The Digital Iron Curtain Looks Like Spaghetti

https://www.bloomberg.com/news/articles/2019-06-12/the-digital-iron-curtain-looks-like-spaghetti

relates to The U.S.-China Race for Tech Dominance Is the Worst Game of Twister Ever

Illustration: Hunter French for Bloomberg Businessweek

If the world is indeed headed for a Cold War 2.0 that splits the globe into U.S. and Chinese technological zones, the new “digital iron curtain” that separates them may well have to run through the heart of this bland industrial park in Oxfordshire, just off the M40 highway from London to Birmingham. On one side of the park looms a gleaming Amazon.com Inc. warehouse. Across the street is the Huawei Cyber Security Evaluation Centre, a modest brick building that’s unremarkable but for the one-way glass that obscures its windows, the CCTV cameras that bristle from its walls, and the oversize air-conditioning units lined up outside to cool the servers within.

Partly on the strength of the work at the center, whose 38 security inspectors are paid by Huawei Technologies Co. but subjected to the same vetting required for U.K. intelligence officers, the government has made a preliminary decision to let the Chinese tech giant build noncore elements of Britain’s sensitive 5G infrastructure, soon expected to connect everything from driverless cars to refrigerators. That would defy
intense U.S. pressure
to exclude Huawei from allied 5G networks. The decision isn’t final, but when a U.S. ally as close as Britain is this reluctant to take sides in a dispute between the world’s two economic and technological superpowers, it suggests that any cold war to come is likely to bear little resemblance to the last.

For one thing, Winston Churchill’s Iron Curtain metaphor may be ill-suited to a digital version that’s forced to follow a spaghettilike path through countries that, like the U.K., are either unwilling or unable to choose. The contest would also play out between two deeply intertwined capitalist economies, often joined by common global technological standards, rather than between the opposed and mutually excluding economic systems of the Soviet era. A Chinese government
white paper released on June 2
described the two economies as a single industrial chain “bound in a union that is mutually beneficial.” Such language would have been unimaginable coming from Moscow in the 1970s.

“It will be totally different, because the Soviet Union was completely shut down, and China cannot be,” says Fan Gang, director of China’s National Economic Research Institute. Think China’s estimated $1 trillion
“Belt and Road” initiative
, stretching from Jakarta to Nairobi and Rotterdam. “The real question is, who will set the standards? Who will have the advantage?”

Of course, security-driven politics have a way of overriding economic interests. There’s no denying the ferocity of the emerging rivalry between the U.S. and China on 5G, artificial intelligence, robotics, gene editing, and the data flows that fuel them all. If the divided future comes to pass, the swath of the globe aligned with China might buy driverless cars from the likes of Baidu and scroll WeChat and Alibaba on Huawei’s 5G networks, under the watchful eyes of censors who can control the data through servers on their shores, while a more laissez-faire model persists in the other part of the world, ruled by Google, Amazon, Facebook, Cisco, and the odd European company, such as Ericsson.

In May, shortly after U.S. Secretary of State Mike Pompeo warned the U.K. against
going “wobbly” on Huawei
, Washington effectively banned the Chinese company from doing business on its shores.
China responded
with a plan to create its own “unreliable entities” list to punish companies that cut off Chinese ones for noncommercial reasons. According to China’s state-affiliated media, Huawei’s 33 American suppliers would be candidates, including Intel, Microsoft, Oracle, and Qualcomm. And while the White House has cut back on visas for Chinese students, 363,000 of whom were studying in the U.S. last year, Beijing issued a June 4 travel warning to citizens planning to tour the U.S., citing danger from shootings, robberies, and thefts. Last year, Chinese visitors spent $36.4 billion in the U.S. A disentanglement appears to be under way.

In a further potential escalation, Bloomberg News revealed last month that
China is developing plans
to weaponize its dominance of the supply of rare-earth metals used to make electric cars as well as the radar, guidance, and sonar systems in high-end military hardware. That’s an area where China “won a war over the last 15 years before anybody else knew they were fighting,” says Brian Menell, chief executive officer of TechMet Ltd., which mines niche metals in Burundi and processes them. China either produces or controls 95% of the world’s rare-earth metals, Menell estimates, including the neodymium and praseodymium used to make critical magnets in electric vehicles. It also controls an estimated 60% to 65% of the cobalt and lithium needed for their batteries and 75% of all tungsten, a high-density metal used for penetrative missiles. TechMet recently hired Admiral Mike Mullen, former chairman of the U.S. Joint Chiefs of Staff, to chair its advisory board.

“You will not be the leading 5G or chip provider in both the U.S. and China, that much is becoming clear,” says Andrew Gilholm, who directs analysis for greater China and North Asia at Control Risks, a consulting firm. Yet there are limits to how far this enforced separation can go. “How do you restrict exports of AI? These are intangible things that are not developed by one company or country but are developed globally on open platforms,” he says.

Similarly, when it comes to driverless cars, China is as unlikely to succeed without access to American technology as the U.S. is without rare-earth metals. China’s autonomous-vehicle systems are still several years behind those in the U.S., according to Patrick Lozada, China director at Albright Stonebridge Group, a global advisory firm. Proposed U.S. Department of Commerce export controls on the transfer of “emerging” and “foundational” technologies, including geospatial positioning and computer chips, could crush China’s program.

“Things were much clearer when trains ran on two different gauges of track,” Lozada says, referring to the different rail widths that hindered trains from crossing between the Soviet Union and the West. “The world is so much more interconnected and complex than 50 years ago.”

The case of Vietnam also suggests that concerns about the emergence of internet governance blocs may be oversimplified. This year the authoritarian government in Hanoi became one of the latest to adopt tough cybersecurity laws modeled on China’s, attracted by the promise of heightened domestic control. Yet Vietnam, which sees Beijing as its primary security threat, isn’t joining any Chinese camp. When it announced the first steps in a 5G rollout last month, Vietnam’s biggest mobile operator, Viettel Group, said it was building its own technology, not using Huawei’s.

The U.S. isn’t having an easy time getting allies to close ranks, either. It has so far persuaded only a handful of countries to ban Huawei, notably Australia and Japan. If Britain does decide to fall in line, it would be the first country in Europe to do so. Most countries will, like the U.K., try to straddle the two superpowers, says Samm Sacks, cybersecurity policy and China digital economy fellow at New America, a Washington think tank.

Britain’s final decision on Huawei is still to be made, and Prime Minister Theresa May, who stepped down as leader of the Conservative Party on June 7 to clear the way for a race to succeed her, probably won’t be making it. Some of her potential replacements have warned against being naive on the security threat the Chinese company poses.

Back in Oxfordshire, a slightly alarmed employee recently denied a reporter access to the Huawei cybersecurity center. It’s overseen by a board chaired by an official from GCHQ, the U.K. equivalent of the U.S. National Security Agency. The board’s latest annual report on the center’s work acknowledges that Huawei products expose U.K. mobile networks to security risks but says that’s a result of sloppy coding practices, not state sabotage. As long as those failures persist, the report says in language that’s both diplomatically vague and loaded, “it will be difficult to appropriately risk-manage future products.”

BOTTOM LINE –
The U.S.-China race for tech dominance may look like a new cold war, but almost no countries have been persuaded to cut off one side or the other.

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