• Allon Advocacy

Trade and Terrorism Could Spell a Bumpy 2020 for Tech

President Donald Trump shakes hands with China's President Xi Jinping. The two leaders have agreed to phase one of a trade deal between the United States and China.

Earlier this week, the U.S. Department of the Treasury announced it would no longer consider China to be a currency manipulator. (That’s a big step for the U.S. president. On the campaign trail in 2016, President Trump regularly called out China for its efforts to sway the valuation of its currency; something some key Democrats, like Senate Minority Leader Chuck Schumer (D-N.Y.) have echoed.) Today, President Donald Trump and Chinese Vice Premier Liu He will sign a limited, phase one trade pact between the United States and China. 

Have tensions between the two largest economies in the world suddenly evaporated?

Hardly, and, particularly when it comes to the intersection of technology, trade and national security, we can expect Washington keep a close eye, and perhaps a forceful hand, on China. In fact, even before today’s trade deal was signed, policymakers in Washington signaled that they will continue to advance efforts to keep China’s tech sector in check.

As New York Times reporter Keith Bradsher reported this morning, while the phase one pact is meant to address China’s tactics in acquiring technology from companies based in the United States and other western nations, that issue is “unlikely to be fully solved” even once today’s deal is inked. That’s because provisions that China already has implemented to comply with this current pact “have large loopholes” that could enable the regime to keep up current practices. 

If the United States government does not think China is living up to its side of the bargain, however, the phase one deal offers a mechanism to take action. Bradsher explains, “The trade pact calls for consultations within 90 days if the United States thinks Beijing is not living up to its commitments.”

We can expect members of Congress to hold the White House to that provision. Lawmakers on Capitol Hill already have pledged stringent oversight of the phase one deal, and likely will press the Trump administration to call for those consultations if they are unsatisfied with China’s implementation of the pact. And it’s not just the opposition party that is intending to keep the administration accountable. Indeed, U.S. Senate Finance Committee Chair Chuck Grassley (R-Iowa) told a radio station in his home state of Iowa that, based on past dealings with China, he is “skeptical about China carrying out their end of the bargain.” Chairman Grassley noted ensuring that China is complying with the phase one agreement is a key part of his 2020 trade agenda.

According to The Wall Street Journal, the phase one deal also might not do enough to address some policymakers’ national security concerns about China’s state-run technology company, Huawei. Lawmakers on Capitol Hill, The Journal said, will continue to pursue subsidies for U.S. firms competing with Huawei to develop next-generation 5G wireless technology. In fact, yesterday a bipartisan group of lawmakers led by Senate Intelligence Chair Richard Burr (R-N.C.) and Ranking Member Mark Warner (D-Va.) introduced legislation that, according to CNBC, would provide more than $1 billion in subsidies to “fund the development of Western alternatives to Huawei.” In the interim, various pieces of legislation enacted by the Congress and signed into law by the White House, including the last several defense authorization bills, have included provisions that would limit or outright prohibit government agencies from working with Huawei itself or any firms affiliated it. 

National security officials also are paying close attention to China, of course, and that could result in new regulations that affect foreign businesses. The National Security Council, for example, recently asked the Department of Commerce to draft rules to restrict all technology sales to China. The Wall Street Journal explains, “Should all the efforts bear fruit, nearly any technology exports to Huawei in particular, and China in general, would require export licenses.” If that rule moves forward, the tech industry is likely to forcefully oppose it. 

The national security concerns hardly stop with Huawei, and even could disrupt one of American teenagers’ favorite social media platforms.

The video-sharing platform TikTok has been in policymakers’ crosshairs since last fall and, recently, the U.S. military, the Department of State, and the Department of Homeland Security took the extraordinary step of blocking the site. 

Last October, Senate Foreign Relations Committee member Sen. Marco Rubio (R-Fla.) called for an investigation into whether the app, whose owner is based in China, is a national security risk. Senate Minority Leader Chuck Schumer also requested an investigation. According to Vox, in an October letter to White House Director of National Intelligence Joseph Maguire written with Sen. Tom Cotton (Ark.)—a conservative Republican who agrees with Sen. Schumer on very few matters—the minority leader said, “Security experts have voiced concerns that China’s vague patchwork of intelligence, national security, and cybersecurity laws compel Chinese companies to support and cooperate with intelligence work controlled by the Chinese Communist Party.”

The Committee on Foreign Investment in the United States (CFIUS), which is tasked with reviewing the national security implications of foreign investments in U.S. companies, reportedly is investigating TikTok, but the results of that review have not been revealed. (Meanwhile, a review by the cybersecurity firm Check Point found TikTok has “multiple” security vulnerabilities.)

We can expect federal lawmakers to renew their advocacy against TikTok if and when CFIUS’ report is released.

To be sure, it is not only China that U.S. policymakers are targeting through terrorism policy and trade pacts. This past Monday, the Treasury Department released a new regulation that will take effect on Feb. 13, 2020 and that will expand the number of instances in which foreign investors must seek approval from the CFIUS before they can invest in a U.S. business that either handles consumers’ personal data or handles technology used by the U.S. military.

The CFIUS rules will impact investors in every country except the United Kingdom, Canada, and Australia, where investors are except in some circumstances.

Federal officials also are stepping up efforts to get the mobile phone records of suspected terrorists. As Gizmodo explains, the U.S. Department of Justice (DOJ) wants Apple to unlock the phone that belonged to Mohammed Saeed Alshamrani, a Royal Saudi Air Force official, who killed three people at a naval airbase in Pensacola, Fla. in December. At a press conference early this week, Attorney General Bill Barr called “on Apple and other technology companies to help us find a solution so that we can better protect the lives of Americans and prevent future attacks.”

Congress—at least Senate Finance Committee Ranking Member Ron Wyden (D-Ore.)—could work to resist the DOJ’s efforts. In a statement submitted to Gizmodo after General Barr’s press conference, Sen. Wyden said, “If William Barr and Donald Trump succeed in weakening encryption with a back door, they’ll also make it far easier for criminals and hackers and predators to get into the digital life of you and your family.”

While Sen. Wyden urged the DOJ to step back, voices from outside of government say the United States government is not doing enough to combat protect Americans. In an interview this week with The Hill, former FBI Chief of Staff John Carlin said, “We use [technology] for everything now, from banking to defense systems to vehicles and planes … That is where we are now, and we are on the cusp of connecting millions of new devices to that same insecure tech ... it’s vital that we tackle it now.” 

In an election year—where 30-second soundbites tend to win the day in Washington—will these seemingly esoteric and complex issues go anywhere? Likely so, and precisely because lawmakers are watching the polls. According to a Harris survey released late last summer, more than 4 in 5 voters will consider a candidate’s stance on cybersecurity when deciding whom to vote for this year.

Silicon Valley better buckle its safety belts.

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