As the United States and China battle for technological supremacy, will countries like New Zealand be forced to pick a side or can the status quo be maintained?

To some, the appeal of the internet lies in its role as a unifying force – but that ideal is becoming increasingly challenged, as Washington and Beijing have looked to technology as yet another avenue for geopolitical rivalry.

Talk of technological "decoupling" has created significant unease in some quarters, and was the focus of an event held last week by the NZUS Council, a non-partisan NGO established to improve bilateral relations.

Dr Reuben Steff, a senior lecturer in international affairs at the University of Waikato, said technological decoupling was about the US and China each seeking greater control of and access to data and advanced technologies.

There was also a “philosophical disagreement” over the governance of the internet, with democracies promoting more open systems and the free flow of information, and autocracies seeking greater control of information and more closed systems.

In a paper for the USNZ Council, Steff laid out three scenarios for the future of decoupling, ranging from an intensification of the status quo at the lowest end to the worst-case scenario of a “technological Cold War”, with countries like New Zealand forced to choose between a US-aligned supply chain and a Chinese-aligned equivalent and locked out from whichever side it spurned.

Steff said it was timely to be discussing the potential implications of the different scenarios for New Zealand, given the supply chain vulnerabilities exposed by the Covid pandemic and the growing geopolitical tensions.

Ainikki Riikonen, a research associate in the Center for a New American Security’s technology and national security programme, said the Biden administration was making multilateralism the bedrock of its approach, after an “overcorrection” in recent years with unilateral export controls and company blacklisting.

“There's been this acknowledgement that the United States really can't go it alone. When we think about supply chains and the tech ecosystem writ large, it is just too large, it's too interconnected.”

As well as other countries, Riikonen said the US would need to work with private companies and non-governmental organisations involved in setting standards that could face interference from Beijing.

READ MORE

• Chinese Embassy hits back after US Ambassador to New Zealand's criticism of China
• United States Ambassador Scott Brown unleashes on China 'taking away people's ability to think'
• China’s influence in the Pacific under the spotlight

Any action did not need to focus on particular industries, but identifying and safeguarding “foundational” technologies, such as 5G, artificial intelligence and semiconductors, as well as areas of human rights concern such as surveillance systems.

Riikonen said the issue of decoupling should not be framed as “strictly a US versus China contest”, as other countries were independently developing concerns about the CCP’s desire to strengthen its control over the technology sector and shape international standards in its favour.

Companies like Yahoo and LinkedIn were already starting to pull out of China due to the challenging business environment, with issues around data storage and what types of content could be put on platforms.

However, she did not think there would be a “massive cleavage” between American-centred and China-focused technology ecosystems, given the economic effects of such a drastic move.

“I don't envision a cold war scenario, especially because there'd be a pyrrhic victory – I mean, even if the US secure certain supply chains [and] their national security interests, if we sort of nuke our own economic security interests while we do it, that's bad for everyone, everywhere.”

'Truly international' regulations needed

Anna Kominik, the Asia-Pacific regional director of autonomous aircraft developer Wisk, said the air industry had been noticeably affected by geopolitical and macroeconomic shifts, with US manufacturers facing a growing challenge from Chinese, South Korean and German competitors after over a century of dominance.

Kominik said Wisk was increasingly mindful of supply chain resilience given potential restrictions on raw materials, while a number of companies were pursuing a “dual strategy” with different approaches for the American and Asian markets.

“Both of those markets are significant so the complexity and the added cost that that creates is still worth it, whether it be automotive or aerospace, but it does create a complexity and a different way of operating.”

It was important to have “truly international” regulations for the aviation sector, given the complexities of developing an entirely new type of aircraft and the need to give the public sufficient confidence about their safety and reliability.

Kominik said Chinese aerospace companies like DJI and EHang were taking a fundamentally different approach both to regulation and community engagement, with greater state backing and less of a focus on gaining “social licence” for new technologies.

The Civil Aviation Authority in New Zealand was already working closely with its counterparts in the US, UK, Canada and Australia, but could expand that cooperation, while work through international fora like APEC was also valuable.

“The world's becoming more difficult and I think together with industry and the Government, we're going to have to be a bit more sophisticated than we have been.”

Stuart Wilson, the chief executive of New Zealand-based network monitoring company Endace, said state-based actors and other large consumers of silicon were placing large orders and “swallowing up” most of the supply, forcing businesses to forecast their needs a year in advance compared with just three months in the past.

The entire world was reliant on the Taiwan Semiconductor Manufacturing Company, the world’s largest semiconductor foundry, but the company was in a delicate position given geopolitical questions about Taiwan’s sovereignty and China’s push for unification, Wilson said.

“Taiwan and TSMC, that's going to remain a pivot point for some time. Until Intel and other foundries get set up in Arizona, which will take several years, it's going to continue to be a real stone in the shoe.”

The Government had taken a hands-off approach to export policy and supply chains in the past, but could look to the US which had more explicit rules on how companies should sell and purchase goods, he said.

“The world's becoming more difficult and I think together with industry and the Government, we're going to have to be a bit more sophisticated than we have been.”