The coming trade battle: As techno-protectionism takes hold across the world, there will be no winners

Arriving in Beijing last month, I knew I would not be able to access Google, Facebook or Uber. As strange as it was to go without these staples of online life in the West, it was even stranger to find that local Chinese didn’t seem to feel deprived at all. They search through Baidu, get their social media fix on WeChat, hail rides on Didi, curate news through sites like Toutiao. And while they know Beijing is watching, they accept this surveillance as normal.

The Chinese government has carved out an alternative internet universe with its own brands, rules and culture, in which privacy doesn’t exist. But its real ambition is to break out of this parallel universe and dominate not just the internet but the technology industry worldwide. To contain Beijing, the United States and its allies are fighting back with a campaign of techno-protectionism, opening a perilous new front in the global trade battles.

President Trump is the unlikely leader of the fight against Chinese tech dominance. Widely seen as a champion of rust belt industries, he recently slapped heavy tariffs on all the leading aluminum and steel exporters, drawing fierce protests not only from China but also from American allies like Germany and Canada. But steel is a side show compared to the emerging tech battle with China.

Technology will decide which country emerges as the world’s dominant economic power in the long run. While about 20% of per capita gross domestic product growth is driven by labour and capital, the remaining 80% is determined by how rapidly an economy is developing and applying new technology to increase production. China’s ambition to catch up to Western living standards thus depends largely on how rapidly it can match or surpass Western technology.

Even allies miffed by Trump’s steel tariffs remained largely supportive when he imposed $50 billion in tariffs on China — and only China — in response to its predatory tech trade practices, then threatened another $200 billion if Beijing follows through on a promise to retaliate. The overwhelming consensus in the West is that Beijing is catching up illegitimately, by forcing companies that invest in China to share their best technology, or dispatching hackers to steal it.

Beijing has banned some foreign competitors like Google and Facebook outright, and regulated others so heavily that they have been compelled to sell themselves to Chinese rivals (Uber) or forced to consider pulling out of China (Amazon). In essence, China has created domestic internet monopolies which are generating enough cash in their vast local market to finance aggressive expansion abroad. I have been told, for example, that Toutiao already sells its novel content curating service to one in ten Japanese.