How technology will drive conflict between U.S. and China

Arthur Dong, Georgetown Professor, joins Yahoo Finance’s Alexis Christoforous and Kristin Myers to discuss the outlook on the trade relations between U.S. and China.

Video Transcript

KRISTIN MYERS: Welcome back. Relations between the US and China remain strained, and US Trade Representative Katherine Tai says that tariffs will not be lifted any time soon. Let's talk about it more with Georgetown Professor Arthur Dong.

So Professor, tariffs aren't being lifted. How does the US continue to, you know, strike the balance between continued harm on American business, but remaining tough on China so that we can have negotiations that are going to be beneficial to the United States?

ARTHUR DONG: Yes-- yes, certainly. Thank you, Kristin, for having me on. I think moving forward, we're going to see continuation of Trump trade policies vis-a-vis China. Certainly, this was demonstrated and exhibited just a few weeks ago in the Alaska summit between Antony Biden and Chinese trade representatives. And so moving forward, I think the Biden administration, I would describe as-- you know, certainly would qualify as an episode for the "Fast and the Furious."

You know, the 100-day agenda of President Biden has been very aggressive and certainly very focused on the domestic economy. So for President Biden, he wants to, again, sort of stabilize the patient, get the US economy back up and running, and certainly march towards a path to full employment. Once we get to that stage, we're going to start to address these broader global issues of global trade, and certainly dealing with China.

Two things come to mind with regard to, I think, the Biden approach to China. Two very important sort of-- two very important executive orders were instituted by President Biden. The first was the 100-day supply chain review, in other words, a critical review of America's supply chain. And the second was the executive order on the Buy America initiative. These two will definitely color any discussion with China moving forward.

Now with regard to the supply chain issue, once this review is undertaken, and it's going to be undertaken across a broad area sectorial sort of examination of America's supply chain, certainly, as was mentioned previously, semiconductors, technology, health care, and medicine, these have all sort of come to the forefront during the past year as a result of COVID and now are put at the front and center of any trade negotiation between the United States and China. So that's going to color things, first of all.

Second of all, I think once the 100-day review is completed, there will be a sectorial review that involves both industry and every level of the executive branch to examine both the sort of where are the bottlenecks with regard to our supply chain and critical supplies? Are there any transportational issues regarding that? And certainly, you know, the jam up in the Suez Canal last week highlighted that. And moving forward, are there national security concerns with regard to critical supplies in the United States?

With regard to the Buy America initiative, part of the sort of-- the part of-- the bold part of the Biden administration policy, in addition to infrastructure, will be this question of energy transition. And so where are those critical materials come from? We can't get to net zero, we can't meet our 2050 climate agreements, and we can't make that transition to cleaner and greener energy unless we have a hold on those critical materials that go into energy storage, solar energy, as well as wind.

And so all those things are, in many cases, sourced from abroad. China happens to be the largest single producer of polysilicon, which goes-- is the primary ingredient in solar cells, as well as with lithium ion. And so all these things are going to be placed on the table, front and center, in trade negotiations with China.

ALEXIS CHRISTOFOROUS: Professor, how-- you ticked off a bunch of things just now, but how might the Biden administration's take on trade with China or approach differ, if at all, from the Trump administration, especially when it comes to things like the theft of intellectual property, which we know is something that is very difficult to police even under the best of circumstances?

ARTHUR DONG: Yes, it's a really good question, Alexis. What will happen is that this will be a very, very important priority for the Biden administration with regard to the export of American technology, as well as the development of US-based technology. The one area where the United States is going to come in-- both in conflict and contest with China is this area of burgeoning and next-generation technologies.

So how the Biden administration is going to approach this and how they're going to be differing from the Trump administration across many fronts, first, I expect to see greater emphasis on research money directed towards universities in terms of primary research. On the private research side where companies engage in research, we're going to see a liberalization in both student visas and the ability of the best and the brightest from around the world to come to the United States to be a part of the research foundation that occurs on both corporate campuses and university campuses. I also believe the H-1B visa program will be loosened up and reopened, unlike during the Trump administration.

And I also think there will be a separation between the economic interests of any sort of potential technology play, as well as the national security interest. And let me explain that further. To give you an example, under the Trump administration, we saw the migration of the two, in other words, economic interests were melded with national security interests under the Trump administration. If it originated from China, we automatically placed a national security threat badge on a particular company or a particular technology.

And the example of this is TikTok. Biden has already stated that his view on TikTok is that unless there's a clear national security issue with regard to TikTok, we'll just separate that and make that only an economic issue. And so long as it doesn't violate a national security concern, there's no reason whatsoever for TikTok to be banned in the United States.

And so you're starting to see, again, the separation that is a different approach by the Biden administration. But at the same time, they will be-- you know, draw a very, very sort of strict line in the sand with regard to these very, very key sort of red-- red line issues that are still points of contention between the United States and China.

KRISTIN MYERS: All right, Professor Arthur Dong from Georgetown University. Thanks so much for giving us a bit of education there on what we can expect going forward between the US and China.