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Davos opens with US-China contest as ‘the key problem of our time’

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As for President Trump, he has expressed increasing concern about how his trade dispute with China is dragging down markets. For the moment, administration insiders say Trump is siding more with Treasury Secretary Steve Mnuchin’s penchant for deal-making, rather than U.S. Trade Representative Robert Lighthizer’s harder line approach, that seeks more fundamental changes in how China operates.

Though it is harder to “price in” the potential impact of an escalating U.S.-Chinese tech war, the impact on the global economy and geopolitics will be far greater and of generational consequence. History has shown that the societies that dominate technological advance also gain other advantage, from military superiority to national prosperity.

This week’s news that a federal investigation into Huawei had reached an advanced stage further escalates tensions after last month’s arrest in Canada of Huawei’s Chief Financial Officer Meng Wanzhou on fraud charges linked to Iranian sanctions violations.

At the same time, a bipartisan group of U.S. legislators introduced bills that would ban the sale of U.S. chips or other components to Huawei, ZTE Corp or other Chinese telecommunications companies that violate US sanctions or export control laws.

Those actions come at a time when the U.S. intelligence is increasingly concerned that at current trajectories, China could come to dominate emerging technologies. The concern is most critical in the area of artificial intelligence, where China’s complete control of vast reservoirs of data without privacy protections could be decisive.

The growing danger is that the tech race could become the primary battleground in a struggle between democracy and autocracy – and between China and the U.S. The dangers of a technological cold war, a zero-sum contest for global dominance that ultimately separates Chinese and U.S. tech sectors from each other and divides up the world, are increasing.

A better outcome would be a collaborative future where the two sides manage their differences, competing vigorously for markets and global influence; while at the same time agreeing to common, transparent and accountable international standards that protect third parties and individual rights.

On current trajectories, however, conflict is more likely.

As Henry Kissinger recently said: “We’re in a position in which the peace and prosperity of the world depend on whether China and the United States can find a method to work together, not always in agreement, but to handle our disagreements. … This is the key problem of our time.”

Frederick Kempe is a best-selling author, prize-winning journalist and president & CEO of the Atlantic Council, one of the United States’ most influential think tanks on global affairs. He worked at The Wall Street Journal for more than 25 years as a foreign correspondent, assistant managing editor and as the longest-serving editor of the paper’s European edition. His latest book – “Berlin 1961: Kennedy, Khrushchev, and the Most Dangerous Place on Earth” – was a New York Times best-seller and has been published in more than a dozen languages. Follow him on Twitter
@FredKempe
and subscribe here to Inflection Points, his look each Saturday at the past week’s top stories and trends.

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