America Must Counter China’s “Military-Civil Union”

COMMENTARY Technology

America Must Counter China’s “Military-Civil Union”

Aug 17th, 2020 7 min read

Commentary By

James Jay Carafano @JJCarafano

Vice President, Kathryn and Shelby Cullom Davis Institute

Klon Kitchen

Visiting Fellow in Technology, Cyber, and Science Policy The Heritage Foundation

A paramilitary policeman guards in front of an emblem of the Communist Party of China at Tiananmen Square in Beijing, 2011. Feng Li / Staff / Getty Images

Key Takeaways

The technologies that will determine the United States’ ability to secure its people and interests are overwhelmingly being developed for commercial purposes.

Washington can best demonstrate its intent to be a true partner with the tech industry in the way it shares information and purchases technology.

Western technology companies and the U.S. government must recognize that the long-term interests of both are better served through national security partnerships.

National security is a team sport—and not just among America’s myriad government departments and agencies. While the United States Constitution makes the federal government responsible for ensuring the “common defense” of the nation, individual citizens, civil society groups and private companies have always helped shoulder this burden. This remains unchanged.

What is changing is the distribution of this burden among these stakeholders—particularly private companies.

The technologies that will determine the United States’ ability to secure its people and interests are overwhelmingly being developed for commercial purposes in the private sector. It is highly unlikely the government will create its own, distinct capacity to create and distribute these technologies in the near- to mid-term.

This leaves the national defense more dependent on the private sector than ever before, precisely as China is emerging as a true-peer competitor and rival economically, technologically, and militarily.

China also recognizes this migration of the national security burden into the private sector and is responding with what its leaders call “military-civil fusion”. This is a form of governance where the Chinese Communist Party (CCP) co-opts Chinese companies and employs them as an extension of the state’s political, economic, military, and intelligence enterprises.

This is the root of Western concerns with Huawei: The potential for a Chinese telecommunications behemoth that has used government subsidies to dramatically undercut Western competitors to build a monopoly over infrastructure that—under Chinese law—could be used as a global surveillance network for Beijing.

All of this adds up to an unavoidable truth: The ability of the United States to invent, design, build, deploy and secure advanced technologies—and their key components—is as important to national security as the nation’s capacity to field traditional military capabilities. With this in mind, it follows that new partnerships between the government and industry are essential.

That’s not to say the United States should try to “out China” China. America’s model of non-coercive private-public cooperation is agile, productive and fair. But this model only works when partnerships between the government and the free market are voluntary. Naturally, this requires technology firms to act from a shared sense of responsibility—a shared sense that was understandably undermined by a number of events, most notably the illegal disclosures of NSA contractor Edward Snowden. That was seven years ago. We have to move on and we have to do better.

It’s not all bad news. Despite these challenges, the world’s largest, most profitable and most innovative technology companies are still American companies. While Chinese tech firms are catching up (and fast), the U.S. still holds the advantage. But it is time to use it or lose it.

This requires two adjustments.

What’s required from government

First, the government must accept the reality that it is a national security stakeholder and not the stakeholder. Many of the world’s leading technology companies have global interests and influence on par with many nations—they have a legitimate place at the geopolitical table. This isn’t hyperbole. Apple’s annual revenue exceeds the GDP of Portugal.

For example, when it comes to encryption, some government officials dismiss tech companies as standing in the way of national security. This is a myopic caricature of reality.

Encryption is critical to securing private communications, financial systems, intellectual property and other trade secrets. A private company’s commitment to securing this data should not make them the enemy of government—it makes them an ally. Efforts to secure themselves and their customers against hostile online actors is as essential for national security as is anything done by the federal government.

To be clear, the case for special access to encrypted materials can have noble objectives and intentions; but technology has changed to make such access detrimental to cybersecurity and data integrity, with no guarantee of success. Policymakers and national security leaders should recognize this and be persistent in trying to find collaborative approaches with industry. Patience is required.

Proactively, Washington can best demonstrate its intent to be a true partner with the tech industry in the way it shares information and purchases technology.

On the information sharing side, for too long, the U.S. government has treated information exchange with industry as a one-way street—demanding “real-time” information sharing from private companies on cybersecurity and other threats while being painfully slow in sharing with industry its own insights about malicious actors, their intentions and their capabilities.

There are early signs this might be changing. The NSA’s release of its Ghidra tool is a good example of the government proactively treating industry as a partner. This software reverse engineering framework was developed by Fort Meade for the NSA’s national security mission, but its release to the public allows private sector security personnel to better defend themselves as well.

Likewise, when Cyber Command publishes fresh malware samples used by U.S. adversaries in public repositories, it democratizes access to information all network defenders need to protect themselves

Less progress is being made in government purchasing and procurement, where a rigid and outdated acquisition bureaucracy makes it difficult for new technology companies to help Washington. Tech companies thrive when they spend precious resources on engineers and coders, not on hordes of contract specialists and lawyers.

Organizations like the Pentagon’s Defense Innovation Unit and the CIA’s In-Q-Tel are good at technology scouting and at strategic investment. But we still struggle to transition these technologies from niche experimental programs into stable, long-term solutions.

To put it bluntly, there’s plenty of capital in innovation, but tech companies need government contracts a lot more than they need one-off “investments.”

What’s required from tech companies

None of these very real frustrations with the government excuse tech companies from the responsibilities that come with their growing global influence.

It is precisely because they are amassing this power and influence, and because they are enabled to do so only under the military, legal, and economic protections of the U.S. government, that these companies must also change.

Specifically, American technology companies must acknowledge their growing national security responsibilities. They must also accept the fact that Great Power competition is returning and that this return requires them to choose sides.

While the Chinese market may be lucrative, it is also a moral minefield and ultimately a dead end for Western companies. American companies’ submission to Beijing’s predatory demands on intellectual property, proprietary information, trade secrets, data and other assets weakens American economic competitiveness, individual and national cybersecurity, and broader national security to the degree that this capitulation enables China’s technological ascendance over the U.S. This participation also gives cover to Beijing’s rampant political oppression and human rights violations.

The business risk is extreme, too. China has a proven record of allowing U.S. companies to take part in their market for only as long as is required to pilfer their intellectual property and secrets. Once these are sufficiently harvested, Beijing caps the companies’ market presence and prioritizes domestic competitors that have been built with the information stolen from American firms. Consider the experience of Microsoft: Back in 2018, some 90 percent of Chinese firms used the company’s operating system, but only 1 percent actually paid for it. This, according to former Microsoft CEO Steve Ballmer, cost the company more than U.S. $10 billion in profits. But, thus far, such losses have been accepted as the cost of doing business in what, until recently, was the world’s fastest growing market.

Companies that chase short-term profits in the Chinese market over long-term stability are in for a rude shock.

Ultimately, western technology companies and the U.S. government must recognize that the long-term interests of both are better served through national security partnerships. They should do this out of patriotism, out of economic interest, and because these partnerships enable the expansion of truly free markets and human thriving around the world.

Such partnerships are needed in several technologies, but in our view, fifth-generation wireless networks (5G), artificial intelligence (AI) and quantum computing should be near-term priorities.

New wireless networks are about more than just faster phones. Competition over 5G will decide who shapes the fundamentals of the new economic order and who builds the technical infrastructure of modern governance.

Most importantly, the outcome of the 5G race will set the conditions for other equally consequential technology struggles between the U.S. and China in fields such as robotics, autonomous vehicles and advanced manufacturing. Washington and Beijing know this and are competing on 5G accordingly.

Artificial intelligence is another key technology where government and industry must cooperate.

On the surface, there is already some public-private cooperation on AI. But this cooperation has brought to light an underlying and serious deficiency that must be addressed: The U.S. must improve its access to trusted state-of-the-art (SOTA) semiconductors that are necessary for AI research and applications.

The interim report from the National Security Commission on AI concludes:

“The United States lacks domestic facilities capable of producing, integrating, assembling, and testing microelectronics at scale…. This lack of access forces the [U.S. government], as well as the U.S. defense industrial base and other commercial U.S. firms, to rely on foreign fabrication and complex global supply chains for production, which increases risks to product integrity and exposes U.S.-developed intellectual property (IP) to theft…. [T]his gap should provoke a “graceful and considered kind of panic” among U.S. policymakers.”

The bottom line: If America wants to win in AI, we must have the ability to design and manufacture the underlying components that enable this technology.

Finally, there are the over-the-horizon promises and challenges of quantum computing.

Like next-generation wireless networks and AI, the private sector is at the forefront of this research with growing quantum computing efforts at Google, Honeywell, Hughes Research, IBM, Intel, Lockheed-Martin, Microsoft, and Northrop Grumman.

Though they have been slower to enter the quantum space, Chinese technology companies like Alibaba, Baidu and Tencent are also rapidly expanding their quantum research and development.

Again, while many national security relevant technologies will benefit from increased public-private cooperation, 5G, AI, and quantum computing warrant special urgency.

The time for rhetoric has passed. We don’t need another study or another commission. Instead, the United States—its government, industry, and civil society—must establish a consensus on, and shared commitment to, our national security. This requires new levels of cooperation and mutual support.

We are confident such cooperation and support are possible. But now we must collectively go about the demanding work of making them a reality.

It is said that, after the signing of the Declaration of Independence, Benjamin Franklin said, “we must all hang together, or … we shall all hang separately.” Apocryphal or not, that statement surely holds true today.

In the face of modern geopolitical realities, America’s public and private sectors must work together, or fail alone.

This piece originally appeared in Risky Business