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A US cellphone chip's global journey
The Graphic Truth: A US cellphone chip's global journey
Semiconductors bind the electrical circuits in the tech we use every day. In mid-2021, a global semiconductor shortage caused by COVID supply/demand issues and a drought in Taiwan made many devices hard to come by. But the self-ruled island in China's crosshairs is only part of the global chipmaking supply chain, which travels back and forth between Europe, Asia, and the US. We follow its steps for a smartphone.
Should investors bet on China over the US?
Hard to say these days, even for a billionaire hedge-fund manager like Ray Dalio.
On the one hand, America has a better system, better tech, and better universities. On the other hand, China "has us outnumbered" in population and pace of per capita income growth.
China, he explains, has not only become a powerful competitor. The US has changed, too.
"[The] America that I remember is a different, uh, and grew up with is a different America than it exists today in terms of like equal opportunity and the American dream."
Watch the GZERO World episode: Does China's rise have to mean America's decline?
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Russian hackers target US tech companies with little accountability
Marietje Schaake, International Policy Director at Stanford's Cyber Policy Center, Eurasia Group senior advisor and former MEP, discusses trends in big tech, privacy protection and cyberspace:
Has Russian behavior in cyber changed after President Biden and President Putin's meeting earlier this year?
Well, unfortunately, we see ongoing assertiveness and aggression from the Russian side, targeting the US government, but also US tech companies. And the fact that there is so little accountability probably keeps motivating. Shortly before the Russian elections, Apple and Google removed an app built by opposition parties, to help voters identify the best candidate to challenge Putin's party. The company cited pressure on their employees in Russia, but of course, the pressure on the Russian population is constant. And after these dramatic events, the silence from Western governments was deafening.
What about US companies being targeted by attackers from Russia?
Well, it is a very inconvenient truth that the very companies whose software we all rely on is not secure enough to withstand these attacks. And again, the lack of accountability of attackers is a problem. Intelligence gathering currently does not violate international law and is rarely met with sanctions, even if the consequences of breaching systems, can be significant throughout an ecosystem. There is a legal vacuum and a political vacuum, in clarity around what is and is not acceptable. So, a combination of state accountability, and corporate liability standards are needed, to change the status quo.
How to fix Facebook
Ian Bremmer's Quick Take:
Hey everybody and happy Monday. Back in the office, getting a little cool. So I've got my sweater going on. It's the first time I've had a sweater on. What do you do with that? Discussing fashion, as I talk to you about what is on my mind this week?
And what's on my mind this week, Facebook. Facebook is on my mind. It's a tough week for Facebook. There are all sorts of whistleblowers out there. There's testimony going on. There's calls for regulation. Everybody seems unhappy with them. Indeed, you even got the government relations types, Nick Clegg, who I've known for a long time back when he was a policymaker in the UK saying that the headlines are going to be rough, but we're are going to get through it. But I will say, first of all, I'm kind of skeptical that any of this goes anywhere in terms of impact on how Facebook actually operates.
I mean, if there's anything that's a real threat to Facebook going forward, it's whether or not people themselves, the consumers start to opt out. Is it a place for young people around the world or is it really just folks like me who are engaged in posting and all of that kind of thing. But why do I feel that way? Well, one, because government does not in any way agree on what to do.
I mean, on the right, you have a lot of people who think the problem is about culture warriors. It's political incorrectness not being allowed. It's people on the right being taken off unnecessarily. So of course, that starts with Trump. It goes farther with others. It is certainly true that the most viewed sites on Facebook continue to be people like Ben Shapiro and Dan Bongino and Fox News. It's not consistent every day, but it is absolutely majority. So it's hard to make that argument overall, but certainly in terms of individual people that are getting canceled and folks that are seen as putting forward, what is described as fake news and disinformation on Facebook, whether it's around the elections or around white nationalism and supremacy, or even around vaccines and the pandemic response, there has been more sensitivity on both the actions taken and the responses from the right than from the left.
On the other hand, on the left, you have people who are saying there's far too much power. This is bad for civil society. It's driving people towards extremes. It promoted all sorts of stop-the-steal behavior and promoted violence as a consequence. And so, it's a very different set of what... When the country is as tribal as it is, the responses to where you see a lot of that tribalism is very, very different.
Secondly, the company of course itself is not interested in taking on principal responsibility for solving the challenges of regulation. I mean, companies always say they'd rather functionally regulate themselves, but they don't want to have direct responsibility for that because that implies direct accountability with the population for that. So in other words, this reminds me of what you used to hear from China 10, 20 years ago, which is, "hey, we're small. We are poor. We're weak. Don't look to us for the global solutions, look to the United States for the global solutions." Facebook is kind of doing the same thing. I mean, I don't know if you read Axios this morning, but Facebook's sponsoring it. And they're basically saying, hey, we want regulation. We want the government to tell us there are problems with the kind of news that's on our and other sites. And we want the government to create new sets of rules that will apply across the entire internet, across all social media that will determine how we should function, what kind of information we should post, what we should not post. They're asking for it. And in part they're asking for it because as they know they're not really going to get it, but in part they're asking for it because it means not their responsibility. If it screws up, it's on somebody else. It's on the US government. Furthermore, Facebook, like most of these AI-driven organizations, don't really know what their algos, what the algorithms really do. And that's a problem of AI. You've got deep learning into massive amounts of big data. And you understand that it's getting you outcomes that drive more engagement, but you don't really know exactly what it's doing.
It's not telling you. I mean, you can figure out what patterns it's getting information from, but that's very different from having a human being sit down and explain, okay, here's why we're getting more engagement. Here is the strategy and the logic behind it. I mean, when you are programming algorithms to look inside data, to drive more engagement, you will get that outcome. And it's not an effort to polarize. It's not an effort not to polarize either. It's just an effort to drive more engagement. And if the companies themselves don't really know what the algos do, then it's very hard for them themselves to say, "well, here's what we would do if we wanted to ensure that civil society was stronger." Because that's not what you're optimizing for. You're optimizing for the business model itself.
Then of course you have the point that it's the United States versus China in terms of the supremacy of different technological capabilities of which Facebook is one. And if you're weakening Facebook, if you're breaking up Facebook, if you're regulating Facebook in a way that fundamentally subverts their business model, while in China with many more citizens and far more data, because there's no real privacy consolidated in super apps, well the Chinese companies are going to become more successful. They'll win. And if these companies are increasingly meant to be a big component of what national security means and how one competes on the global stage, the worst thing you can do is undermine American companies at the expense of their competitiveness, vis-a-vis China.
So I think all of these things together are reasons why it is unlikely that we are going to see structural regulation that will meaningfully undermine the power of organizations like Facebook to have more and more influence over the areas that they play. And in the case of Facebook, it really is social interaction, information, and news that the average person around the world on the platform, 3 billion people at this point are digesting.
I do think that there are some... As Ian Bremmer here, there are some obvious fixes that would reduce the level of the problem. I mean, fix number one seems pretty clear to me, that choosing not to run political ads of any sort would improve the level of information and the quality of discourse with US elections. That's number one. Secondly, systematically reducing the importance of domestic politics, or heck, even all politics on the site so that people who are going to Facebook are not being fed primarily that kind of information. That runs against my interest, frankly, but nonetheless, I think it would probably help.
And third, my favorite one, everyone should be verified. Every person that is on the site should actually be a real person like on LinkedIn, for example. They have to sign in and verify who they are. If they break the terms of agreement, then that means that they lose that. And they can't just come up with another random anonymous account. Now, the problem with all three of these fixes is that they all would actually in different ways undermine the business model. You will make less money if you don't take political ads, if you don't run them. You will make less money if something that's very popular, drives a lot of engagement, like politics is reduced in its prevalence on the site. You will make less money if you get rid of all of the anonymous accounts and the bots and the fake trolls, because they drive engagement, they drive a lot of engagement.
So there are very legitimate reasons that a shareholder-driven company would not take the steps to make those sorts of fixes. And there's also lots of reasons that I mentioned before, why the US government will not put the kind of regulations in place that would lead to fixes like that. So what does that mean? What's going to happen? What's going to happen is that we are going to need to adapt to an environment where technology companies are increasingly powerful in various digital spaces.
This reminds me of when I first came up with the idea of the "G-Zero World," a world without global leadership almost 10 years ago now, and immediately the response I got from people is, "okay, Ian, well, that's bad. So how do we stop it from happening?" And I was like, "well, what do you mean? How do we stop it from happening?" I'm telling you, I think it's going to happen and it's going to happen because it's overdetermined, because the United States increasingly doesn't want to be the global policeman or architect of global trade for reasons that are deep and structural. And the Europeans are more divided themselves and less capable and willing of providing that kind of leadership in the absence of the US. And the Russians are in decline, but angry at the Americans and the Europeans. They want to further undermine those countries and their ability and willingness to provide that leadership. And China's becoming stronger, but they are not aligned with the political and economic models of the US and Europe.
So it's not how you stop the "G-Zero" from coming. It's given that the "G-Zero" is coming, what do you do about it? How do you respond to it? How do you adapt to it? It's like climate change. We started 27 years ago, the COP process and the people involved would not even talk about adaptation because that was tantamount to surrender. If you said you were going to adapt to climate change, that meant that you were refusing, you were abdicating responsibility for a world that we had to stop climate change. And yet, the reasons that climate change were not going to be stopped were so incredibly overdetermined. So entrenched among many actors across the entire world, that it should have been obvious that we were heading towards one, two degrees, increasingly three degrees centigrade of warming. And it's a horrible thing for the environment, but we need to adapt to it. Doesn't mean that we stopped trying to mitigate the consequences themselves, of course, but you can't refuse to adapt. Adaptation has to be a big component of how you respond. And I think when we talk about Facebook, when we talk about technology companies more broadly, adaptation is increasingly a core part of the model in part because it's happening a lot faster than climate change. And for reasons that I've argued, I really don't think it is sensible to presume that we're going to be able to fix this in the near term future.
That's enough for me. Hope everyone's good. Talk to everyone soon.
How will the global corporate tax deal impact tech companies?
Marietje Schaake, International Policy Director at Stanford's Cyber Policy Center, Eurasia Group senior advisor and former MEP, discusses trends in big tech, privacy protection and cyberspace:
Will the OECD-brokered global corporate tax deal make a difference?
Well, it should, at least in two years, once it is adopted by the 136 countries that have now agreed to it. Once enforced, a minimum contribution would see approximately $125 billion flowing to public purses where it doesn't today. It would make it harder for countries to be tax havens or to be part of this race to the bottom when it comes to tax rates. It puts a limit on competition between countries but that is still possible. Now, public scrutiny over the corporate sector has intensified over the past years and with a whole host of issues like health care, climate change, and infrastructure begging for better solutions, there is a need for fair taxation that is widely supported, both publicly and now also politically.
Will tech companies finally start paying their fair share?
Well, they would be part of this treaty once it is in place, but in the meantime, there is actually a two-year ban on tax levies. The US negotiated that because if you recall, there were French proposals to tax US tech giants over their European income and profits and those almost led to a trade war between the two allies. So, most likely this OECD tax treaty will go over much more smoothly. Already, the historic agreement by the OECD and G20 countries is a much-needed sign of hope.
The US and EU further talks on technology governance
Marietje Schaake, International Policy Director at Stanford's Cyber Policy Center, Eurasia Group senior advisor and former MEP, discusses trends in big tech, privacy protection and cyberspace:
Hello, and welcome to the new Cyber In 60 Seconds. My name is Marietje Schaake, and you're finding me at the Democracy Forum in Athens. So, from my hotel room, I'm looking back at the Trade and Technology Council that took place in Pittsburgh this week.
For those who missed it, this gathering brought together high-level officials from the Biden administration and the European Commission. It was a long-anticipated meeting that was supposed to reach conclusions about a shared governance agenda for tech-related issues like AI, data, semiconductors, and foreign direct investments. But the Trade and Technology Council was also expected and hoped to mark a new start after very difficult years across the Atlantic. I think we all remember the years when President Trump was still in the White House. And thankfully, the August fallout and French anger did not end up pouring cold water over the events. Although, the general sentiment in Europe that the honeymoon weeks are over is widely shared.
The conclusions of the Trade and Technology Council actually read more like an agreement on the agenda for the next couple of years, rather than tangible actions and conclusions. Tony Gardner, the former US Ambassador to the EU actually remarked that reading them, he figured the fact that the meeting took place at all was a result to mark. But with low expectations, the only way seems up, and there is work being planned in no less than 10 working groups, focusing on green tech standards and SMEs.
And developments that I'm going to watch are trade rules such as sharing information on dual-use export controls, but also FDI screening. The coordination on semiconductors, despite respective programs to develop domestic industries. Data governance, including access for academics. But without the privacy, because that issue is negotiated separately. And then of course, the question of aligning and governing AI in line with democratic values and respect for human rights. Between now and the next meeting, it will be interesting to watch how the tensions between the EU, the US, and China may unfold and whether the EU and the US will converge as part of a larger democratic alliance, but also which domestic legislative initiatives may go on and unfold that could actually impact the agenda of the next Trade and Technology Council in a year.
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US & allies unite against China's cyberattacks
Ian Bremmer's Quick Take:
Hi, everybody. Ian Bremmer here, back in Nantucket for a few days, and a Quick Take to start out the week.Well, I thought I would talk about the finger-pointing happening at China for these cyberattacks. When we've been talking about cyberattacks recently, we mostly talk about Russia. It's been ransomware, it's been espionage, it's been disinformation, and US election intervention and all of these things. But no, this week it is all about China, and specifically the White House had this unusually strong statement, citing concerns about China's, what they call, irresponsible and destabilizing behavior in cyberspace, specifically talking about a hack against the Microsoft Exchange Server that we found out about back in March. That is a big deal.
Second, and related to that, is the fact that there was a massive response, a coordinated response, from NATO, as well as all G7 members. You remember back at the G7 meeting that we had a month ago in the UK, and the surprise was the statement was much more about China, much more coordinated on China, than people would've expected. That was the 3-hour meeting that they shut down the internet so they could all talk internally. There's increasing backlash against what is seen as more assertive Chinese behavior towards the West. We saw the big speech by Xi Jinping at the 100th Communist Party plenum. On the back of that, the Chinese government has made tougher statements on Taiwan, they have taken big moves against Chinese tech companies, against their IPO-ing in the West, in the United States, which is what makes them more transparent and more interoperable and engage in a global way. And now you see the United States and our allies around the world, in turn, taking on more coordination vis-à-vis China.
In the medium-term, one of the biggest questions out there will be to what extent countries like Germany and France and the UK would get on board with the United States that considers its top national security priority to be China, to be a threat from a competitive, assertive, and increasingly powerful China. And what we've seen in last 3 months has been a surprising amount of consolidation of that position. Doesn't mean it's going to continue on that trajectory forever, doesn't mean the Americans will be able to continue to implement on it, but at least for now, what we see is a Chinese government that is looking away from globalization, that's focusing more on domestic supply chain, on domestic consumption, on national champions, and a Chinese model of development, and we're seeing in the United States, Europe, Canada, Australia, Japan, even South Korea, all say we really don't like that direction. We have to work closer together.
Here's the big push back on all of that, and that's, despite all of these headlines, the level of interdependence and interoperability between the West and China continues to be incredibly deep. And you wouldn't necessarily know it by listening to the headlines. Deep in terms of trade, in terms of tourism, in terms of access to each other's markets, access to each other's financial systems, and frankly, most of the major economic actors in the United States in the West over the coming 5, 10 years, they expect to have not only the present level of engagement in China, but even more exposure to the Chinese market. China is the leading trade partner in almost the entire world in 2021. The United States is not about to supplant that. In fact, that trajectory is moving more in that direction.
So, on the one hand, you have the reality of globalization and interdependence that no matter what the politics are, will continue to get stickier and more engaged. On the other hand, you have the politics of pretty much all of the major economies in the world driving exactly against that. It's the most important cleavage in the world today, geopolitically, and it's one we're going to be spending an awful lot of time trying to suss out as these headlines continue to drive this kind of conflict.Anyway, that's it for me today. I hope everyone has a good week. Talk to you all real soon.
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Cuba internet censorship amid protests; pressure grows against Huawei
Marietje Schaake, International Policy Director at Stanford's Cyber Policy Center, Eurasia Group senior advisor and former MEP, discusses trends in big tech, privacy protection and cyberspace:
Cuba has curbed access to messaging apps amid protests. How controlled and censored is Cuba's internet?
Well, any debate and criticism is tightly controlled in Cuba, including through information, monitoring and monopoly. But activists such as blogger Yoani Sánchez have always been brave in defying repression and making sure that messages of Cubans reached others online across the world. Now mobile internet has become accessible to Cubans since about two years, but accessing it remains incredibly expensive. But the fact that the regime in Cuba once again seeks to censor people through shutting down internet services actually shows it is its Achilles' heel. As Yoani has said, the Castros have lost the internet.
On a different note, the FCC is finalizing a program to replace Huawei equipment in the United States. Will Europe soon make a similar move?
Well, I wouldn't wait for it, although pressure is growing against Huawei in Europe too. Sweden has taken a tough line along with Eastern European countries, while a country like Spain has sought a much more gradual approach. And one of the main challenges for Europeans is to ensure a united position at the intersection of its single market and 27 nationally decided national security thresholds. It is a question also impacting universities as they continue to accept research grants from companies like Huawei.