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Are we prepared for the technical decoupling between the US and China?

Technology supply chain issues are at the cutting edge of the current geopolitical tensions between the United States and China, and we are not immune to the practical implications.

Gursimrat Ganda

Technology supply chain issues are at the cutting edge of the current geopolitical tensions between the United States and China, and we are not immune to the practical implications.

OPINION: The Covid-19 pandemic has accelerated our reliance on technology to work, raise children, connect with friends and family, and find sourdough recipes. At the same time, it has revealed the vulnerabilities in the global supply chains we rely on to live this modern life.

We are seeing increasing international competition for and protectionism of the critical technology needed to deliver innovations, from 5G and electric vehicles to cloud computing and artificial intelligence. But what does this mean for us as a small island nation at the bottom of the world?

This question is central to our latest briefing and scenarios: The big disconnect? Technology decoupling between the US and China and its implications for New Zealand written by Waikato academic Dr. Reuben Steff. Technology supply chain issues are at the cutting edge of the current geopolitical tensions between the United States and China, and we are not immune to the practical implications.

We all benefit from the largely invisible mechanics of complex global supply chains that provide a choice of ever-evolving safe, reliable and cost-effective technologies. New Zealand companies, innovators, researchers and universities are intertwined in these supply chains, and maintaining access to critical technologies and their supporting digital ecosystems will be vital to our future economic prospects. It could also be one of the biggest challenges we face right now.

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Just a few years ago, we were unlikely to have considered the possibility that global technology supply chains could collapse and splinter into clearly aligned trading blocs – one targeting the US and the other targeting China. Such a change could occur through the disengagement of research and development and critical manufacturing companies, and new ‘techno-nationalist’ rules and regulations that limit where companies can source materials or technology.

These are the kinds of scenarios that Dr. Steff is presented. But far from being a theoretical exercise for curious academics, this is happening now. The US Senate has passed industrial policy legislation aimed at improving the United States’ ability to compete with Chinese technology. The US and the EU agreed to more closely coordinate technology issues, and China, for its part, made technological self-reliance the central theme of its 14th Five-Year Plan. The Digital Silk Road – the technological vector of China’s global infrastructure Belt and Road Initiative – is another important aspect of China’s strategy.

Ongoing strategic competition between the US and China is now causing global fragmentation as both seek to reduce their interdependence through a controlled decoupling of their technology sectors. The early and notable moves so far have involved the rollout of 5G telecommunications, semiconductor chips (computer) and the rare earth minerals needed for a range of new developments, such as long-life battery storage.

Decoupling will reduce global innovation and impact economies and businesses as investment and financial flows shift.

UNSPLASH

Decoupling will reduce global innovation and impact economies and businesses as investment and financial flows shift.

A major driver behind this tremendous disconnect is the growing need of Washington DC and Beijing to access and control the core components of critical technologies, as well as data and supporting infrastructure beyond their borders (the controversy surrounding the rise of Tiktok is out there). an example of). Data is considered ‘the new oil’ – the primary ‘fuel’ for many advanced technologies, providing benefits to governments, businesses and militaries who can use and integrate it in innovative ways.

New Zealand is an albeit small player in the global technology market. It is one of our fastest growing industries with the promise of quality jobs and weightless exports – of which the US is by far our largest market. If geopolitical tensions continue to change technology supply chains, it will have an increasing impact on our technology sector and the country in general.

There are few winners of the decoupling between the US and China. Decoupling will reduce global innovation and impact economies and businesses as investment and financial flows shift. Should tensions escalate and become entrenched, Dr. Steff that New Zealand faces tough choices, with significant and costly disruption affecting thousands of our businesses because of the materials and technology they can rely on and rely on, and the markets in which they can operate.

These are the kinds of scenarios we need to explore to explore how prepared we are, both in government and in business, to manage our response to the major disconnection as it is currently unfolding and the directions it could take. Because whatever happens, we have to be ready.

Jordan Small is the Executive Director of the NZUS Council.

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