Industrial Policy: Where Technology is Made, and Who Makes it, Matters – Sen. Mark Warner and Ted Schlein

November 5, 2020
Harris Allgeier

Interos’ 2020 summit for the Financial Services Industry (FSI) featured Sen. Mark Warner in conversation with investor Ted Schlein in discussion on industrial policy. A former investor and venture capitalist, Sen. Warner is intimately familiar with the intersection of business, technology, and government. As part of his official duties, Sen. Warner serves on the Senate Finance and Banking Committees. This blog will provide a brief overview of some of the topics raised in their conversation. For the full talk and the rest of the Interos summit, click here.

The History of American Investment in Technology

A significant portion of the conversation focused on the perception generated by differing approaches to industrial policy. Ted Schlein opened their conversation with a quote from the Senator from last year: “We in this country have avoided the notion of industrial policy where the government tries to pick winners and losers. But when we compete with a nation with the size and scope and the focus of China, [current policies] may need to be rethought.” Sen. Warner went on to remark that, while the U.S. has stepped back from direct technology investment in recent years, that wasn’t always the case. Examples include:

  • ARPANET – The Advanced Research Projects Agency Network (ARPANET) was established by the DoD and is considered foundational to the existence of the internet as we know it today. The project was entirely funded by the US government
  • GPS – GPS was initially developed by the U.S. military to overcome limits of traditional navigation systems and was made available for civilian use by President Regan.

The two projects serve as time-tested examples of the positive results of direct US investment in technology development.

China, China, China.

A central topic of discussion was the U.S.’ increasingly tense relationship with China. Sen. Warner was careful to clarify that international trade friction should not be used to disparage Chinese Americans or the Chinese diaspora, but that that macro concerns over unfair treatment by the Chinese govt needed addressing. The senator highlighted a number of concerns including:

The allure of access to Chinese markets has led to increasingly dubious tradeoffs for American businesses, some of whom have adopted stances encouraged by the CCP, such as removing Taiwan from airline maps.

The Senator also highlighted that while the Chinese model of economic development encourages domestic competition in nascent industries, once a clear winner emerges the Govt will essentially designate that company as a leader for all of China, conferring numerous benefits including access to unlimited financing and access to developing countries as part of China’s Belt and Road and Digital silk road initiatives.

This makes real competition against these companies almost impossible, and ensures these leading businesses prioritize the needs of the CCP, even over their own shareholders, while creating international powerhouses that can secure control over standards setting bodies.

The Senator went on to highlight that in the future, military and economic alliances will potentially need to be bolstered by technology alliances of like-minded countries who recognize the need to foster fair international competition and advancement, while maintaining technical parity with China.

Educating Allies

Sen. Warner took a few moments to acknowledge the potential disruption and confusion surrounding recent federal initiatives encouraging decoupling from China, voicing concern that we could do a better job of explaining such efforts to our allies or risk alienating them.

“I worry at times, that if we don’t also do that kind of education process with our allies, that this turns into ‘Are we going to believe the Americans? Are we going to believe the Chinese?’ This kind of decoupling effort, where countries are then forced to make a pick, not maybe based upon our values, or not maybe based upon kind of our traditional alliances, but just who do we think is going to win this competition? That’s not always good for us.”

America’s alliances are one of the primary drivers behind the structure of much of our global supply chains. As the Senator points out, ensuring clear communication to our allies of the reasons behind (and complexities of) regulatory efforts is critical to their success.

More to come!

Stay tuned for further content from the Interos summit including more blogs on Sen. Warner and Ted Schlein’s conversation, and talks from Dr. Richard Haass, Valarie Abend, Phil Venables, Meg Anderson, Jim Routh, and more!

Click here to view the summit in full or visit the rest of our website to learn more about Interos.

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