September 13, 2022
It is an honour to be speaking at the American Enterprise Institute today, one of the world’s leading think tanks. Before my election to the Senate in 2016, I worked at a think tank, the Institute of Public Affairs, founded at a similar time and with a similar mission to defend the free enterprise system.
In fact, it is wonderful to be back at AEI. When my wife and I were university students, we came to Washington D.C. as interns. I was on Capitol Hill in the office of a Republican Congressman, and she worked on a magazine called The American here at AEI.
I am particularly pleased to be speaking here today on the topic of “Winning the Tech Race in an Age of Strategic Competition: A New Compact with Big Tech” because my thinking on these issues has been strongly influenced by the work of people like Klon Kitchen, a scholar who is rightly respected for his insight into these profoundly important issues.
I’m speaking today in the context of a dramatically deteriorating strategic environment. Even if we were not witness to the largest ground war in Europe since World War II in Ukraine, we have in just the last month seen the most aggressive attempted intimidation of the people of Taiwan by the Chinese Communist Party since the end of China’s civil war in 1949.
The Chinese government is engaged in the fastest military build-up since World War II, and they have shown a willingness to use it in the face of even the most modest provocations, like a delegation of politicians visiting Taiwan.
The CIA director Bill Burns has said China is the “most important geopolitical threat we face in the 21st century”.
Although there was a time when we did not see it that way, today, most Australians would agree with that assessment.
We have been on the receiving end of a sustained campaign of espionage, foreign interference and cyber-attacks from China, which is assessed by our intelligence and security agencies to be the most intense in our history, even greater than at the height of the Cold War.
And showing their willingness to deploy all elements of state power in pursuit of their strategic objectives, they have also initiated a campaign of economic coercion, seeking to leverage their status as our largest trading partner to dictate to us our domestic public policy settings.
The CCP’s extraordinary expectations of compliance from a much smaller power like Australia was laid bare in their now infamous 14 demands.
It was a shopping list of grievances which included silencing our free press, independent think tanks and democratic parliament from criticising their human rights record; to our decision to safeguard our digital sovereignty by banning Huawei from our 5G rollout, and our temerity of passing laws to combat foreign interference in our democracy.
While I am proud to say that Australia has so far successfully stood our ground against these grey-zone attacks, China will become even more assertive as it grows more confident in the years ahead, a prediction well documented by Rush Doshi in his compelling book The Long Game.
History can be a straitjacket. Today’s geopolitical contest is not exactly the same as those in the past. We must be careful not to simply copy and paste insights from previous eras of great-power rivalry on to this one.
But history can also be illustrative and illuminating. And we can draw lessons for today from the most recent struggle between two superpowers: the Cold War.
An important question posed by the AEI’s own Senior Fellow Hal Brands, in his recent book The Twilight Struggle, is:
“What do you do when your best competitive advantage begins to wane and perhaps even becomes unusable?”
This was one of the many perilous scenarios that Washington wrestled with in its long-term rivalry with the Soviet Union. The technological revolution that gave the US economic and military superiority was being challenged as that Communist regime engaged in an ambitious effort to neutralise the free world’s competitive advantage, particularly in the then emerging domains like nuclear weapons and space.
We should have this question at the forefront of our minds today as we navigate the great power rivalry of the 21st Century. Because once again the world is on the precipice of great power conflict.
In my view, nothing less is at stake than whether or not our children and grandchildren will inherit from us the free world that we inherited from previous generations.
The main arena for competition in today’s great power rivalry is advanced technology, just as it was in the Cold War.
Whether or not the United States and its allies prevail in the contest to first and most successfully develop critical and emerging technologies will be as decisive today as it was in the Cold War.
This time, instead of space or nuclear weapons, it is quantum computing, artificial intelligence and other digital technologies which could give either power a decisive advantage over the other.
It is imperative that America’s global leadership in critical technologies is maintained – and in some areas regained - and that liberal democracies demonstrate a functional model of high-tech democratic governance that fosters competition and innovation.
It is vital that we learn the lessons of how we collectively prevailed in previous tech races.
Despite the Soviet Union’s significant achievements in nuclear technology and space during the Cold War, the full range of America’s technological ingenuity ultimately gave it the upper hand over the Soviet Union beyond just military applications.
America’s uniquely powerful model for creating and sharing wealth under a free market system enabled it to outcompete the Russian economy which could not keep up.
Human ingenuity, creativity and entrepreneurship ultimately always flourish most strongly in free societies.
In the Cold War, it was our competitive markets, rule of law, private property rights and free trade which fuelled our growth and ensured liberal democracies prevailed against inefficient, corrupt and inflexible centrally planned economies.
Despite the clear geopolitical gains America’s technological supremacy has secured for all liberal democracies, this advantage is fragile and is not guaranteed into the future.
China has emerged as a full-spectrum competitor, with Xi Jinping declaring the battle for global technological superiority will be “fierce”.
The battle is more than underway, and from where we stand today the outcome of the US-China great tech rivalry is far from clear.
Leading experts have identified the foundational technological battlegrounds that are likely to define the 21st century:
• artificial intelligence;
• semiconductors;
• quantum information science and technology;
• biotechnology;
• 5G; and,
• Green tech.
Today I will focus on three of those: AI, quantum and green tech.
As the authors from the Belfer Centre at Harvard argue in the Great Tech Rivalry: China vs the US, in each category, China is well and truly in the race. In areas where it hasn’t already gained a competitive advantage, it could soon be the global leader on current trajectories.
In AI - an area that the Russian President Vladimir Putin has said will determine “the ruler of the world” - America’s lead is waning.
Based on current trends, it is projected that China will overtake America in five to 10 years and some experts including the Air Force’s former Chief Software Officer, Nicolas Chaillan, believe China’s victory in AI is “already a done deal.” The dual-use applications of AI are broad, and could transform operations in financial, political, and military fields.
We know authoritarian regimes will be attracted to China’s high-tech autocratic governing model to exert their authority and suppress dissent. A 2019 study by Steven Feldstein at the Carnegie Endowment for International Peace on the global expansion of AI surveillance found Chinese companies already supplied AI surveillance technology to 63 countries.
In China’s 14th Five Year Plan, quantum information science is a second tech priority after AI.
The military applications of quantum computing, communications and sensing technology are no longer in the realm of the hypothetical.
Quantum communications could see state secrets stolen through broken encryptions. Particularly sobering is the Chinese government’s practice to “harvest now and decrypt later”, a policy which sees them hoover up classified and sensitive materials which are currently protected by encryption, but whose secrets will likely be revealed if and when they crack quantum decryption technology in the future.
Louisiana State University physics professor Jonathan Dowling, who was also a visiting faculty member at the University of Science and Technology of China in Shanghai, predicted China’s communications could “go black” - meaning the US can no longer listen in - in just a few years.
Quantum sensing could nullify stealth craft and radar jamming, and quantum computing could calculate highly complex equations and simulations in seconds.
Energy security is national security, and China is now the world’s leading manufacturer, user and exporter of low-emissions technology, despite America’s role as the primary inventor of green tech over the past two decades.
As they rush to transition to renewable energy, countries will become increasingly dependent on China’s technology to meet their climate targets – a troubling dependence both strategically and morally given much of it is being made by forced labour from persecuted minorities like Uyghurs in Xinjiang.
Of course, underscoring advancements in each of these foundational tech battlegrounds is investment in research and development. While America currently spends more on basic research, China’s expenditure is on an aggressively competitive trajectory and is targeted at converting scientific developments into commercial and military applications under Xi Jinping’s civilian-military fusion philosophy.
China already spends $70 billion more annually on commercialising scientific developments than America. China will overtake the US in R&D expenditure within the decade on current trajectories, according to the OECD.
These trends mean America could lose its global leadership position in critical technologies by the end of this decade.
This will bear significant consequences not just for America, but for the freedom, prosperity and security of the world.
A successful strategy to arrest these trends will require many elements, including ensuring defence-technology sharing partnerships like AUKUS live up to their full potential beyond nuclear submarines, deepening tech cooperation through strategic partnerships like the Quad, and making sure the world-leading innovations from our higher education sectors are captured by us and not our potential adversaries.
But an indispensable part of the strategy to win the tech race in an age of strategic competition is a new compact with Big Tech. Nothing less than the survival of liberal democracies and the free enterprise system depends on it.
To win the great power rivalry of the 21st Century, Western governments need a new cooperative relationship with the tech industry to harness their unique ability to develop next generation technological innovation. Only then can we ensure that liberal democracies stay ahead of authoritarian regimes in the tech race.
Because, whether we like it or not, big tech companies are geopolitical actors and Western governments cannot out-spend and out-innovate our rivals without them.
Western companies at the centre of the technological revolution - Google’s parent company Alphabet, Amazon, Apple, Facebook, Intel and Microsoft - accounted for 70 per cent of the US’ total commercial R&D expenditure in 2019, spending a combined $140 billion in comparison to the Pentagon’s $109 billion investment.
To use the words of my friend, Klon Kitchen; “pushing the frontiers of science and pioneering game-changing technologies is expensive”, and these companies are able to invest at these extraordinary levels because they are profitable.
And as Klon has argued, with Defence Department’s here in the US and elsewhere in the alliance network rightly focused on acquiring more conventional and immediate military technologies, we simply can’t devote enough taxpayer dollars to developing the decisive military technologies of tomorrow.
With China’s R&D expenditure already reaching 90 per cent of US spending today, Western governments must partner with the tech industry to combine their spending power to develop critical and emerging technologies earlier and more successfully than our authoritarian rivals.
Xi Jinping is right to recognise that these technologies are inherently dual use. They will have profound economic as well as military applications.
While Big Tech’s investment in these technologies is driven primarily by commercial motives, that doesn’t mean their progress cannot be harnessed for strategic objectives.
Big tech can spend big on R&D because they are the beneficiaries of the free enterprise system which allows them to secure a strong return on their investment on their intellectual property.
Unlike authoritarian systems, we offer them a stable regulatory environment, strong private property rights and a dynamic and competitive market which rewards innovation and risk taking.
But not everyone in our democracies is comfortable with this.
They worry about the power of Big Tech, and are calling for increasingly onerous regulations to rein them in, or even break them up.
They are right to be concerned.
Too often, Big Tech companies fail to live by the values of the societies from which they are drawn and where they have flourished.
They inconsistently police their rules on free speech.
They fail to create safe environments online for our children.
They have been too slow to identify and combat foreign state sponsored disinformation.
They’ve dragged their feet on the privacy protections their users rightly expect.
I am not here today to defend Big Tech.
This is not a defence of the conduct of social media companies in particular, which in recent times have often been revealed to be egregious.
Nor is this a rallying cry against any and all regulation of them, which can and still should be done prudently.
If there is ever a disagreement over what constitutes the national interest between the tech industry and our legislators, those who are democratically elected must always prevail.
But the regulation we enact must be judicious, proportional to the problems we face, consistent with our values as market based liberal democracies and cognisant of the bigger strategic picture.
This is an appeal for hard-headed realism in ordering our priorities as legislators and a recognition that trying to “solve” some problems with Big Tech risks exacerbating much more existential challenges that we face.
I am asking my parliamentary colleagues to lift their eyes from much more day to day and conventional domestic challenges posed by Big Tech to the horizon to contemplate the systemic risks we all face if they fail.
As liberal democracies look to establish a functional governing model for high-tech - which should form the basis of a new compact - we must take great care that in doing so we do not inadvertently weaken the West’s competitive advantage in critical and emerging technology.
Western governments should avoid punishing Big Tech with regulatory measures that would undermine the ability of the tech industry to innovate, research and develop next generation technologies.
Legislators must carefully consider any potential unintended consequences of laws that might hobble tech firms originating from liberal democracies, while providing a leg-up to autocratic high-tech companies.
In forging a new compact with Big Tech, Western governments should guarantee a secure regulatory environment that not only enables but empowers Western tech firms to innovate, be profitable and to out-perform competition from authoritarian tech.
But this is not to give Big Tech a free pass, as some critics might fear.
As former CIA officer and ex-Facebook employee, Yael Eisenstat correctly warned: “These companies want all the benefits of monopolizing the world’s communications with none of the responsibility of getting swept up in geopolitics and having to choose sides.”
Instead, to win the great power contest of the 21st Century a new compact with Big Tech must ensure the opposite is true, by compelling the industry to choose a side in the geopolitical contest – ours.
In return for a regulatory environment that enables innovation and profitability, Big Tech needs to be unambiguous about where they stand in the strategic competition.
Big Tech should not forget that all we are asking of them is that they choose to aid the cause of the societies from which they are drawn, where they have been allowed to prosper, and where their future lies. They will never flourish in a world dominated by authoritarian states.
In effect, Big Tech companies need to be responsible geopolitical actors that will use and develop their innovations to help defeat autocratic threats to global stability.
We only need to look at the ability of tech firms to disrupt the balance of power in a kinetic geopolitical crisis as we are seeing in Russia’s invasion of Ukraine for a persuasive case study.
The war in Ukraine has been a watershed moment that forced Big Tech companies to pick a side. As Steven Feldstein has argued in Foreign Policy, Russia’s aggression forced Big Tech companies “to confront geopolitical realities they have largely managed to avoid.”
In picking a side in the geopolitical contest, global tech companies exerted considerable power to frustrate Russian aggression and strengthen Ukrainian defence. In this way, as Melanie Garson and Pete Furlong identified in a paper for the Tony Blair Institute for Global Change, Big Tech played the role of both disrupter and defender.
Russia’s control of cyberspace was significantly impeded by global tech companies that created a strategic digital blockade of Russia, counteracted Moscow’s information warfare and ensured Russian citizens could access free and unrestricted content. As disrupters and defenders, Garson and Furlong said; “Global tech companies were able to step in with a speed and agility that individual countries did not possess, helping neutralise Russia’s digital strategy.”
For example, Microsoft security teams worked closely with the Ukrainian government to provide 24/7 intelligence sharing through secure lines of communication, and to help deploy technical countermeasures to defeat attacks.
Microsoft’s Threat Intelligence Centre detected at least six individual Russia-aligned nation state actors that had launched more than 237 cyber operations against Ukraine. Microsoft publicly released the details of their intelligence on Russian cyberwarfare to enable the security community to identify and defend against this activity.
Amazon Web Services helped migrate Ukrainian government services and data on to the cloud to preserve it in case their physical servers were destroyed in Russian strikes.
As part of Project Shield, Google helped protect Ukrainian government websites and services from DDOS and other cyber-attacks by Russian affiliated groups.
Elon Musk’s Starlink Satellite system has helped keep Ukrainians online, a critical component in Ukraine’s ability to fight back in the information war against Russia.
Many Western tech companies have fought to keep the internet accessible to the Russian people to counter Russia’s attempts “to raise a digital iron curtain.”
This is why the future of war fighting is increasingly being regarded as “software first,” according to Seth Robinson of Palantir.
In a speech to the Lowy Institute this month, Rachel Noble, the Director-General of the Australian Signals Directorate reflected on the “awe-inspiring” and “terrifying” role of cyber actors in the Ukraine-Russia conflict and
welcomed the fact that “Large private sector companies chose to involve themselves by taking sides”.
It’s a sentiment shared by her signals intelligence colleague, Sir Jeremy Fleming of the UK’s GCHQ, who wrote in The Economist in August that the “modern digital and cyber” nature of the war was seeing a “reshaping of the cyber landscape” leading to greater cooperation between big tech firms and governments.
But is the role of global tech companies in the Russia-Ukraine conflict a preordained outcome for future geopolitical contests? Afterall, it was only a few short years ago when Ukraine’s former foreign minister spoke for many when he blasted Apple’s redrawing of its country’s border lines saying, “global politics is not your strong side.”
And the choice the tech industry might be forced to make in future conflicts won’t be as easy as it was in this one.
But we must have the same expectation of Big Tech when it comes to potential scenarios in the Indo-Pacific. They must pick a side. And it must be ours.
If Western governments fail to secure this partnership, and if global tech companies fail to behave as responsible and strategic geopolitical actors, then the free world must be prepared to surrender to China’s high-tech autocratic governing model - for this is the only alternative.
Google co-founder Eric Schmidt has warned; "It is entirely possible to imagine a future where systems designed, built, and based in China dominate world markets, extending Beijing’s sphere of influence and providing it with a military advantage over the United States."
In other words, if China wins the great power rivalry of the 21st Century, Xi Jinping’s vision for Big Tech will entrench autocratic rule over liberal democracies.
We only need to look at the Chinese government’s current method of engagement to understand the authoritarian rules of the road.
Even with the West’s current narrow technological advantage, our democracy, institutions and critical infrastructure are under sustained pressure from cyber espionage and attacks.
In Australia, there is a cyber-attack against our critical infrastructure every 32 minutes, and cyber experts have warned that state actors are already pre-positioned on Australian networks to weaken us in the prelude to a regional conflict or crisis.
Australia has responded with strength. We’ve initiated world leading cyber reforms to harden our systems from cyber intrusions and attacks.
But these measures would be worth little if China dominates critical technologies that enable it to disrupt and even control our social, democratic, financial, political and military institutions.
For example, our knowledge of cyber-enable election interference on social media platforms is largely informed by Western tech platforms. We will never have this level of insight or accountability into cyber-enabled election interference with Chinese and other authoritarian based tech companies.
Authors of the new book “Surveillance State: Inside China’s quest to launch a new era of social control”, Josh Chin and Liza Lin explore China’s mass surveillance governing model as a system for entrenching both totalitarian oppression and techno-utopian smart cities to control social behaviour, traffic and financial systems. “The same algorithmic controls can terrorise or coddle depending on who and where you are,” Chin and Lin write.
It's a model that already reaches well beyond its borders.
The same surveillance technology that enables President Xi’s social control domestically, including through the tracking and detaining of Uyghurs and other ethnic minorities in Xinjiang, is being widely purchased and installed in homes, businesses, institutions and even government departments around the world.
And swing states who side comfortably neither with liberal democracies nor authoritarian powers will be attracted to the best and cheapest technology.
If China meets their needs better than Western alternatives, they will freely choose their technology. And that will make the world a much less safe place for our citizens who seek to travel and do business abroad.
Despite our many legitimate frustrations with our own tech titans, we do have to choose ourselves whether we want them to prevail in their own competition with their counterparts in authoritarian countries.
Because it will either be Google, Facebook, Microsoft and Amazon who set the international rules of the road when it comes to technology, or it will be Tencent, ByteDance, Huawei and HikVision.
That should be an easy choice for us.
As the strategist Elbridge Colby puts it: “Many Americans have big concerns about the social media companies. I do! But our debate assumes that we can change things in Washington or state capitals. Not if [the People’s Republic of China] is hegemon. Then the social media companies will be Chinese or subsidiaries.”
Threats once considered hypothetical are now in the realm of possible.
Like Cold War strategists, we need to make strategic decisions now to stop the waning of our technological competitive advantage.
Forging a new compact with Big Tech is an economic, political and national security imperative, and anything less will see China emerge victorious in great power rivalry of the 21st century.
If they do, our present frustrations with the tech industry will seem trivial by comparison.
