Back in the late 1980s, the American government was frustrated by the size of Japan’s trade surplus with the United States and launched negotiations called the Structural Impediments Initiative (SII). The theory of President George H.W. Bush’s trade team was that Japan had structural barriers that prevented American companies and others from selling more parts to Japanese automakers. The heart of the matter was that Japanese companies had developed group structures, first called zaibatsu during World War II and renamed keiretsu in subsequent years to make them seem less threatening. Each Japanese car company had established suppliers with long-term contracts and they had cross-holdings in each others’ shares. It was difficult for American companies to break into that interlocking structure.
The negotiations essentially went nowhere. And we had enormous leverage over the Japanese compared to what we have over China today. We had defeated Japan militarily, written its constitution and maintained 50,000 troops in the country. Still, we could not force Japan to undo the structure of its economy.
So today, President Trump’s negotiators are targeting China’s industrial policies that have the name, “Made in China 2025.” The Chinese have identified the top technologies where they want to become self-sufficient and perhaps world dominant in the next seven years. Billions of dollars of government money are pouring into Artificial Intelligence, facial recognition, autonomous and hybrid vehicles, supercomputers, genetic editing and the like.
If we could not force Japan to alter the structure of its economy and its aspirations, what are the chances that this American administration some 30 years later will be able to force the Chinese to abandon their ambitions? Absolutely nil. We don’t have nearly the same leverage. And the lesson is that a trading rival can’t be forced to give up what it regards as a comparative advantage, just because Washington tells it to.
The moral of the story is that we have to make sure our technology base remains the world’s most advanced. That’s why a story in today’s New York Times is so important. The Pentagon is asking Trump to create a national strategy for AI. It’s an incredibly sensitive and complex issue. The Chinese are very candid in acknowledging that they are working on a “military-civil fusion.” Their military has no qualms about using AI.
But our technologists at Google and elsewhere are leery about cooperating with the Pentagon, fearing that their software will be used to launch weapons. There must be a middle ground in which the military can use AI to screen targets and assess their threat without automatically launching missiles. We need to hammer out a consensus.
So rather than wasting time and resources trying to get the Chinese to abandon their technology base, we should be concentrating on making sure that our new technologies are developed in compliance with our values. The place to do that is here at home.
