TECHNOLOGY RULES: Who has the best always wins!...

TECHNOLOGY RULES: Who has the best always wins! Christopher Netelkos

This presentation discusses the influence of technology and examines how China acquires U.S. technology through underpayment and deceptive practices.

According the SPM tags, such transfers have significant National Security Risks and Long Term Unintended Consequences to cause the American dollar to lose its status of exceptionalism before the end of this century:

  (1) National Security Risks: (1) Leakage to Adversaries: Technology intended for friendly nations may inadvertently fall into the hands of U.S. adversaries through espionage, cyber attacks on partner systems, or changes in the partner government's alignment.

(2) Erosion of Military Advantage: Sharing advanced military technology can reduce the U.S.'s own qualitative military edge as other nations acquire similar capabilities, potentially challenging U.S. dominance in future conflicts.

(3) Enabling Undesirable Behavior: The transfer of military and surveillance technology could be used by recipient governments to repress their own populations or engage in actions contrary to U.S. interests or international norms.

(4) Economic and Commercial Impacts: Intellectual Property (IP) Theft: Sharing technology increases the risk of intellectual property theft. Foreign companies and governments can reverse-engineer U.S. innovations, often without fair compensation.

(5) Creation of Present and Future Competitors: By sharing technological know-how, the U.S. can inadvertently build up the industrial and technological capabilities of foreign competitors, who may eventually challenge U.S. companies in the global market.

(6) Job Outsourcing: The transfer of manufacturing processes and technical expertise to other countries can sometimes lead to U.S. companies moving production overseas to leverage cheaper labor, resulting in job losses domestically. 

(7) Political and Diplomatic Challenges: i. Dependence and Leverage: Recipient nations may become overly dependent on U.S. technology and support, which can create complex political dynamics and be used as leverage in diplomatic negotiations. ii. Loss of Control Over Usage: Once technology is transferred, the U.S. government loses some control over how it is ultimately used or modified, potentially leading to unforeseen applications or further proliferation. iii. Arms Races: The introduction of advanced U.S. technology into a region can prompt neighboring countries to seek similar or counter-technologies, potentially fueling regional arms races.

(8) Intellectual Property (IP) Theft: One of the most significant risks is the potential for foreign entities, including adversaries, to steal or misuse U.S. proprietary technology and intellectual property. This unauthorized access can erode the competitive advantage of U.S. companies, lead to substantial financial losses, and enable other nations to bypass years of research and development.

(9) Enhancement of Adversary Military Capabilities: Sharing "dual-use" technologies (those with both commercial and military applications) can inadvertently accelerate the military or intelligence capabilities of potential adversaries. This could directly threaten U.S. national security interests and potentially require the U.S. to invest more in countermeasures to maintain its military edge.

(10) Loss of Market Share and Competitiveness: Proliferation of a specific technology can help other countries develop their own domestic industries, eventually leading to increased global competition and a loss of market share for U.S. firms. This can result in reduced revenue for U.S. companies, which in turn means less money for future R&D and innovation.

(11) Supply Chain Vulnerabilities: Intertwined global technology supply chains can create dependencies on foreign manufacturers or service providers. This can make the U.S. vulnerable to disruptions caused by geopolitical tensions, trade restrictions, or cyberattacks originating from other countries.

(12) Espionage and Data Security Risks: Collaboration involves significant data sharing, which exposes sensitive personal and government-related data to potential exploitation by foreign intelligence services. This data can be used for espionage, blackmail, or cyberattacks on critical infrastructure.

(13) Compliance and Legal Penalties: U.S. companies involved in international technology transfer face a complex web of export control regulations (like ITAR and EAR). Unintended or unknowing violations can lead to severe penalties, including hefty fines, criminal charges, and the loss of export privileges.

(14) Erosion of Trust in U.S. Technology: Concerns about potential "backdoors" or the U.S. government's ability to access data in U.S. tech products can lead to other countries, even allies, reducing their reliance on American technology, as seen in cases following high-profile surveillance disclosures. 

According to SPM tags, China acquires foreign technology through a combination of licit, coercive, and illicit methods as part of a state-directed, long-term national strategy to achieve technological self-reliance and global leadership.

These methods can be broadly categorized into the following: 

(1) Illicit Methods:

i. Cyber Espionage: Chinese state-sponsored actors and hacking groups (such as APT31 and "Nylon Typhoon") conduct extensive cyber intrusions into foreign company networks, government agencies, and research institutions to steal intellectual property (IP), trade secrets, technical data, and sensitive communications. This occurs on a massive scale and often goes undetected for years.

ii. Physical Theft and Smuggling: In response to increased export controls, there has been a resurgence of older methods like smuggling key components (e.g., advanced microchips) into the country.

iii. Human Intelligence: Chinese intelligence officers have been known to approach businesspeople and researchers at trade fairs and exhibitions to gain information or introduce malware. 

(2) Coercive and Legal Methods

i. Forced Technology Transfer: Historically, a key method has been requiring foreign companies to enter into joint ventures (JVs) with local Chinese firms to access the Chinese market. This structure often enables Chinese partners to learn and eventually replicate the foreign technology.

ii. Talent Acquisition Programs: The Chinese government actively incentivizes overseas Chinese talent and foreign experts and researchers to return to China or partner with Chinese companies, bringing valuable know-how and expertise with them.

iii. Exploitation of Academic and Research Collaboration: The open research environment in foreign universities and institutions can be a "leakage point" where Chinese state-directed individuals or entities gain access to cutting-edge, pre-publication research and early-stage technologies.

iv. Foreign Direct Investment (FDI) and Venture Capital (VC): Chinese firms, often backed by state-owned funds, invest in or acquire foreign technology companies and startups to gain access to their technology and R&D.

iv. Reverse Engineering: China legally purchases foreign products, components, and dual-use technologies and then reverse engineers them to build indigenous production capabilities, often creating near-replicas with "Chinese characteristics."

ACCORDING TO SPM TAGS, the U.S. has a complex policy on technology transfer, involving strict export controls to protect national security and economic interests, primarily through the International Traffic in Arms Regulations (ITAR) for military items and the Export Administration Regulations (EAR) for "dual-use" items. Additionally, federal laws like the Technology Innovation Act of 1980 and the Federal Technology Transfer Act of 1986 mandate and promote the transfer of federally funded technologies to the private sector for commercialization. Recent regulations have specifically targeted the export of advanced technologies like AI and semiconductors to certain countries to prevent their use by adversaries. 

Key policies and regulations

• Export Controls: The US government tightly controls the transfer of technology, both military and "dual-use," to other countries. See: note 1.

  • ITAR: Regulates exports of military equipment and technology, managed by the Department of State's Directorate of Defense Trade Controls (DDTC).

  • EAR: Regulates "dual-use" items (those with both civilian and military applications) and is managed by the Commerce Department's Bureau of Industry and Security (BIS).

  • Office of Foreign Assets Control (OFAC): Implements sanctions that restrict exports to certain countries or entities.

• Promoting domestic commercialization:

  • Laws such as the Stevenson-Wydler Technology Innovation Act of 1980 and the Federal Technology Transfer Act of 1986 promote the transfer of federally funded research and technology to industry for commercial use.

  • Mechanisms like Cooperative Research and Development Agreements (CRADAs) and patent licensing are used to facilitate this process.

• Recent restrictions on advanced technologies:

  • The US government has imposed new restrictions on the export of advanced AI and semiconductor technologies, particularly to countries considered a national security risk.

  • Rules limit the amount of computing power that can be transferred to or installed in certain countries and require companies to keep a significant portion of their AI computing power within the US.

• Enforcement and compliance:

  • Transferring controlled technology without the required license can result in severe penalties, including fines and imprisonment.

  • Companies are responsible for ensuring their transfers comply with ITAR, EAR, and other applicable regulations. 

How the U.S. government manages technology transfer

• Licensing: The government issues licenses as a way to allow and trace transfers of export-controlled technology.

• Scrutiny: The US government closely scrutinizes technology transfers to foreign companies, especially those in countries identified as potential risks to national security.

• National security reviews: The Department of Defense conducts national security reviews to provide policy and regulatory guidance on technology transfers. he US has a complex policy on technology transfer, involving strict export controls to protect national security and economic interests, primarily through the International Traffic in Arms Regulations (ITAR) for military items and the Export Administration Regulations (EAR) for "dual-use" items. Additionally, federal laws like the Technology Innovation Act of 1980 and the Federal Technology Transfer Act of 1986 mandate and promote the transfer of federally funded technologies to the private sector for commercialization. Recent regulations have specifically targeted the export of advanced technologies like AI and semiconductors to certain countries to prevent their use by adversaries. 

UPDATE: TECHNOGLY RULES 2025 FROM THE LENS OF THE TARIFF WAR.

Overview of Recent Developments

In 2025, technology competition has become the defining factor in the relationship between the United States and China, particularly under the leadership of President Xi Jinping and President Donald Trump. The concessions made during their meeting in South Korea on October 29, 2025, did not advance the bilateral relationship but rather resulted in trade-offs that potentially compromise both national and economic security.

Key Concessions and Trade-Offs

President Trump agreed to reverse certain tariffs and paused the imposition of new fees on Chinese ships. In response, China suspended the rollout of its rare earths restrictions, introduced in October, for one year and agreed to resume purchases of U.S. soybeans. While this "deal" allowed President Trump to claim a victory for American farmers and companies, China essentially restored the previous status quo by agreeing to buy soybeans and delaying further restrictions on rare earth exports.

Diplomatic Dynamics

President Xi adeptly appealed to Trump’s domestic agenda, expressing that China's development aligns with the president's vision to "make America great again." Trump reciprocated with praise, calling Xi “a great leader of a great country” and a “great friend.” These personal gestures underscored the rapport between the two leaders during the negotiations.

Aftermath and Official Statements

Following the meeting, President Trump celebrated the agreement, stating that China had pledged to take greater action against the flow of chemicals used in fentanyl production and would purchase more U.S. soybeans. China’s Ministry of Commerce subsequently announced a one-year suspension of the rare earths restrictions introduced in October, although it did not mention earlier controls from April.

Export Control Measures and SPM-EF Analysis

The Trump administration agreed to pause for one year the expansion of a rule that restricted additional Chinese companies from accessing advanced technology. This regulation, issued just four weeks earlier, had broadened the "entity list," which blacklists foreign companies viewed as national security threats. According to the Subjective Probability Model on Economics Factor (SPM-EF), this export control measure carries an SPM-EF of 84.346%, indicating a significant advantage for China over the United States.

Implications for U.S. Policy

For China, the U.S. decision to make export controls a negotiable item marks a notable shift in American policy. Chinese officials have long sought the rollback of these measures in discussions with multiple presidential administrations. President Trump’s actions discarded decades of precedent by treating export controls as tradable assets in the negotiation process.

Overview:

The evolving landscape of technology competition now fundamentally shapes U.S.-China relations. Through these recent negotiations, President Xi succeeded in securing critical U.S. concessions, further highlighting the strategic significance of technology in the ongoing tariff

According the SPM tags, such technology transfers have significant National Security Risks and Long Term Unintended Consequences to cause the American dollar to lose its status of exceptionalism before the end of this century

______________

Note 1: Export control measures are used to prevent the proliferation of weapons, protect national security, and advance foreign policy goals by regulating the transfer of sensitive goods, technology, and information to other countries. These controls are also implemented to maintain U.S. economic competitiveness and prevent certain items from being used for harmful purposes, such as terrorism or human rights abuses. 

Key objectives of export controls:

• National and international security: To protect national security and prevent the spread of weapons of mass destruction (WMDs), conventional arms, and other sensitive items that could be used for military purposes.

• Foreign policy objectives: To support and advance a country's foreign policy goals, such as by preventing trade with embargoed nations or encouraging responsible behavior from certain countries.

• Economic interests: To preserve economic competitiveness and protect industries and trade goals.

• Preventing misuse: To stop items from falling into the hands of unauthorized or malicious actors, such as terrorist groups, or from being used in ways that could lead to human rights abuses. 

What they regulate:

• Physical goods: This includes a wide range of items, from chemicals and materials to machinery and software.

• Technical data: Information about the design, manufacture, use, or operation of controlled items.

• Technical assistance: Providing instructions, training, or other support related to controlled items. 

Examples of regulated activities:

• Physical shipments: Shipping physical goods to a foreign destination.

• Electronic transfers: Sending software or technical data electronically across borders.

• Foreign nationals in the U.S.: Sharing controlled information or technology with foreign nationals while they are within the exporting country's borders.

• International travel: Researchers traveling with controlled items or data.

• Hiring: Hiring foreign nationals who may have access to controlled technology. 

Note 2: concerns about rare earths as a national security issue existed prior to Trump's presidency. China's 2010 export restrictions on rare earths to Japan heightened awareness, and subsequent legislative actions and government assessments by both the U.S. and other nations recognized the vulnerability of relying on a single source for these critical materials, especially those used in defense and high-tech industries. 

• Pre-Trump recognition:

  • China's 2010 export actions: When China temporarily restricted exports to Japan in 2010, it served as a wake-up call for many countries, including the United States and Japan, about their dependence on Chinese rare earths.

  • Congressional action: U.S. legislation related to rare earths was introduced in Congress before 2016, with the number of bills often increasing in response to market volatility and geopolitical events.

  • Government reports: The U.S. Geological Survey and other bodies consistently identified critical minerals, including rare earths, as national security risks long before the Trump administration.

• Underlying reasons for concern:

  • Defense and technology: Rare earths are essential components for high-tech military applications, such as guidance systems and radars, as well as consumer electronics and clean energy technologies.

  • Supply chain vulnerability: Although not always rare in the ground, the processing of rare earths is concentrated in China, creating a significant vulnerability in the supply chain for nations that lack this processing capability.

  • Economic security: Dependence on a single dominant supplier for critical materials raises concerns about economic and national security, leading to efforts to develop alternative sources and supply chains.