Technology and Innovation | Council on Foreign Relations

China

Beijing's Silk Road Goes Digital

Rachel Brown is a research associate in Asia Studies at the Council on Foreign Relations. The pageantry at last month’s Belt and Road Forum in Beijing highlighted the two major prongs of China’s Belt and Road Initiative: the Silk Road Economic Belt, which runs through Central Asia to Europe, and the 21st Century Maritime Silk Road, which runs through Southeast Asia, Africa, and Europe. But a third prong of the initiative – the “digital new silk road” or “information silk road” – received less attention. Yet this component could generate significant consequences. The idea of incorporating digital sectors like telecommunications, internet of things infrastructure, and e-commerce into One Belt, One Road (OBOR) is not new. The March 2015 white paper articulating the vision for OBOR called for growth in digital trade and the expansion of communications networks to develop “an information silk road”. A few months later, Lu Wei, then director of the Cyberspace Administration of China, told the China-EU digital cooperation roundtable that, “We can build a digital silk road, a silk road in cyberspace”. The concept even received a shout out in the joint communiqué from the recent Belt and Road Forum, with a pledge to support “innovation action plans for e-commerce, digital economy, smart cities and science and technology parks.” But outside the bland formulations of policy documents, what will the digital new silk road actually look like? Many aspects of the concept are a natural extension of the “going out” policies pursued by Chinese telecommunications companies and could fill unmet needs for digital connectivity; greater connectivity could in turn open new markets for Chinese firms in e-commerce and other areas. But overall, the digital new silk road looks less like a cohesive concept and more like a catchall phrase applied to everything from earth observation projects at the Chinese Academy of Sciences to cell phone sales by Xiaomi. So are companies and officials simply paying lip service to Xi Jinping’s One Belt, One Road vision when they speak of the digital new silk road or is there the potential for something more? The three sectors below offer insights into the ambitions for – and possible pitfalls of – OBOR’s third prong: 1. Telecommunications and Satellites In addition to new railways, ports, and power plants, another infrastructure priority under OBOR is improving “international communications connectivity” through “the construction of cross-border optical cables and other communications trunk line networks”. State-owned enterprises including China Telecom, China Unicom, and China Mobile have already embarked on OBOR-related projects and are building out the infrastructure to underlie the digital new silk road. Among the ambitious programs are the construction by China and Russia of overland cable links between Asia and Europe. Private companies like Huawei and ZTE have also gotten into the game with projects including a fiber optic cable network in Afghanistan. In addition to cable networks, OBOR also offers the Chinese government a chance to encourage the adoption of its Beidou satellite network, a competitor to GPS, through a “space-based silk road”. The government aims to roll out basic services along the Belt and Road route by 2018 and the State Council Information Office is promoting Beidou’s use in everything from power transmission to transportation. Already, limited use of Beidou has been piloted in Karachi, Pakistan. These new projects will not only enhance digital connectivity in underserved Central and Southeast Asian countries but also facilitate faster and easier to maintain data connections. However, telecommunications cables built by China and Russia could also lead to network splintering if countries seek to insulate their data from traveling through the United States or Europe due to surveillance fears. Additionally, while the expansion of the Beidou system could improve the accuracy of consumer satellite navigation, it could also squeeze foreign companies out of satellite navigation markets in China and certain OBOR nations. Beidou’s development could also have implications in the national security realm as the People’s Liberation Army improves its weapons and tracking capabilities. 2. Smart Cities Another digital infrastructure frontier for Chinese firms is the construction of “smart cities”. Smart cities are broadly defined as urban areas that integrate information and communications technology to improve city operations in everything from traffic flows to water conservation to crime prevention. In recent years, ZTE and Huawei have expanded their efforts to supply smart city projects in OBOR nations such as Malaysia, Kenya, and Germany. Even China’s model smart city, Yinchuan, lies along the path of the path of the original silk road in a region now poised to benefit from new trade routes. Yinchuan offers citizens an array of innovative services including access to city information via QR codes and the ability to pay bus fares upon boarding through facial recognition software. Last December, ZTE’s chief information and strategy officer, Chen Jie, stressed the company’s commitment to sharing its smart cities know-how across the OBOR route. One of the company’s subsidiaries, ZTEsoft, has even co-opted the Belt and Road name for its new initiative the “Data Belt, Information Road”. The program will work with Singapore’s StarHub telecommunications to promote cross-border collaboration on smart city development, operations, and technology. Such collaborations could help modernize cities, increase their efficiency, and promote greater standardization of technologies. However, the increasing reliance of cities on technology also raises cybersecurity risks given the susceptibility of internet of things devices to hacking. Moreover, for countries with often tense relationships with China, there could be broader worries about depending on digital infrastructure supplied by Chinese firms. For example, the City of Pearl, a planned “city within a city” in Manila, is being touted as the largest OBOR project in the Philippines. The project aims to integrate artificial intelligence to regulate city functions, but will be built by the Hong Kong and mainland China-affiliated UAA Kinming Group, which could raise security concerns. 3. E-Commerce Increased internet connectivity could also pave the way for more Chinese e-commerce sales along the Belt and Road route. Two of China’s e-commerce giants – Alibaba and JD.com – have already sought to link their global expansion to OBOR. According to Xinhua, JD.com plans to set up “more than 20 overseas warehouses to store and transfer goods from over 100 countries and regions including those along the Belt and Road Initiative.” Alibaba founder Jack Ma has cited countries along the OBOR route as among the most important regions for his company and plans further expansion in Russia, Central Asia, and Southeast Asia. This year, the company went even further and partnered with the Malaysian government to establish the first “digital free-trade zone”. The project will offer logistics and fulfillment capabilities as well as an online services platform. At the free trade zone’s launch, Ma argued that, “For human beings the first globalization was the silk road... today in the internet [age], I think we should transfer the silk road to an e-road”. This is a common refrain from Ma, who has argued for integrating standards and reducing trade barriers in e-commerce via an “electronic world trade platform”. Ma’s dream of promoting greater global online trade is consistent with OBOR’s mission of expanding commerce along new routes. But despite their apparent enthusiasm, Chinese e-commerce firms could become disillusioned in certain Belt and Road nations as they face competition from local firms, infrastructure challenges, and regulatory obstacles. OBOR projects may smooth some existing challenges such as limited shipping routes and high-speed broadband access, but other impediments will remain including customs policies and a lack of trust regarding e-commerce fulfillment. Given these hurdles, companies may not make money right away. But Ma appears willing to play a long game with his international e-commerce ambitions, much like Chinese leaders themselves with the entire OBOR project. Surveying the digital landscape under the auspices of One Belt, One Road, many projects still appear linked by political rhetoric rather than a coherent strategy. But if the digital new silk road overcomes the challenges highlighted above and emerges as more than a catchy phrase, it will be an important step in knitting other countries into Chinese networks and could limit the influence of the U.S. government and multinationals strategically and economically.

Blog Post by Guest Blogger for Asia Unbound June 6, 2017 Asia Unbound
United States

A Bipartisan Twenty-First Century New Deal

The challenge of how to help those left behind by rapid economic change—whether caused by technology or global competition—has moved to the center of the U.S. national debate in a way it has not been since the 1930s. Trade competition, especially from China, was a significant factor in the disappearance of nearly six million U.S. manufacturing jobs in the 2000s, and President Trump’s criticisms of U.S. trade policy helped him to victory in November in the Rust Belt states of Michigan, Pennsylvania, Ohio, and Wisconsin. Despite the White House focus on the issue, however, trade is only a small part of the disruption. Retail industry employment is rapidly shrinking in competition with Amazon and other online retailers, self-checkout machines continue to replace cashiers, and autonomous vehicles will soon come to replace truck and taxi drivers. Technology will leave few segments of the labor market untouched: new computer programs are already replacing some forms of entry-level legal work and investment planning, while machines with rudimentary artificial intelligence capabilities are already writing basic news stories. In our new Renewing America Discussion Paper, "A New Deal for the Twenty-First Century," we argue that the central economic policy challenge for the United States and other advanced economies is how to prepare the workforce to manage this rapid pace of change. It is far from obvious that there will be a shortage of work—indeed as the population ages, some countries in Europe are already struggling to fill available jobs, and American companies are complaining of growing labor shortages. The problem will instead be to ensure that the workforce is prepared to fill the new sorts of jobs that will become available as consumers redeploy their savings from automation into spending on other goods and services, and that the labor market and public policy are working together to create rising living standards for more Americans. Young people starting careers should be equipped with the education and skills needed to adapt to multiple job and even career changes over the course of their lives. Older displaced workers will need help to find new jobs, and often alternative careers, that can put them back on a path of rising incomes. There is no other issue on which it is more urgent that Republicans and Democrats find a way to come together than on a “Twenty-First Century New Deal” that helps more Americans find decent work in a time of rapid economic change The worrisome alternative is that Americans will embrace a still more radical politics that threatens to compound the damage. Already, both parties are flirting with populist “quick fix” remedies. President Trump walked away from the Trans-Pacific Partnership trade agreement—which would have helped many of the most competitive U.S. industries—and is calling for a “massive” renegotiation of the North American Free Trade Agreement (NAFTA) with Mexico and Canada. He has threatened to impose reciprocal tariffs on imports that would raise prices on a wide variety of goods, disproportionately hurting low-income consumers, and inviting retaliation that would harm successful U.S. exporters. The Democrats have their own quick fix myths. With most in the party having rejected NAFTA and other trade deals, Democrats will hardly be in a position to criticize any new trade protectionism, even if it backfires. One staple of progressive Democrats is the proposal to double the federal minimum wage to $15 per hour, which would boost the wages of some lower-income workers. But such a large jump in the minimum wage nationwide would discourage hiring workers, while encouraging an even faster adoption of automation that would eliminate even more retail and service jobs. Railing away at large banks or the top one percent, however justified, provides good applause lines but does not address the workforce challenge the country faces. A bipartisan new deal would instead be premised on helping individuals to acquire the education and skills they need to prosper in a fast-changing economy. Washington needs to step up by doing far more to help finance mid-career education and retraining, to remove impediments in the economy that discourage workers from moving to better-paying jobs, and to assist those who are forced to take a significant wage reduction. These propositions should make sense both to Republicans, who stress personal responsibility and hard work, and to Democrats, who believe as well that government has an obligation to offer a helping hand. The approach would have three pillars: First, Congress should establish lifetime career-training loan accounts for all citizens. These accounts could be used for courses at qualified providers of certificate programs, at community colleges or other educational institutions. To prevent rip-offs, loans could be used only to attend schools that regularly report, subject to audit, their permanent job placement rates. Loans could also cover some temporary income support. Importantly, like many college loans today, repayments of career-training loans would be tied to a percentage of future income. Those who find high-paying jobs would be expected to repay the full loan amount, while those who earn less would repay less. The cost to taxpayers would be modest—the estimated subsidies for income-contingent college loans, for example, is roughly $75 billion for more than five million borrowers over the first two decades of the program, less than $4 billion annually. And that number does not take into consideration the additional tax revenues that will result when many individuals are re-employed at higher salaries. Secondly, governments at both the federal and state levels should do more to help Americans move from regions where jobs are being lost to regions where they are being created. The movement of workers from state to state, once a vaunted feature of the flexible U.S. labor market, is falling. High-wage job growth is increasingly clustered in faster-growing cities, and the U.S. workforce has become less mobile. Government is doing little to help. The Trade Adjustment Assistance program, for example, which assists workers who lose their jobs to trade competition, includes financial support for relocation. But that program only covered 58,000 out of the nearly 8 million people who were unemployed in 2015, and the relocation grants are small, covering only 90 percent of moving costs and a lump sum of just $1,250. Aid for relocation should be universal and more generous, helping all displaced workers who need to relocate to find employment.There are other barriers to labor mobility that should be tackled as well. Occupational licensing is much too restrictive, affecting roughly one-quarter of all jobs in 2016, up from just 5 percent in 1970, according to the Council of Economic Advisers. Many states do not recognize credentials earned in other states. While national certification has gained some ground among teachers, for example, most states require a new certification every time a teacher moves from another state. Such regulatory restrictions are a needless burden on people trying to make a better life for themselves. Third, the reality is that re-training is not going to be attractive or successful for all displaced workers, especially those reluctant to move to where better jobs exist. But the government can play an important role in helping these workers get back into the labor market, even if the new jobs pay significantly lower wages than previous ones. This can be done through wage insurance, which since 2002 has been available to only a small slice of American workers: only full-time employees over the age of fifty with pre-displacement incomes up to $50,000 who can prove their jobs were eliminated by trade. This program should be made universal.In 2016, the Congressional Budget Office (CBO) estimated the current annual cost at just $3 billion; even a huge expansion in wage insurance would not come close to what Washington is now paying people not to work. For example, the percentage of workers receiving Social Security Disability (SSDI) benefits has nearly doubled since 1990; even accounting for an aging workforce, the additional cost to taxpayers for is nearly $50 billion for what has for too many become a permanent unemployment benefits program. Wage insurance, in contrast, rewards responsibility and hard work because, unlike unemployment insurance, it only kicks in when a worker accepts a new job paying less than his or her previous one. Much like the last time that economic nationalism reared its head in the 1920s and 1930s, with damaging consequences that worsened the lives of most Americans, what is needed now is a new set of policies that lift Americans, without harming the United States’ economic relations with the world. But for either or both parties to embrace this twenty-first-century deal, they need to shed some of their old shibboleths. For Republicans, it is a way to turn Trump’s rhetorical commitment to the well-being of the working class into actual measures that can help better their lives. So far, the president instead seems to be forgetting those election promises and turning again to the long-standing GOP agenda of cutting taxes on the wealthy and hoping the benefits trickle down. For Democrats, our suggested approach would be a more effective way to help working Americans than the set of policies the party pushed during the last election: the expensive promise of free college education, a nationwide fifteen dollar per hour minimum wage, and opposition to more trade deals. The goal should be to provide what Americans—especially those who feel left behind by technology, globalization, and the rapid pace of change—have made it clear they want: new opportunities for decent, well-paying jobs of the sort that were once well within reach.

Blog Post by Edward Alden and Robert E. Litan May 31, 2017 Renewing America
Energy and Environment

How to Save Mission Innovation

Today officials are reporting President Trump plans to pull the United States out of the Paris Agreement on Climate Change. I’ve argued before that that would be an inexcusable foreign policy blunder. But wait, there’s more. Not only is the U.S. commitment to Paris in question, but so is its role in Mission Innovation (MI), an initiative of 22 countries and the European Union to invest in clean energy innovation. Although the Obama administration spearheaded the initiative and hosted its operations in the U.S. Department of Energy, the Trump administration’s budget last week would zero out funding to run MI. What’s more, the budget request aims to slash funding for energy innovation, rather than raise it, as the United States had pledged when it joined MI. Next week, energy ministers from around the world will meet in Beijing to discuss the future of MI. Even though U.S. support for the initiative has shifted, the underlying case for energy innovation hasn’t. In order for the world to achieve the climate goals in the Paris Agreement, it will need new and improved clean energy technologies. And that will require a redoubled commitment from countries around the world to support research, development, and demonstration (RD&D) of new technologies. MI still has an important role to play in encouraging that outcome. And its member countries have an opportunity in Beijing to show their support for innovation, refocus MI’s objectives and activities, and shore up the initiative’s resilience for the future. To help them accomplish all this, here are three new resources for them to consult. 1. “Harnessing International Cooperation to Advance Energy Innovation,” Insights from a Council on Foreign Relations Workshop Earlier this year, with the generous support of the Sloan Foundation, I hosted a workshop at CFR that convened “nearly forty current and former government officials, entrepreneurs, scientists, investors, executives, philanthropists, and policy researchers. Participants explored how international cooperation can accelerate energy innovation, which lessons from other sectors are applicable to the energy sector, and what policy options are available to spur cooperation in light of political realities.” In particular, a lot of the discussion centered on the future of Mission Innovation. Participants suggested that the original objective of MI, which was to double global government RD&D spending by 2021, is now infeasible. That’s because the United States is by far the biggest funder of energy innovation in the world, but it is in danger of reducing, rather than expanding, RD&D spending. Still, participants were optimistic and offered this advice to officials meeting in Beijing next week: "There might, however, be a silver lining, some participants noted. Now that doubling global public R&D funding appears improbable, countries could focus on improving the quality of their innovation efforts. Many participants agreed that although the quantity of R&D funding is woefully inadequate today, simply doubling it could be wasteful. For example, one participant noted that India cannot double its public R&D funding because it lacks the institutional capacity to spend that money effectively. Many participants argued that a more promising function for MI could therefore be in enabling countries to share lessons about designing public institutions to fund innovation. The United States, for example, has the Advanced Research Projects Agency-Energy (ARPA-E)—modeled after the military’s funding body for emerging technologies—which funds potentially transformative technologies but cuts off grants to projects that miss their milestones. Though ARPA-E has existed for less than a decade, one participant noted that teams funded by ARPA-E are more likely to obtain patents and private funding than those funded by other arms of the DOE." Others cited Germany’s Fraunhofer Institutes and institutions in the United Kingdom as good candidates from which to distill lessons and share them across borders. Still, participants noted that institutions can’t simply be “helicoptered” from one country to another without differences in domestic political contexts. The figure below sums this all up. Participants were resolute in their support for the importance of MI continuing as a nimble, bottom-up initiative, though they recommended that it refocus away from a single quantitative goal of doubling R&D funding. 2. Sanchez and Sivaram, “Saving innovative climate and energy research: Four recommendations for Mission Innovation,” Energy Research and Social Science 29 (2017). My colleague Dan Sanchez and I also have a new Perspective out in Energy Research and Social Science, arguing that countries should seize the opportunity at Beijing to put MI on firmer footing moving forward, given the Trump administration’s proposal to cut U.S. funding for its operations. We argue: "[MI’s member states should] work together to fill the gap in American leadership. Many countries are capable of hosting the physical secretariat itself, while sharing duties with other MI members. China is hosting the second annual summit and is committed to ramping up funding for domestic energy R&D. The United Kingdom is also a leader in promoting energy innovation. And the United Arab Emirates hosts IRENA and may be eager and capable of supporting a related initiative. Importantly, MI’s future operations should be designed such that it is resilient to another political change of heart in the country hosting its staff. Therefore, member states should share the financial cost of the staff and facilities of MI—which is a relatively small sum for a handful of staff members, given that MI is an initiative rather than an institution. This approach is the best way to keep all of MI’s member states engaged and to reinforce the inclusive and bottom-up ethos that defines the initiative. It also would mean that no single country could undermine MI’s future. Thus, this approach would enable MI member states and staff to focus on implementing its ambitious agenda, rather than worrying about its survival. Given all of these shifts and accommodations, member states in Beijing may be tempted to shun the United States, as it begins to retreat from its prior position of climate leadership. We caution against this approach. Even if the United States does not contribute to MI’s quantitative doubling goal, it is still the epicenter of global energy innovation, has valuable institutional knowledge to share, and might reassert leadership if its domestic politics shift in subsequent elections. Therefore, member states should take the long view and engage the US constructively in advancing the four activities described above. And for the United States to save face might require creative thinking: for example, member states might allow the United States to put forth a more politically tractable R&D doubling plan that focuses only on selected technologies, like nuclear power and carbon capture, utilization, and sequestration." 3. Myslikova, Gallagher, and Zhang, “Mission Innovation 2.0: Recommendations for the Second Mission Innovation Ministerial in Beijing, China.” My colleague Kelly Sims Gallagher at Tufts University and her collaborators have an excellent new report out with recommendations for the future of MI. The report aligns with the first two pieces in calling for MI to undertake more “diversified and realistic goals,” rather than focusing solely on a quantitative doubling goal for global public RD&D spending. Among the goals that the report recommends, two stand out to me. First, MI should aim to improve collection of data about clean energy innovation around the world. The table below runs through several of the metric that should be collected. And second, MI should take stock of its member countries’ funding priorities and aim to fill gaps in funding for underfunded technology priorities like nuclear power. If member states take the recommendations in these three pieces to heart, Mission Innovation could seriously accelerate global clean energy innovation.

Blog Post by Varun Sivaram May 31, 2017 Energy, Security, and Climate

Technology and Innovation

Harnessing International Cooperation to Advance Energy Innovation

On March 29 and 30, the Council on Foreign Relations convened a workshop in New York to explore how international cooperation can accelerate energy innovation. The workshop, hosted by Douglas Dillon Fellow and Acting Director of the Energy Security and Climate Change Program Varun Sivaram, was made possible by the support of the Alfred P. Sloan Foundation. The views described here are those of workshop participants only and are not CFR or Sloan Foundation positions. CFR takes no institutional positions on policy issues and has no affiliation with the U.S. government. Introduction New and improved clean energy technologies to confront climate change can help countries set ambitious targets to reduce their carbon emissions. Whereas countries have long participated in formal negotiations convened by the United Nations to curb emissions, it was not until the 2015 Paris Climate Change Conference that momentum grew for international cooperation on advancing energy innovation. The election of U.S. President Donald J. Trump threatens to undermine that progress. To take stock of recent events and discuss prospects for the future, CFR convened a workshop, gathering nearly forty current and former government officials, entrepreneurs, scientists, investors, executives, philanthropists, and policy researchers. Participants explored how international cooperation can accelerate energy innovation, which lessons from other sectors are applicable to the energy sector, and what policy options are available to spur cooperation in light of political realities. Mission Impossible The Paris Agreement on climate change was a major breakthrough because nearly every country around the world committed to reducing its carbon emissions. But these individual commitments do not add up to the reductions needed to limit global warming to 2 degrees Celsius or less, the agreement’s stated goal. Fortunately, on the sidelines of the Paris summit, twenty world leaders announced Mission Innovation (MI), a pledge to double public funding for energy research and development (R&D) within five years. At the same time, Bill Gates and twenty-eight other billionaires collectively announced that they would also invest in the next generation of energy technologies, highlighting the importance of the private sector in bringing new technologies to market. These public and private leaders argued that better and cheaper energy technologies could enable even deeper cuts to carbon emissions than countries were initially willing to commit to. Workshop participants expressed concern that the Trump administration would ignore the MI pledge, which had been brokered by the Barack Obama administration. Such a move would be unfortunate, participants noted, because MI, for the first time, focused high-level political attention on the urgent challenge of advancing energy innovation. Already, energy ministers had convened in 2016 in San Francisco and concluded how their countries would cooperate: for example, by sharing data about public and private R&D investment. And MI’s second ministerial summit is slated to convene in Beijing in June 2017, when countries will determine its future. MI’s original target—doubling global public R&D funding from $15 billion to $30 billion by 2021—cannot be met if the United States does not live up to its commitment to boost funding from $6.4 billion to $12.8 billion. Trump’s budget proposal slashes R&D funding by over $3 billion, which affects renewable energy technology in particular. Congress is unlikely to approve such a sharp reduction, but the president’s proposal reduces the likelihood that the United States will increase its R&D funding as previously committed. One participant speculated that the best-case scenario would be if the United States boosted funding only for those technologies favored by the Trump administration, such as advanced nuclear reactors or equipment to capture and store carbon emissions from fossil fuel power plants. At least for now, other countries remain committed. One participant noted that countries as diverse as Indonesia, Saudi Arabia, Canada, and various European Union members are all committed to ramping up public R&D spending. And these investment flows will likely be overshadowed by a tidal wave of funding from China, which has pledged to spend $8 billion per year by 2021 and will thus overtake the United States as the largest funder of energy R&D. However, without U.S. financial support, the global MI funding goal would be out of reach. In fact, it is even uncertain whether the Trump administration will continue to host MI’s small staff at the U.S. Department of Energy (DOE). Summing up these developments, one participant lamented, “This is a disappointing, chastening time for clean energy innovation.” Quality Over Quantity There might, however, be a silver lining, some participants noted. Now that doubling global public R&D funding appears improbable, countries could focus on improving the quality of their innovation efforts. Many participants agreed that although the quantity of R&D funding is woefully inadequate today, simply doubling it could be wasteful. For example, one participant noted that India cannot double its public R&D funding because it lacks the institutional capacity to spend that money effectively. Many participants argued that a more promising function for MI could therefore be in enabling countries to share lessons about designing public institutions to fund innovation. The United States, for example, has the Advanced Research Projects Agency-Energy (ARPA-E)—modeled after the military’s funding body for emerging technologies—which funds potentially transformative technologies but cuts off grants to projects that miss their milestones. Though ARPA-E has existed for less than a decade, one participant noted that teams funded by ARPA-E are more likely to obtain patents and private funding than those funded by other arms of the DOE. Another participant proposed Germany’s Fraunhofer Institutes as an important model of “translational infrastructure to bridge the gap between great science and engineering at universities and commercial products produced by industry.” Yet another cited the Low Carbon Trust, which was created by the British government but enjoyed political autonomy to make investments in promising technologies alongside the private sector. Although that institution’s budget was sharply curtailed in 2009 as a result of the financial crisis, participants agreed that it offered valuable lessons for funding innovation. Still, participants noted that institutions “can’t be dropped from a helicopter” into one country from another because of differing national contexts. U.S. universities, federal laboratories, and private firms generate enough good ideas for an institution like ARPA-E to assemble a diverse portfolio of technology bets, but countries that have no such research backing would have no practical or political value for a (low) carbon copy of ARPA-E. For that reason, participants concluded, information-sharing on institutional design and performance would help countries try out elements best suited to their national contexts. Countries could also evaluate and help improve one another’s innovation. This approach has a precedent: Group of Twenty countries have exchanged reviews to help members identify wasteful fossil fuel subsidies to eliminate. Participants concluded that MI should reorient its focus toward enhancing the quality, rather than the quantity, of its members’ innovation efforts (see figure 1). Recognizing that MI might need an alternative home to the U.S. Department of Energy, participants debated whether MI should be subsumed within an existing international institution, such as the International Energy Agency or the International Renewable Energy Agency. Although some supported that route to ensure MI’s survival, others doubted that countries would pay leader-level attention to MI if it were part of a large institution. Either way, most participants agreed, MI should not become a large, bureaucratic institution; it should remain a nimble, bottom-up coalition of countries whose leaders are willing to work together to advance energy innovation. Figure 1. Experts' Assessments of the Future of Mission Innovation Other Opportunities for Cooperation Participants stressed that MI is not the only venue for countries to cooperate on energy innovation. Two other modes offer important benefits as well. Bilateral Research Collaborations In some cases, bilateral collaborations have achieved a similarly high political profile to that of MI. One participant cited the U.S.-China Clean Energy Research Center (CERC), which U.S. President Barack Obama and Chinese President Xi Jinping discussed on several occasions. CERC’s priorities include developing technologies to reduce energy use in buildings, to capture and store emissions from coal plants, and to design cleaner vehicles. The participant conceded that U.S. and Chinese research teams have not yet obtained joint patents. One possible reason is that theft of intellectual property (IP) remains a concern for U.S. researchers and companies. But CERC has clear IP rules, and as teams get more comfortable designing joint research projects, joint IP ownership will likely follow. Participants cited CERC’s ability to attract private-sector firms to work alongside academic researchers as an important strength. Participants also noted that the United States would benefit from continued participation in CERC, because U.S. firms can demonstrate their technologies in China and thus gain access to a massive and growing market for advanced energy products. Other participants cited the U.S. research partnership with India as a successful example of collaboration that combines the research expertise of industrialized countries with the technology needs of developing ones. For example, one participant noted that developing energy-efficient ceiling fans is an important priority for India, even if it is not one for the U.S. market. The United States stands to benefit from such partnerships if its firms can design better products for fast-growing emerging economies. International Technology Standards Given that almost six hundred standards apply worldwide to renewable energy technologies, and more apply regionally or domestically, countries could collaboratively develop future standards for shared benefits. Participants did not see the need for new international institutions to develop and help implement standards across borders. However, some argued, existing institutions could take a systemic approach to setting standards. Such an approach would mean, for example, setting standards for not only how well a solar panel should work in isolation but also how it should interact with the power grid. “Standards play a critical role for technology markets, as they contain technical specifications or other precise criteria designed to be used consistently as rules, guidelines, or definitions,” one participant noted. Participants explained that standards matter for three reasons. One, they increase the size of the market for energy products by, for example, making it possible to use the same energy-efficient lightbulbs all over the world. Two, they help customers and investors trust that new technologies will work as advertised. And three, standards can improve the performance of energy products. A participant noted that the first two advantages arise from scalar standards that simply standardize product specifications; the third advantage arises from vector standards that impose a directional requirement that products get better over time. Another participant offered an example of how standards could popularize cleaner energy technologies. In colder parts of North America, Europe, and China, the burning of fuel oil or coal to heat homes and businesses is a major source of emissions. Electric heat pumps offer a much cleaner alternative. Developing standards on equipment performance and installation practices could make it attractive for customers to use heat pumps. The participant noted further that Canada and the United States had already started to cooperate on setting such standards. Working With the Private Sector Several participants stressed that successfully bringing new energy technologies into the marketplace will require far greater investment in innovation by the private sector. Therefore, a primary objective of international cooperation should be to catalyze private investment flows. Other sectors offer important examples of how to accomplish this goal. Participants noted that the semiconductor industry, in which private R&D investment far outstrips public R&D funding, offers an aspirational example for the energy sector. One expert from that industry explained that corporations, rather than governments, drive international cooperation, often joining forces with international rivals on research and manufacturing ventures. The expert noted that nonprofit standards-setting bodies play an important role in coordinating the global industry and pushing firms to innovate rapidly. And when governments enact strict IP protections, remove trade and capital barriers, and invite talent from abroad, firms cooperate across borders and invest heavily in innovation. Another participant shared lessons from the global health sector, in which pharmaceutical companies invest heavily in R&D for new drugs. Some drugs, particularly vaccines that target tropical diseases such as malaria that are endemic to lower-income countries, are not lucrative to develop. For some such cases, governments around the world pool funds to purchase large quantities of vaccines and create markets for otherwise unprofitable drugs. Participants reasoned that this strategy could apply to the energy sector, in which some clean energy products for developing countries would be profitable for the private sector to develop only if governments were to create the right incentives. A participant noted that universities could also play an important role in spurring private sector investment; they could tailor programs for corporations to invest in breakthrough energy research on campus. Finally, although participants generally agreed on the need for far greater private investment in energy innovation, some energy entrepreneurs and venture capital investors reported on exciting examples of ongoing breakthroughs in developing the vehicles of the future, designing cleaner power grids, and bringing electricity to millions who lack it. Innovation is inevitable, they argued; the challenge is to accelerate it.

Report by The Council on Foreign Relations May 24, 2017 Energy Security and Climate Change Program
Technology and Innovation

Blog Redesign

The Council on Foreign Relations—obviously—has adopted a new web format, and that extends to CFR blogs. The new blog design doesn’t support comments. I will miss the interaction. My email is available on my biography page, and I usually tweet out blog posts @Brad_Setser. For the time being, the graphs on many of my legacy posts aren’t displaying, and the legacy links are at times not being redirected to the new site. Those problems should be fixed soon. The new format is consistent with a lot of modern digital platforms, and designed to look good on mobile devices and the like. I am not sure the result of optimization for digital devices is also optimal for the presentation of detailed balance of payments analysis. So I will be experimenting a bit to find a style that feels comfortable on the new platform, if that makes any sense.

Blog Post by Brad W. Setser May 17, 2017 Follow the Money
Global

A Conversation With Inge Thulin

Inge Thulin discusses the value of research and development in a fast-moving world, global growth strategies, and the effect of U.S. trade policy on multinational corporations.

Event with Inge Thulin and Gillian Tett May 16, 2017 CEO Speaker Series

France

What Emmanuel Macron's Victory Means for French and U.S. Tech

Emmanuel Macron won the French presidency--the youngest man ever to accede to the Élysée palace. But what does it mean for French and U.S. tech?

Blog Post by Guest Blogger for Net Politics May 8, 2017 Net Politics
U.S. Foreign Policy

The Future of News and the Information Revolution

Experts examine how the media industry is adapting to the changing information landscape, from traditional news sources to social and digital platforms, and the effects of these changes on how the public receives their news and analyzes U.S. foreign policy.

Event with Vivian L. Schiller, Samantha Barry, Kate Nocera and Betsy Fischer Martin May 1, 2017
China

Anies’s Big Win, India’s Sex Ratio, USS Carl Vinson Bluff, and More

Rachel Brown, Sherry Cho, Larry Hong, Gabriella Meltzer, and Gabriel Walker look at five stories from Asia this week. 1. Anies elected Jakarta’s next governor. Anies Baswedan, Indonesia’s former education minister, beat out sitting governor Basuki Tjahaja Purnama (better known as Ahok) in a closely contested election. While official results have not yet been released, Anies clearly leads in polls. This year’s gubernatorial campaign was plagued by ethnic and racial tensions. Ahok, a Christian of Chinese descent, was accused of blasphemy for remarks made in September regarding a Koranic verse. And although he garnered the largest share of votes in the first round of voting in February, he did not win the necessary simple majority. In the subsequent runoff race, religion may have played a decisive role in his defeat; Anies, who is Muslim, placed second in February and may have gained votes from supporters of third-place candidate Agus Yudhoyono, who is also Muslim. Ahok’s trial is ongoing, but he is unlikely to face jail time even if found guilty. Observers worry that the election results may empower conservative Islamic groups in both in the city itself and across the nation. The divisive role of religion and ethnicity in the Jakarta campaign could also foreshadow similar frictions in the 2019 presidential election. For now, the new mayor will face not only the challenge of uniting the city, but also of addressing a range of problems including those involving public education and urban infrastructure. 2. India’s women-to-men ratio expected to decline rapidly. According to a report released this week by the Indian government, the ratio of women to men among those ages fifteen to thirty-four is expected to drop precipitously over the course of the coming decades. According to data from both the Indian government census and the World Bank, the ratio will drop from 939 girls per 1,000 boys to only 898 girls per 1,000 boys by 2031. This stark gender imbalance is a result of the decades-long practice of female infanticide, evidence of which began to appear when ultrasounds were first introduced to the country in the 1980s. Parents’ strong preference for male children is based on perceptions that only males will be able to financially care for their parents in old age, that family lineage should be passed through sons, and that the practice of dowries will “financially cripple” families. Poonam Muttreja, executive director of the Population Foundation of India, remarked that many Indian families are still choosing to have boys despite declining fertility rates, even as incomes and education levels rise. Although the practice of prenatal sex determination was officially banned in 1994, its enforcement has been lax at best. 3. Bluster billows over USS Carl Vinson bluff. Sparking ridicule and bewilderment throughout Asia, the revelation that the Pentagon did not send the USS Carl Vinson carrier directly toward North Korea, as U.S. officials had stated, also sparked questions about the coherence of the U.S. strategy toward North Korea. The reveal on Wednesday—that the carrier strike group was actually thousands of miles away and had been heading away from South Korea—caused many in South Korea to question the Trump administration’s leadership and strategy in Asia. It also caused turmoil in South Korea during an already turbulent election period. After South Korea’s Defense Ministry declined to comment substantively on the issue, critics accused the ministry of aggravating anxieties in an election where North Korea’s nuclear program and Seoul’s close military relationship with Washington have been central issues. In China, the USS Carl Vinson episode prompted ridicule on social and news media, much of it directed at the perceived gullibility of foreign media and the Trump administration’s attempts to stymie Pyongyang. The incident provoked much less coverage in Japan, with many top officials declining to comment on the level of communication with Washington regarding policy toward North Korea. The USS Carl Vinson is now on its way to the Korean peninsula and is expected to arrive in the region next week. 4. Support slips for Duterte’s drug war. The latest public opinion poll on Filipino President Rodrigo Duterte’s drug war shows declining—though still high—support. 78 percent of respondents reported they were satisfied with the government’s crackdown on illegal drugs, down from 85 percent in a similar poll taken in December 2016. The amount of dissatisfied respondents rose from 8 to 12 percent. The poll also shows that 73 percent of Filipinos were worried that they or someone they know would be a victim of extrajudicial killing. Since assuming office on June 30, 2016, President Duterte has put in place a controversial drug policy that involves calling upon Filipinos to kill drug addicts and suspected criminals. Since the implementation of the policy, human rights organizations such as Amnesty International have criticized the drug war on a number of grounds, including extrajudicial killings, disproportionate targeting of the poor, and fabrication of police evidence. Despite these alarming features, however, support for the drug war has remained high, including among young, liberal Filipinos. In response to the latest decline in public satisfaction, Presidential Spokesman Ernesto Abella said that “there seems to be consistency in the way the public appreciates the [anti-drug] efforts.” 5. Baidu to share self-driving car technology. Chinese search giant Baidu has been steadily expanding its AI research and investment in self-driving vehicles in recent years. This week, Baidu announced it will go one step further by releasing a platform for self-driving cars to the public this July. The platform, named Apollo, will provide access to systems for mapping, operations, and vehicle control. Initially the technology will only be available for use in limited areas, but ultimately the hope is to make it accessible for all road types by the end of the decade. Industry analysts see the move as a way for Baidu to accelerate the production of self-driving cars, assume an important role in the supply chain for such vehicles, and collect and analyze data on how the cars operate. Other major Chinese internet companies including Alibaba and Tencent have also been investing in the autonomous vehicle sector, along with firms in the United States and Europe. But open-source technology could help push Baidu closer to beating out competitors. Already car manufacturers in China, Germany, and the United States are reportedly interested in using the Apollo platform. Baidu’s decision to grant open access to its information is not without precedent. Tesla granted access to its patents to accelerate the development of the electric car market, and Google made its Android platform open source as well. Bonus: South Korea swaps coins for cards. On Thursday, South Korea took an important step on the road to a coinless—and possibly even cashless—future. Beginning this week, customers at some popular stores, such as CU, 7-Eleven, and Lotte Department Stores, can elect to deposit their small change onto cards rather than receiving it in coins. If the limited trial is successful, change could be deposited directly into bank accounts as early as next year. The shift would not only streamline shoppers’ transactions, but also save the government nearly $50 million a year that it would normally spend on minting coins. Even before the trial began, South Korea had the foundation for transitioning into a cashless society: according to the Bank of Korea, only 20 percent of payments are made with cash, over 60 percent of South Koreans do not use coins, and the rate of credit card ownership is relatively high at around 1.9 per citizen. Other Asian governments, such as those in Singapore and India, are also pushing to reduce the size of their cash economies to cut costs or combat tax evasion and corruption.

Blog Post by Guest Blogger for Asia Unbound April 21, 2017 Asia Unbound
China

Trump’s Attack on H-1B Visas: A Boon for Asia?

Rachel Brown is a research associate for Asia Studies at the Council on Foreign Relations. This is the third part of a series on migration trends in India and China. India’s outsourcing and IT sectors are on edge. The combination of recent congressional proposals to alter the H-1B visa program, President Donald J. Trump’s vitriolic statements, and his draft executive order on visa reform looms large for heavily visa-reliant companies. Currently, roughly 70 percent of H-1B visas go to Indian nationals. But that could all soon change. H-1B visas are intended for temporary skilled workers, but some politicians perceive abuse of system, in which employers allegedly substitute foreigners for more expensive U.S. labor. Recent bills crafted by both House Republicans and Democrats seek to eliminate perceived loopholes, as well as to raise the base salary required for an H-1B visa up from $60,000 to anywhere from $100,000 to $130,000. It is unclear whether such bills will be enacted or what form executive action might take, but the increasingly hostile climate toward foreign workers in the United States will no doubt hit Indian IT firms particularly hard. Just three of these firms – Wipro, Infosys, and Tata Consultancy Services – together accounted for over 12,000 H-1B visas granted in 2014. But could greater visa restrictions on Asian workers going to the United States have the silver lining of promoting greater talent circulation within Asia? Two of the first places Indian firms may look in their quest to diversify are Japan and China, the two largest economies after the United States. But neither country is known for its openness to foreign workers. So what kind of reception might Indian companies and workers expect? Japan actually appears increasingly eager to attract and host skilled foreigners. Reforms to the country’s permanent residency system released this year by the Ministry of Justice would shave down the waiting period for skilled foreigners. Instead of waiting five to ten years, workers will now be able to apply after just one to three years, depending on how many points they accrue based on their education, profession, and salary. The changes go into effect at the end of this month. While Japan’s proposed immigration reforms received an enthusiastic response in Indian media sources, reasons remain for skepticism over whether a country with such notoriously stringent immigration policies can truly open up. On the face of it, Chinese companies too appear ready to welcome foreign tech workers displaced from the United States. In November, Baidu CEO Robin Li criticized Trump advisors’ hostility toward foreigners in Silicon Valley. He added, “so I myself hope that many of these engineers will come to China to work for us…In the past, Chinese IT companies can only attract Chinese engineers from abroad. We would now like to hire more engineers from different backgrounds around the world, because China is the fastest growing major market, so let’s all work together.” The Chinese government also looks increasingly supportive of attracting foreign talent to promote innovation. Recent immigration reforms include a streamlined work permit program being piloted in select provinces and municipalities. Additionally, in July news leaked of plans to set up China’s first immigration agency under the Ministry of Public Security. Restrictions on permanent residency were also eased slightly last year; individuals working for certain science, technology, or other research-oriented entities in both the public and private sectors can now apply. In 2016, the number of foreign permanent residents increased by 163 percent, although the country still granted a mere 1,576 new green cards. Chinese officials would like to see that number rise further. As Indian IT companies look to expand in China, they will need to consider not just government policies, but also their own mixed records of success in the country. Tata Consultancy Services has operated in China since 2002. However, its business has grown slowly and is not yet profitable. Others are faring better. Infosys, which posted revenues of approximately $120 million in China in 2015, aims to more than double its employees in China. Meanwhile, management training firm NIIT opened a data and IT training center in Guizhou’s provincial capital this year. Digging deeper, however, the prospects dim for would-be H-1B visa recipients to relocate to China. The foreign talent that Chinese firms and officials hope to attract is mostly made up of skilled engineers and coders, essentially the cream of the H-1B crop. But many individuals sent to the United States by outsourcing firms are not programmers but managers and other less technical personnel. Moreover, acquiring a Chinese green card remains an onerous process with high skill, salary, and/or investment barriers even after reform. Even the pilot work permit system classifies workers into buckets of “high-end personnel, professional personnel and the temporary and seasonal personnel,” and seeks to manage flows from the latter two categories. An early test of Indian technology firms’ ability to reorient toward China, Japan, and other Asian markets will come from the Regional Comprehensive Economic Partnership (RCEP) negotiations. Prior to the most recent round of discussions, Indian negotiators pushed for more liberal policies on services and greater freedom of migration. But whether India’s proposals will be included in a final agreement remains uncertain. ASEAN countries have previously resisted pairing open markets with open immigration policies; similar opposition from both ASEAN and Northeast Asian states could hamper RCEP negotiations. At present the likelihood remains low that any but the highest-skilled Indian IT professionals could relocate to China or Japan in the wake of a dramatic change to the U.S. H-1B visa program. Eventually, however, improving regional labor mobility will be necessary to address Asia’s impending demographic reality. Ironically, as the U.S. government seeks out all manner of ways to tighten borders, historically closed-off Asian states may be the ones to embrace and benefit from immigration.

Blog Post by Guest Blogger for Asia Unbound March 9, 2017 Asia Unbound
China

Samsung Scandal, Islamic State and China, Philippine HIV, and More

Rachel Brown, Sherry Cho, Larry Hong, and Gabriel Walker look at five stories from Asia this week. 1. Samsung heir indicted on corruption charges. Lee Jae-yong, the de facto head of Samsung Group, was formally indicted on Tuesday on bribery and embezzlement charges. Lee’s indictment was the culmination of a ninety-day special prosecutor investigation of an intensifying corruption scandal that has already brought about President Park Geun-hye’s impeachment. Lee was arrested on February 17 but was not formally indicted until February 28 on charges that include allegedly paying roughly $38 million (43 billion won) to Choi Soon-sil, Park’s close confidante and corruption scandal linchpin, and two nonprofit foundations Choi controlled. Samsung is one of eight Korean conglomerates that has admitted to making payments to Choi and her nonprofit foundations, but claims that the payments were made under coercion. The alleged bribes were purportedly made in exchange for the South Korean government’s backing of a contentious merger in 2015 of two Samsung affiliates that helped Lee inherit corporate control from his father. The merger allegedly enlarged the stock value of the Lee family by at least $758 million at the cost of at least $123 million in losses for the national pension fund, which held large stakes in the two affiliates. Lee’s father, Lee Kun-hee, has been twice convicted of bribery and tax evasion but was presidentially pardoned both times by then-presidents Kim Young-sam and Lee Myung-bak. At least six of South Korea’s top ten chaebol conglomerates—which generate a revenue equivalent to more than 80 percent of South Korean gross domestic product—are led by men once convicted of white-collar crimes. Four other Samsung senior executives were also indicted on February 28, but not arrested, on the same corruption charges as Mr. Lee; three of the four have resigned. 2. Self-proclaimed Islamic State targets China in new video. A video released by the self-proclaimed Islamic State (IS) showed a Uighur fighter in Iraq conducting an execution and proclaiming to China, “We will come to you to clarify to you with the tongues of our weapons, to shed blood like rivers and avenging the oppressed.” It also features shots of Chinese police conducting surveillance, most likely in Xinjiang, and a burning Chinese flag. The video follows other China-focused media released by IS, including an online chant issued in Mandarin in December 2015, which encouraged Chinese Muslims to “take up weapons to fight.” Some Chinese nationals have heeded the call, and an estimated one hundred to three hundred Uighurs, including children and the elderly, have traveled to Iraq and Syria. The video comes at a particularly unfortunate time for Chinese officials already on edge about violence in Xinjiang. Security tightened dramatically following a knife attack in the autonomous region in mid-February, and over ten thousand troops rallied in the provincial capital this week. In the long run, however, it is unclear whether this crackdown will improve public safety or simply drive further radicalization. 3. Philippine fight against HIV falters as rates climb. Since 1984, when HIV was first reported in the Philippines, the prevalence and spread of the virus were described as “low and slow.” Between 2010 and 2015, the rate of new infections climbed by more than 50 percent—the highest in all of Asia. Though the population-wide prevalence is still relatively low today, the epidemic is widespread among young people. According to the Philippine Department of Health, 57 percent of young gay men in high school or college are at risk for contracting HIV, and 67 percent of those who are HIV positive are between fifteen and twenty-four years old. To combat the epidemic, this past Valentine’s Day the National Youth Commission launched an anti-HIV campaign called “Virus Ends With Us,” which aims to teach parents and educators how to approach taboo subjects and help eliminate stigma surrounding the condition. Unfortunately, stakeholders are of different minds as to how to fight the skyrocketing infection rates: last month, a coalition of conservative politicians, parents, and the Roman Catholic Church pressured the Departments of Health and Education to halt a proposed program that would have provided sexual education and distributed condoms in schools. 4. More Chinese students study abroad, and more return home. According to China’s Ministry of Education, around 80 percent of Chinese students studying abroad, or “sea turtles” as they are called in China (because the word is a homophone for “returning from overseas”), have returned home, in contrast to about one-third in 2006. While Beijing claims that the record number of returnees is due to the fact that the Chinese job market has become increasingly appealing, the reality could be more complex. In the United States, which is the most popular destination for Chinese students, the demand for foreign skilled-workers visas, known as H-1Bs, often far outstrips the supply of such visas, forcing the U.S. government to employ a lottery system. A seasoned immigration lawyer suggested that the chance of being selected in the lottery in 2014 is about 50 percent. Those who are not chosen will be forced to return home or apply to another degree program. H-1B visa sponsors also generally favor technology experts and those with more advanced degrees, and most Chinese students are enrolled in master programs in business and marketing. Beijing is at least partly correct on one count: many “sea turtles” are returning to China to join the frenzied startup boom in China, thanks in large part to the Chinese government’s generous financial support for startups. 5. Xiaomi debuts smartphone chip. Lei Jun, the founder and CEO of China’s Xiaomi mobile phone company, showed off the firm’s first internally developed chip, the Pengpai S1, on Tuesday. The chip was produced by Xiaomi subsidiary Beijing Pinecone Electronics, and the entire endeavor cost more than one billion RMB ($145 million). The company received government support in developing the chip, although the exact value of that assistance remains unknown. Xiaomi now ranks among just two phone companies in China (the other is Huawei) and four international companies to create its own chip. The new smartphone processor is a major coup in China’s ongoing effort to strengthen its domestic semiconductor sector and reduce reliance on foreign manufacturers, particularly Qualcomm. Chinese firms have also sought to purchase semiconductor manufacturers abroad and acquire their technology, although foreign investment reviews have at times hampered such acquisitions. Chinese authorities and private companies are spending big on the semiconductor push, and now these efforts appear to be paying off. Bonus: India to publish first official sign language dictionary. This month, the Indian Sign Language Research and Training Center (ISLRTC) in Delhi, a group established by India’s ministry of social justice, will publish the first installment of its Indian Sign Language (ISL) dictionary. Though a university released another ISL dictionary early last year, ISLRTC’s promises to be the country’s first official and most comprehensive version, containing six thousand words in English and Hindi and forty-four different hand shapes under which each sign is categorized. India is estimated to have as many as 7 million deaf individuals (and only 300 certified ISL interpreters), with significant linguistic variation between sign languages of different regions. The ISLRTC dictionary promises not only to take into account regional variations in ISL, but also to improve ISL practitioners’ awareness of syntax and grammar necessary for communicating through written language. According to one ministry official, among all persons living with disabilities in India, deaf individuals have the lowest literacy rate. ISLRTC undertook its project as a part of the Rights of Persons with Disabilities Bill 2016, which requires the government “to ensure that persons with disabilities can access an inclusive, quality, and free primary education and secondary education on an equal basis with others in the communities in which they live.”

Blog Post by Guest Blogger for Asia Unbound March 3, 2017 Asia Unbound
Climate Change

When the United States Abdicates the Throne, Who Will Lead?

President Donald J. Trump’s initial forays into foreign policy suggest a desire to abdicate the throne. Not his own position as president of course, but rather the United States’ position as the world’s preeminent power—both as a driver of a globalized world and a defender of the traditional liberal order. He has withdrawn the United States from the Trans-Pacific Partnership, the Asia-Pacific trade pact that would have cemented U.S. leadership among the economies that make up 40 percent of the world’s GDP. He has claimed that climate change is a hoax and wants to raise the U.S. fossil fuel industry from the dead. He is moving forward to build a wall to prevent Mexican citizens from crossing through to the United States, and he has issued a ban on Muslims traveling to the United States from seven different countries. (Whatever happened to the “welcoming pledges” that cities all across the United States adopted in the late 2000s to help immigrants adapt and thrive?) His brand of “Make America Great Again,” rejects the notion that American greatness depends in large measure on values that underpin the current global system. Thus, President Trump has little interest in supporting—much less leading—a globalized world. Who, then, can fill the vacuum? Leading in an era of globalization requires three things: domestic institutions that promote the free flow of goods, information, and people; the economic wherewithal to shape world affairs; and the vision to look beyond one’s own immediate interests. Surprisingly, it is not difficult to find countries that fit the bill. To begin with, there are countries that epitomize open markets in the form of free trade and investment. Hong Kong, Singapore and New Zealand achieve top status, but they are too small to drive the world economy. China as the world’s largest trading nation would certainly qualify in economic heft but it fails the test of openness, ranking 144th on Heritage’s “Economic Freedom” scale. The countries that rank high on both metrics include the United States, Canada, Germany, the United Kingdom, and Japan. Also essential to a well-functioning globalized world is the free flow of information. Here, too, tiny countries take top billing. Estonia and Iceland rank first and second in net freedom. But Canada, the United States, Germany, Australia, Japan, and the United Kingdom follow closely on their heels. China, in contrast, ranked last out of the sixty-five countries evaluated by Freedom House, earning it the title of “worst of the worst.” Globalization also relies on the free flow of people. Unsurprisingly, large liberal democracies dominate the top group. The countries perceived as having the most open immigration policies are Canada, Australia, Germany, Singapore (an exception to the rule), and the United States. To be fair, however, the countries that bear the burden of the largest number of refugees are Turkey, Pakistan, Lebanon, Iran, and Ethiopia. While openness to the flow of goods and services, information, and people is critical to leadership in a globalized world, countries must also demonstrate the capacity to adopt the interests of the broader international community as one’s own. For example, when disaster strikes, who can be counted on to help? In terms of humanitarian assistance, the United States stands head and shoulders above the rest of the world, spending more than twice as much as the United Kingdom, the second largest donor. Germany, Sweden, the United Arab Emirates, Japan, and Canada rank next in line. Several of the same countries—the United States, Germany, Japan, Canada, and the United Kingdom—top the list for donations to the United Nations High Commission for Refugees; and financial support to meet the Ebola crisis in 2015 brought out a similar group of supporters: the United States, the United Kingdom, Germany, France, Sweden, Japan and Canada. While the United States and China have received credit for their leadership on climate change, neither breaks into the top twenty for actual performance, ranking 34th and 47th respectively in Germanwatch’s Climate Change Performance Index. Instead, look to the United Kingdom and Germany among the large economies, along with Denmark, Sweden, and Morocco, for true leadership on the issue. Finally, there is the issue of will. What country is ready to succeed the United States? China was quick off the starting block. At the World Economic Forum’s annual gathering of political and economic elites in Davos this past January, Chinese president Xi Jinping used his star turn to assert Beijing’s desire to wear the crown. Yet China is a mere pretender to the throne, demonstrating none of the qualities necessary to support, much less lead, a globalized world. Justin Trudeau, in contrast, replied to President Trump’s ban on Muslim refugees by welcoming the refugees to Canada, and German Chancellor Angela Merkel has long kept the door open to refugees fleeing violence in the Middle East. The reality may well be that there is no one, individual country that can replace the United States. Instead, an informal alliance of countries may need to step up to the plate. Germany, Canada, Japan, and the United Kingdom all emerge as important pillars of a globalized world, with different combinations playing a central role on different issues. And in some cases, smaller countries may become the true leaders. After President Trump announced a ban on American funding for overseas non-governmental organizations that provide abortion services, for example, the Netherlands emerged to rally a group of twenty-odd countries to begin to fill the $600 million funding gap. Many Americans will undoubtedly despair that the United States is no longer the essential power. What really matters, however, is that the values and institutions that the United States helped create and sustain for more that seventy years are strong enough to withstand the loss of its leadership.

Blog Post by Elizabeth C. Economy February 6, 2017 Asia Unbound
Cybersecurity

Rebuilding Trust Between Silicon Valley and Washington

Overview Cyber threats to the United States are escalating in sophistication and magnitude, but mistrust between Washington and Silicon Valley continues to stymie progress on cybersecurity. In a new Council Special Report, Adam Segal examines the security risks exacerbated by the divide between government and the technology community and offers policy recommendations to help restore trust. "In addition to rising cybersecurity threats, the [Donald J.] Trump administration will inherit a growing political divide between Washington and U.S. tech firms that stems in large part from the disclosures by NSA contractor Edward Snowden," writes Segal, the Council on Foreign Relations' Ira A. Lipman chair in emerging technologies and national security and director of the Digital and Cyberspace Policy program. "Although numerous government officials have traveled to Silicon Valley over the past several years, narrowing the gap will not be easy in part because technology firms operating as global platforms have strong economic motivations to keep Washington at a distance. Potential adversaries will continue to use hardware and software developed by U.S. companies and thus law enforcement and intelligence agencies will persist in exploiting the vulnerabilities in these products," he adds. Segal asserts that "repairing the rift will not be easy, but there are areas where the two sides can find common ground." The report, Rebuilding Trust Between Silicon Valley and Washington, notes that the two sides can work together to: Create a vibrant cyber workforce. The private sector and the U.S. government both benefit from growing the labor pool of qualified cyber professionals. Fight the global trend of forced data localization. U.S. tech companies and the U.S. government share an interest in opposing requiring tech companies operating abroad to store data locally. Deter state attackers. "Although companies must improve their own defenses, policies taken to deter the most sophisticated state actors would be an important step in reducing the threats and thus restoring some measure of confidence in the technology sector that the government can effectively address the cybersecurity challenge." Forge a compromise over the deployment and use of encryption and lawful access to data. "A broad policy and legal debate to define the parameters of the hacking, followed by strict judicial oversight, would ensure that lawful hacking is used responsibly, much like the restrictions that already apply to wiretapping." Segal also outlines several policies the U.S. government should pursue on these issues: continue support for the U.S. Digital Service (USDS), a technology consulting team drawn from the private sector, and create a highly specialized cybersecurity service within the U.S. government "amend provisions of the Electronic Communications Privacy Act, using the U.S.-UK agreement as a template, to allow technology companies to provide data to foreign governments" "attribute attacks more frequently and, for cyberattacks that fall below the use of force and armed attack threshold, devise and implement forceful responses, such as covert cyber operations designed to disrupt future attacks" strengthen law enforcement's ability to conduct lawful hacking under strict judicial oversight and clearly defined protocol on when to disclose information about computer software security vulnerabilities Professors: To request an exam copy, contact [email protected]. Please include your university and course name. Bookstores: To order bulk copies, please contact Ingram. Visit https://ipage.ingrambook.com, call 800.234.6737, or email [email protected]. ISBN: 978-0-87609-703-8

Council Special Report by Adam Segal January 24, 2017 Digital and Cyberspace Policy Program
China

Chinese Carrier in the Strait, Philippine Birth Control, $100 Billion SoftBank Fund, and More

Rachel Brown, Sherry Cho, Lorand Laskai, Gabriella Meltzer, and Gabriel Walker look at five stories from Asia this week. 1. China’s aircraft carrier sails through Taiwan Strait. Early Wednesday morning, China’s sole aircraft carrier, the Liaoning, sailed into the Taiwan Strait, leading Taipei to scramble F-16 fighter jets and ships to “surveil and control” the movement of the Liaoning and its accompanying five warships. The carrier ship group was returning to Qingdao after training exercises in the South China Sea, and did not technically veer into Taiwanese waters during its ten-hour journey through the Taiwan Strait. This new military posturing by China comes at a delicate time in cross-strait relations. On her way to a diplomatic visit in Central America, Taiwanese President Tsai Ing-wen recently met with prominent U.S. politicians such as Senator Ted Cruz in a visit that, unsurprisingly, met with Chinese censure. Tsai’s Central America visit was itself intended to shore up support from Taiwan’s dwindling number of diplomatic allies after São Tomé and Príncipe’s recent diplomatic recognition of China, which left Taiwan with just twenty-one diplomatic allies. Since last May, when Tsai refused to acknowledge the 1992 Consensus in her inauguration speech, relations between China and Taiwan have deteriorated. China views the consensus, a tacit agreement that there is only one China, with each side having its own interpretation, as crucial to ensuring stable cross-strait ties. An unprecedented phone call between Tsai and U.S. President-Elect Donald Trump last month injected further uncertainty into China-Taiwan relations. And while Beijing may continue to claim that its recent maneuvers are normal training exercises, China’s most recent round of military exercises in the disputed South China Sea continues to sustain tensions with its Pacific neighbors in a theater already full of fraught enmities and uneasy allies. 2. Philippines to expand birth control access. Philippine President Rodrigo Duterte authorized his government to increase contraception availability for approximately 6 million women currently lacking access. The government’s first priority will be assisting 2 million women living in poverty over the next year by partnering with civil society organizations. Birth control is already available in the Philippines, but it is often prohibitively expensive, making it accessible only to middle- and high-income individuals. Family planning poses a conundrum for the Philippines, which is 81 percent Catholic and the only Asian country to experience a rise in the rate of teen pregnancies over the past twenty years. In 2008, 54 percent of pregnancies were unintended, most of which occurred among poor women. Abortion is illegal in all circumstances. While the Philippines passed the Responsible Parenthood and Reproductive Health Act in 2012, which would have provided nationwide birth control access, it has been stalled by a temporary restraining order from the Supreme Court. The order stopped issuance of implanted birth control devices, and budgets for birth control provision have been cut independent of the court’s ruling. Duterte’s latest move to promote contraception access will likely anger the Catholic Church as well. 3. $100 billion SoftBank Vision Fund takes shape. Last October, Japanese telecommunications multinational Softbank made headlines by announcing a plan to create a $100 billion fund to invest in new technologies—the largest such fund in history. Now, with a number of investors and leaders in place, the fund is beginning to take shape. So far, investments have come from Saudi Arabia’s sovereign wealth fund ($45 billion) and SoftBank itself ($25 billion), along with Qualcomm, Apple, and others. The sovereign wealth fund of Abu Dhabi may soon join as well. In addition to SoftBank Chief Executive Masayoshi Son, many of the fund’s leaders are Wall Street veterans, including the fund’s head Rajeev Misra who formerly worked at Deutsche Bank. The Vision Fund is expected to invest in a range of new technologies including robotics, artificial intelligence, and the “Internet of Things,” and will likely make investments in larger companies as well as start-ups. With the fund, Son will endeavor to build off previous technology investment successes including deals with Alibaba and Yahoo! Japan. Some have speculated, however, that the fund may also serve as a way for SoftBank to cozy up to the incoming Trump administration by investing large sums in the United States. 4. China offers to remove compulsory IUDs. For more than thirty years, the Chinese government has required many women be fitted with an intrauterine device (IUD) in order to comply with the country’s controversial one-child policy. But now with the country’s birth rate declining, the government has replaced the one-child policy with a “two-child” policy and is offering women that were forced to receive an IUD a free surgery to remove the device. But many women are not accepting that gesture graciously: after years of being subjected to forced family planning, the government’s about-face without an apology has left many women indignant. Since the inception of the one-child policy, over 300 million Chinese women were fitted with IUDs and more than 100 million underwent tubal ligations. The enforcement of the one-child policy, which Nobel Prize-winning author Mo Yan portrays in Frog, a novel about the most intense years of forced sterilization and abortion in a fictional village, has had a brutal history. Over three decades later, its victims’ scars have not yet healed. 5. Australia and East Timor tear up maritime agreement. On Monday, Australia and East Timor, a nation of just over a million citizens that became a sovereign state in 2002, agreed to terminate a decade-old treaty in favor of negotiating a new maritime boundary. Under the 2006 treaty, the two countries agreed to suspend boundary talks for fifty years and split the tax revenues of the Greater Sunrise oil and gas field equally—a tract closer to East Timor’s coast with up to $40 billion in hydrocarbons. Now, according to a joint statement, the governments have committed to negotiate a new maritime boundary under the auspices of The Hague’s Permanent Court of Arbitration. But this time around, East Timor will likely demand a boundary line equidistant between the two countries and, as a result, a greater share of the oil and gas revenues from the region. For East Timor, the revenues are practically a matter of life and death: without new sources of income, some predict that the fledgling nation could be bankrupt within a decade. Bonus: Benefits of China’s “anti-smog” teas debunked. Chinese citizens in Beijing are finally finding relief after a period of dangerous smog that forced a red alert for twenty-three cities throughout northern China and shut down schools, construction sites, and factories. The smog extended 3.9 million square miles, which is roughly the area of the continental United States. In an effort to protect themselves from pollution levels ten times greater than those advised by World Health Organization guidelines, many Chinese have turned to “anti-smog” teas, sold widely in medicine shops, pharmacies, and online for about $2.90 per pack. Listings claim that the tea’s combination of traditional Chinese herbs, including dried chrysanthemum and honeysuckle, can boost overall health and remove smog-induced impurities from the body. However, a recent state report on CCTV featuring Liu Quanqing, president of the Beijing Hospital of Traditional Chinese Medicine, attacked these claims as false, saying that the “digestive and respiratory systems are separate” and that many of these teas contain ingredients that in fact can cause “health problems if taken for a long time.” China’s Centers for Disease Control instead recommends face masks and air purifiers to combat smog.

Blog Post by Guest Blogger for Asia Unbound January 13, 2017 Asia Unbound
Human Rights

Net Politics Podcast: Farhaan Ladhani

In this latest episode of the Net Politics podcast, I sit down with Farhaan Ladhani, the director of partnerships at the Digital Public Square. I spoke with him about the creation of online spaces for political discussion in countries where the internet is heavily monitored and censored such as Iran, online anonymity, digital activism, and whether the internet is the best marketplace of ideas. Listen to the podcast below, or check it out on Soundcloud.

Podcast January 9, 2017 Net Politics