Technology, Economics, And Governance News Roundup | October 7-14

Industrial Policy & International Security

China’s chip industry set for deep pain from US export controls | Financial Times

New US export controls are targeting China’s AI and high-performance computing efforts. An export license will be required to sell semiconductors made with US technology to China. Additionally, US citizens and entities are barred from working with Chinese chip manufacturers unless granted special permission. Analysts expect these restrictions will dampen the innovative capacity of Chinese companies and research centers working in artificial intelligence. However, US companies that sell to China will also take a hit–the Chinese semiconductor market accounts for nearly one-fourth of global demand. These new restrictions will force Beijing to seek out alternatives but China is years away from semiconductor independence. Some believe these conditions will lead to increased intellectual property theft. For US policymakers, the collateral damage to commercial industries is worth the national security benefit of slowing down the development of military technology in China. 

Biden’s National Security Strategy Focuses on China, Russia and Democracy at Home | The New York Times

David Sanger analyzes the Biden administration’s National Security Strategy–released this week after a delay last winter to account for Russia’s invasion of Ukraine. The strategy focuses on competing with Russia and China while rebuilding US democracy at home, which Sanger points out is “notable for its erasure of the distinctions between domestic and foreign policy.” The Biden administration calls for speedier military modernization and emphasizes the role of allies and private industry in technological competition, especially with China and in key industries like microelectronics. Transnational challenges like climate change also make an appearance in the strategy but they are secondary to the threat of great power competition and challenges to US democratic principles and elections. The coming weeks will see the publication of additional strategic documents including the National Defense Strategy and the Nuclear Posture Review. 

US Regulation

How Democrats’ big plans for Big Tech shrank to tiny steps | Axios

Despite Democrats’ majority in Congress, they did not live up to the initial hype of their tech agenda. While some tech policy bills have progressed, most have not been passed into law and time is running out before the midterm elections. Congress recently passed legislation raising fees for large mergers and expanding the venues for antitrust cases but more ambitious antitrust bills and data privacy and children’s safety bills have stalled. Tech regulation ultimately lost out to other priorities including bipartisan spending packages to boost the domestic chip industry and improve high-speed internet access and affordability. If Republicans win control of Congress, the unpassed bills will face even higher barriers to becoming law. 

Innovation

Robotics companies don’t want robots weaponized — will anyone listen? | Military Times

Boston Dynamics published an open letter co-signed by five other robotics companies asserting that their products should not be used for hostile purposes. In practice, this means the companies will vet their customers’ intended use cases and may seek to develop technological features to prevent weaponization. Boston Dynamics and the letter’s co-signers believe that their robots should be used to ease or replace human labor in manufacturing or search-and-rescue settings, for example. The statement comes after a Russian hoverbike manufacturer allegedly modified a Unitree quadrupedal robot to carry and fire a machine gun; Unitree was one of the companies that signed the letter. The companies also call on policymakers to promote safe use of robots. However, other robotics companies, specifically those seeking military contracts, have demonstrated options to weaponize their products at the Association of the United States Army conference, for example. 

Cyber

Federal government considers sharing costs for ‘catastrophic’ cyber incidents | The Hill

At the suggestion of the Government Accountability Office, the Treasury Department and Cybersecurity and Infrastructure Agency asked industry stakeholders to comment on the need for a federal insurance response to “catastrophic” cyber incidents. With the frequency of cyberattacks on the rise, more companies are seeking out cyber insurance but firms are increasing premiums and sometimes deny coverage. Some insurance providers do not provide coverage for state-sponsored attacks or attacks that constitute an act of war. However, these conditions are not always clearly defined: Merck recently won a lawsuit against its insurer after they refused to cover damages caused by a 2017 Russian attack that disrupted Ukrainian institutions and spread to other countries. Despite excluding coverage for acts of war, the court ruled in favor of Merck because the insurer’s policy was specific to armed conflict. The US government does not currently offer a federally backed cyber insurance program.

State & Local Tech Ecosystems

The bane of Silicon Valley: How Web3 solves the geographical siloes of innovation | Venture Beat

CEO of StrongNode, Daniel Saito, argues that the decentralized approach to Web 3.0 offers internet tech entrepreneurs an alternative model to Silicon Valley. Saito points to the large concentration of capital, talent, and risk-tolerant culture as the key ingredients for Silicon Valley’s success as a geographical epicenter for tech innovation. However, the Valley is becoming a victim of its own success as new entrants are priced out of the region. Because Web 3.0 startups generate higher returns from network effects and rely more on crowdfunding than venture capital funding, they have more geographical flexibility and can take advantage of more friendly regulatory environments. Saito believes this independence from traditional funding models and geography will level the playing field for startups and ultimately unlock more innovation.

Democracy Online

How social media ‘censorship’ became a front line in the culture war | The Washington Post

In the mid-1990s, Congress passed the Communications Decency Act, which included the Section 230 provision that allows online platforms to host user-generated content without being held liable even if it is illegal. Decades later, the internet companies that this legislation allowed to flourish are at the center of partisan debates over who can and should regulate speech online. Washington Post reporter Will Oremus outlines the history of controversial content from a 2006 YouTube video depicting the hanging of Saddam Hussein to Alex Jones’s conspiracy theories, foreign interference in the 2016 US general election, and misinformation about the COVID-19 pandemic. In 2018, Congress removed liability protections for online platforms that knowingly or unknowingly facilitated sex trafficking but Section 230 otherwise remains largely unchanged. Today, the left and right are pursuing more stringent policies at the state level to regulate what online platforms can and can’t do with user-generated content.