to drive concrete outcomes. A working group on semiconductors might, for example, involve the U.S., UK, South Korea, Japan, the Netherlands and Taiwan. A working group on A.I. standards might instead emphasize the UK, U.S., Canada, Israel and India. 

Okay, what about global tech supply chains? How serious are the concerns about China’s dominance of the global technology supply chains? 

We need to carefully parse what portion of the tech supply chain we’re talking about. If you’re talking about assembling your iPhones and all the devices in your pocket at Foxconn, it’s probably okay. If you’re talking about chips and motherboards and things that go into the defense supply chain specifically, we should obviously be quite careful. My belief is that this narrow set of items should be produced either in America or with our allies. To come back again to semiconductors, the most advanced chips are made by TSMC, in Taiwan. Those fabs are on the west coast of Taiwan, facing mainland China. So it raises a lot of really thorny issues. You know, if Taiwan keeps separating further and we keep restricting how much TSMC can sell to mainland China, do we end up with Beijing wanting to quarantine or strangle Taiwan to get access to the chips? 

I don’t believe all tech manufacturing needs to move back to the United States, but I would say that certain key parts of the supply chain, especially those destined for our Defense Department, need to be secured in a way that we’ve recently been lax about. 

The other challenge is that Silicon Valley has partnered and financed many of China’s best startups. It has cultivated the talent, shared best practices and built up China’s own Silicon Valley with funding and technology. Is this a good thing or would you agree with the Trump administration, which seemed to be moving to block American investment in Chinese companies that might be tied to the military or the most advanced tech? 

Yes, it’s a really novel issue, because of course, the U.S. has never restricted where American companies can invest. During the Cold War, the Soviet Union was self isolating. No one was investing in the Soviet Union. That’s not the case here. We don’t have a good mechanism for investment restrictions. You’ve seen this with some of these [White House] executive orders that came out in the last few weeks of the Trump administration that attempt to say, “Well, Americans shouldn’t invest in companies affiliated with the PLA.” 

During the Cold War, the Soviet Union was self isolating. No one was investing in the Soviet Union. That’s not the case here.

So one of the many challenges before the Biden administration is: how do we tailor this carefully? How do we make this multilateral? Because, of course, you can’t just say, “Well, Americans can’t invest in Chinese tech,” and then the Europeans will do it, or money will be routed through somewhere else. So again, you need to be multilateral, and you need it to be narrowly tailored. Of course, the devil is in the details. Should we restrict U.S. investment in companies that are directly affiliated with the People’s Liberation Army? Is it companies in any area that we consider strategically important? I think that would be too broad. Finally, the Biden administration is rightfully focused on human rights: will they say Americans can’t invest in Chinese companies that are part of the human rights abuses against Uighurs, Tibet and elsewhere in China? We saw executive orders that dealt with Hikvision and some of the other companies allegedly involved in repression of Uighurs. Does that become tougher? These are all really difficult calls. 

One of the push backs on all these efforts, particularly from Beijing, has been that the U.S. is jealous and can’t get itself to accept that China is going to be a technological leader, and Chinese entrepreneurs are going to run some of the world’s most dynamic companies. What do you say to that? 

I am consistently impressed by Chinese entrepreneurs, and I wish them well. And there are big areas of the broad economy and the tech economy that we can, and should, cooperate on; for example, clean tech. Also, we might have cooperation in the healthcare space and elsewhere that isn’t, you know, tied to the pandemic, necessarily. There are so many areas where you wish the Chinese well, and there are only a few areas, specifically the ones I’ve mentioned, where I believe it’s important for the next few decades for the U.S. and friends to be the most competitive.

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