Shadow Government

Here’s How the United States Can Keep Its Technological Edge

Washington needs to do more to foster and protect the country’s innovation ecosystem.

AT&T executive Randall Stephenson, right, explains  5G cellular network deployment to U.S. President Donald Trump on June 22, 2017. (Olivier Douliery/Pool/Getty Images)
AT&T executive Randall Stephenson, right, explains 5G cellular network deployment to U.S. President Donald Trump on June 22, 2017. (Olivier Douliery/Pool/Getty Images)

This month, U.S. President Donald Trump signed a new executive order on artificial intelligence, directing federal agencies to prioritize AI investment, research, and development. While far too modest in actionable recommendations, the executive order signals a welcome, more ambitious approach to strengthening the U.S. innovation ecosystem and safeguarding the U.S. technological advantage over China and other countries.

In an era of growing strategic competition, the United States must adopt measures to out-innovate China, not just restrict its technological rise. While curbing the openness of the U.S. economy may serve the United States well when playing defense, it puts the country at a severe disadvantage when trying to supercharge its own technological innovation. Managing these competing interests will require the Trump administration to wield a scalpel, not a sledgehammer: a nuanced, multifaceted policy that safeguards the three primary pillars of the innovation ecosystem—investment, people, and goods—while emplacing sensible restrictions to protect U.S. national security when necessary.

The first element of the U.S. innovation ecosystem subject to these dueling interests is foreign investment in U.S. firms. In August of last year, Trump signed the Foreign Investment Risk Review Modernization Act, expanding the jurisdiction of the Committee on Foreign Investment in the United States (which looks into the national security implications of foreign investments) to include certain noncontrolling investments that permit foreign investors access to certain types of intellectual property. It does not, however, extend the committee’s jurisdiction to more modest investments that do not grant decision-making authority or access to sensitive technical information. The law appears to strike the right balance between protecting critical technologies and preserving U.S. access to much-needed foreign direct investment, which reached $1.6 trillion in U.S. high-tech industries in 2016. Whether the act is ultimately effective will depend on the scope of the Treasury Department’s final regulations, which, if widened, could unintentionally undermine the vitality of U.S. companies engineering the very technologies crucial to maintaining the United States’ technological edge.

Where national security mandates regulation, the U.S. government can help boost firms’ competitiveness and maintain access to adequate capital by incentivizing new U.S. investment. The Defense Department could, for example, offer purchase commitments, providing guaranteed revenue to attract investors and help bridge the valley of death between prototyping and production. The government could also help connect critical technology and resource suppliers to private sector capital. In modest ways, the department has already embraced this role by engaging both communities through the Defense Innovation Unit, the Defense Advanced Research Projects Agency, and other channels. A healthy U.S. innovation environment is in the national security community’s best interest—increased partnerships with the private sector could help the government fill emerging technological needs and remove adversaries from critical components of the U.S. supply chain.

The second element of the U.S. innovation ecosystem is the free flow of people. Skilled immigrants have catapulted the United States to global technological leadership: Immigrants founded 52 percent of new Silicon Valley companies between 1995 and 2005. Skilled immigrants have catapulted the United States to global technological leadership. Recent steps, such as the Trump administration’s May 2018 decision to cut the length of visas for Chinese graduate students in certain science, technology, engineering, and mathematics fields, may ultimately harm U.S. competitiveness and betray the country’s values. While the intent of the policy—to curb Chinese theft of sensitive U.S. technological know-how—is important, practically it means the United States is educating the next generation of tech leaders and then sending them home to support China’s rise as an innovation powerhouse.

Instead, given a projected shortfall of 1 to 2 million skilled workers in these fields in the United States by 2025, the country should incentivize students with needed skills to stay and contribute to the U.S. economy while imposing appropriate safeguards to limit non-U.S. citizens from working on the most sensitive technologies. The United States should streamline the process for earning a work visa for the most talented researchers in fields including AI, robotics, and biotechnology. It should simultaneously impose additional screening measures for foreign students working in sensitive laboratories, particularly those funded by the Defense Department.

The third element of U.S. economic dynamism is the free trade of goods, which has historically been subject to some level of restriction by both tariffs and export controls. Today, many emerging technologies have both commercial and military applications. Therefore, export controls should be focused not on entire classes of technologies—like AI, robotics, and autonomous systems—but instead on specific applications that would pose a threat to U.S. national security in the hands of competitors. However, U.S. strategy cannot merely be defensive; it should also aggressively promote U.S. exports. In allied countries that have or are considering restricting Huawei, the Chinese technology company that U.S. officials say poses a security risk, from their networks, U.S. and allied telecommunications companies should fill the gap. And in nonallied countries receiving entreaties from China to choose Huawei as their 5G cellular network provider, Washington should provide incentives to companies in the United States and allied countries to provide competing offers. Given the stakes and risks, China’s path to constructing a digital Silk Road should not go uncontested.

Competitiveness requires both affirmative moves and defensive measures to drive private sector innovation and protect U.S. national security. A carefully crafted policy that accounts for both is the United States’ surest way to maintain its technological leadership.

Michèle Flournoy is a co-founder and managing partner of WestExec Advisors. She served as U.S. undersecretary of defense for policy from 2009 to 2012.

Gabrielle Chefitz is an associate at WestExec Advisors.

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