U.S. Tech Regulation & Geostrategic Competition

In the early 2000s, a handful of U.S. tech companies grew exponentially to become some of the most successful enterprises in history. At the time, these companies benefited from limited regulations, sparse international competition, and an abundance of investment capital. Nearly two decades later, the global landscape has shifted dramatically. Today, the convergence of the widespread digitalization of society, a renewed era of great power competition, and threats from state and non-state actors are making technology policy a critical component of both national security and economic prosperity.

Regulation is increasingly becoming a tool used by governments around the world to advance national innovation agendas, with an increasing number of countries enacting broad regulatory regimes restricting the free flow of data across borders. Both China and the EU are using new laws to bolster domestic technology companies and have enacted restrictions that hinder U.S. companies’ ability to compete within those jurisdictions. They are simultaneously pursuing robust industrial strategies to gain an advantage in developing next-generation technologies. While the EU’s tech sector is still developing, China has numerous established tech companies—many of which are directly backed by the state—poised to challenge U.S. leadership in the sector. International challengers are emerging from new tech hubs such as Tel Aviv and Singapore.

To maintain competitiveness and safeguard national security, U.S. legislators have a vital role in crafting a regulatory regime that preserves technology leadership, drives innovation, establishes strong data protection and cybersecurity protocols, and counters mis- and disinformation and foreign influence. However, progress to date has been slow and piecemeal. The U.S. is one of the only developed countries without a comprehensive data privacy law, and it lacks a clearly defined industrial strategy to rival China or the EU.

In the coming months, Congress will consider the most significant legislation to regulate the U.S. tech sector to date. The proposed bills are far from comprehensive reforms. Instead, select provisions could limit the competitive position of a small set of major U.S. companies while leaving underlying issues with data privacy, cybersecurity, and foreign competition unaddressed. The proposed provisions, if passed in their current form, could result in a range of unintended consequences that would hinder—rather than strengthen—the global competitiveness of U.S. tech companies by overlooking broader threats to U.S. technology leadership, introducing new national security risks, and privileging foreign competitors.

This project, produced by FP Analytics with support from the Computer Communications Industry Association (CCIA), distills key provisions under consideration, analyzes the potential implications of the proposals before Congress, and convenes leading experts to discuss these pressing issues and advance our collective understanding of the ramifications of emerging technology policies. CCIA did not provide input to nor influence this analysis.

U.S. Tech Regulation and Geostrategic Competition

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As currently drafted, various provisions in the tech industry regulations under consideration by the U.S. Congress could bear unintended consequences for national security by exacerbating existing vulnerabilities in the domains of data privacy, cybersecurity, and the spread of mis- and disinformation. Major technology platforms face existing challenges in these spheres, but elements of the legislation aimed at reigning in these companies’ market power do not address fundamental concerns and presents new risks.

May 25, 2022

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“There’s been a problem of process. This has been handled as an issue strictly from the prism of antitrust… I don’t see much involvement by the national security committees of Congress…The participants are very much focused on the domestic realm and not the national security areas… My main point is let’s get some national security input embodied in this legislation.”

Ambassador John Negroponte, Vice Chairman, McLarty Associates, and Former Director of National Intelligence

“We talk a lot about short-term or long-term approach, [but we need to] really think strategically about these legislations… Thinking about those secondary and tertiary impacts of what the legislation is going to do is really important…How do we create rules-based laws, legislation when we're competing against entities and nation states that don't play by the same rules?”

Anna Puglisi, Director of Biotechnology Programs and Senior Fellow, Center for Security and Emerging Technology, Georgetown University

“When Congress gets into the business of dictating activity, it’s not only intervening in the marketplace in a way that is not productive and not helpful, [but] it's beginning to set the conditions for expanding cybersecurity concerns. The same thing would be true in terms of interoperability… And what it means is a race to the bottom on cybersecurity protocols…”

Klon Kitchen, Resident Fellow, American Enterprise Institute

“The internet in and of itself, and also the decentralized tools built on top of the internet, are a lot harder to corral, a lot harder to control. China manages with the great firewall but even then, there’s ways around that if you know what you’re looking for. I think that decentralized tools are some of the best weapons in the information war of the 21st century.”

Ross Schulman, Senior Policy Technologist and Senior Counsel, New America’s Open Technology Institute

June 23, 2022

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“Folks in Washington D.C., really have not cohered around the basic purposes (of tech regulation), including such fundamental matters as: are we trying to advance U.S. interests in relative terms? In which case, we might be willing to accept some lose-lose dynamics where we hurt China, and hurt ourselves in the process, but they're hurt more. Or are we trying to advance in absolute terms?”

Jon Bateman, Senior Fellow, Technology and International Affairs Program, Carnegie Endowment for International Peace

“Many of the leading U.S. tech companies have deep investments in Europe, have deep employee bases there, and do lots of R&D in Europe. While we may be having a debate about decoupling from China, Europe seems to be having a debate about decoupling from the United States.”

Sean Heather, Senior Vice President, International Regulatory Affairs and Antitrust, U.S. Chamber of Commerce

“We should absolutely be prioritizing open and fair digital markets and use our trade policy for that end. Now we've been doing exactly that with agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)… where we authored the pioneering e-commerce chapter, that has binding gold standard rules for digital trade. We have taken that template and used it in the USMCA with Mexico and Canada, and improved on it in my view as well… These are very good templates that we have ourselves architected, but we need to start to apply these more broadly, through existing trade agreements.”

Dr. Kati Suominen, Founder and CEO, Nextrade Group

“Europe has basically singled out U.S. companies and said: ‘we are going to target them for discriminatory treatment. We're not going to treat our companies the same way…’ Then you look at the U.S. and the antitrust legislation that's being considered right now in Congress, and it's basically doing the same thing as Europe. It's singling out U.S. companies for a whole range of bans on different kinds of behaviors.”

Clete Willems, Nonresident Senior Fellow, Economic Statecraft Initiative, Atlantic Council’s Geoeconomics Center

Key Insights and Takeaways

As emerging technologies become increasingly integral to countries’ national security and economic interests, tech regulation is being leveraged by countries as a tool to drive a range of desired policy outcomes. While far from the only actors doing so, China and the EU countries, among others, are in the process of enacting regulatory regimes that favor their domestic tech sectors over international competitors. The U.S. Congress is now looking to regulate tech further, with multiple bills currently being debated. The current package of laws under consideration would enact new antitrust restrictions on a handful of U.S. tech companies based on their revenues and user bases.

As major global tech hubs have emerged in the past decades, from Beijing to Mumbai, there is intense competition to attract investment and establish leadership across a range of new technologies such as artificial intelligence (AI) and quantum computing. As companies and countries compete to establish leadership in emerging technologies, there will be wide-ranging national security and economic implications. These include, for example, strengthening cybersecurity, developing new weapons systems, and unlocking economic efficiencies from AI-integration into supply chains. The unfolding global competition to capture the gains from the development of these new technologies makes enacting effective regulatory policy more urgent as well as more complex.

Against this backdrop, FP Analytics, with support from the Computer and Communications Industry Association (CCIA), convened panels of tech policy experts working within the private sector, government, and think tanks. Across two lively dialogues, experts discussed key considerations for the U.S. and other countries that are looking to drive tech innovation and enact effective regulations.

Key Points

The global nature of the technology sector means that domestic regulations will have broad impacts internationally. For major economies like the U.S., China, and the EU, current and future regulations could broadly re-shape the way major tech companies compete internationally.

National security and economic competitiveness interests have become intricately intertwined with the technology sector. The potential impact of emerging technologies such as AI on a range of sectors, from cybersecurity to supply chains, means that regulations impacting their development will inevitably also impact security and economic progress.

Countries are increasingly using regulation to prioritize their domestic tech industries, and this trend is likely to continue. From government-driven investment in the development of semiconductors, to regulation limiting international competitors, government policy is influencing how companies compete within the technology sector.

U.S. companies have been long-standing leaders in the global tech sector, but their position is being challenged by international competitors and shifting regulatory requirements developing in the U.S. and abroad. As the U.S. seeks to regulate its own tech sector, it faces the challenge of boosting competition without weakening its international position.

The discussions on the future direction of technology leadership and effective regulation raised a broad range of issues. While participants focused the discussions on the national security and economic impacts of the current package of tech regulations under consideration by the U.S. Congress, the dialogues covered additional topics, such as the complicated nature of the U.S.-China relationship in tech, the EU’s Digital Markets Act and Digital Services Act, and the potential impact of decentralization on the tech sector. The complex nature and breadth of issues reflect the competing considerations lawmakers are faced with while crafting regulations. Participants further stressed the potential for unintended consequences, and the importance of carefully assessing and anticipating the full range of impacts of any proposed regulations.

This analysis was produced by FP Analytics, the independent research division of Foreign Policy, and was supported by the Computer and Communications Industry Association (CCIA). CCIA did not contribute to any of the content, nor did it have any influence over any part of this analysis. The content of this report does not represent the views of the editors of Foreign Policy magazine, ForeignPolicy.com, or any other FP publication.