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Russia is pushing the US-China tech split way ahead of schedule

Protocol Policy

Hello and welcome to Protocol Policy! Today we will explore the U.S.-China tech divide that seems to be expanding at a dizzying rate. Also, Schumer gave Klobuchar a 60-vote demand on the antitrust bills — it’s going to be an uphill battle to get anything done before midterms. And read to the end to get the latest on Jeff Bezos’ space suit drama.

The growing U.S.-China divide

There’s a geopolitical mess a-brewing, and executives, and the firms they lead, are stuck in the middle. Massive write-downs hide behind all those headlines of “X company pulls out of Russia.” Firms such as Shell and BP are likely taking losses in the billions of dollars just to make a clean break.

With international conflicts now top of mind, U.S. tech executives may find themselves asking, “what about China?” This conflict has driven another wedge between the two global superpowers. But just how quickly are the economies coming apart? And will separation occur gradually, or all at once, like the severing of a frayed tug-of-war rope?

One thing is already clear: Tech is in the crosshairs. This week, U.S. politicians have called for more aggressive economic policies directed at China, particularly targeting the tech sector. This is a multi-pronged effort that seems to be moving faster than most observers would have anticipated even a few weeks ago.

  • The U.S. escalated threats against China chipmakers for violating Russia sanctions. Commerce Secretary Gina Raimondo said Tuesday that the administration could “essentially shut” down any Chinese chipmaker that exports goods to Russia or Belarus by cutting off a company's access to software and equipment vital to the chipmaking process. Although the policy was already implied it was the first time an administration official specifically called out China and its chipmakers.
  • National security officials want limits on U.S. banks lending to China’s tech firms. National security adviser Jake Sullivan reportedly urged Biden to ban American investment in China’s tech firms through an executive order. Officials within the Treasury and Commerce departments are resisting the measures, Politico reported. A senior administration official denied the characterization of an impasse. Already, however, some mutual funds and investors have preemptively stopped investing in China’s tech firms.
  • Sen. Marco Rubio said the U.S. should sanction China if it allows Russia to use its SWIFT alternative, CIPS. In particular, Rubio said in a tweet that the U.S. would impose sanctions on China “if we catch [them] trying to use [CIPS]” to “get around SWIFT sanctions.” This framing of CIPS as a workaround is bizarre, considering CIPS was built as a SWIFT alternative from the very beginning. Of course, none of this would stop the U.S. from moving forward with such sanctions. And it’s certainly in the U.S.'s interest to target any SWIFT alternatives that threaten the primacy of the U.S. dollar.

China isn’t happy with the U.S. telling it whether it can trade with Russia. Protocol’s Zeyi Yang notes that China sees itself eventually playing the role of Russia in a future Western sanctions campaign. At last week’s National People’s Congress, increased self-reliance emerged as a top economic priority. As China develops on this path, it will be emboldened to fight back against Western sanctions. If that tipping point ever arrives, the U.S. will feel the sting of decades of offshoring manufacturing.

— Hirsh Chitkara (email | twitter)

In Washington

Senator Chuck Schumer is dragging his feet on antitrust. Schumer reportedly said he’d put two critical antitrust bills — the Open App Markets Act (S. 2710) and the American Innovation and Choice Online Act (S. 2992) — on the Senate floor as soon as proponents of the legislation could prove they’d fetch 60 votes. Neither Schumer nor House Speaker Pelosi have publicly committed to put the antitrust bills on the floor. And as I wrote last week, time is running out to get anything done before midterms.

Congress passed the $1.5-trillion, 2,700-page spending bill, clearing the way for President Biden to sign it into law. Nearly half the funding will go toward military and national security, presenting more opportunities for tech companies to win lucrative deals as military contractors.

A MESSAGE FROM INTEL

In a few years, we may be largely living “on the edge.” As the amount of data grows exponentially, there is a greater need for edge computing solutions to aid in real-time decision-making.

Learn more

On Protocol

Brian Fishman, Facebook’s former counterterrorism chief, conducted an “exit interview” with Protocol’s Issie Lapowsky. The two discussed Meta’s policy toward Russia, the precedent set by Facebook’s performance in Myanmar and Frances Haugen. “Bottom line,” Fishman said when asked why he left, “I got to a point where I didn't feel the same fire internally for some of the fights that you need to have.”

Protocol has a behind-the-scenes look at The Cyberspace Administration of China’s rise to power. “Its core functions expanded from content to now include data security and privacy,” Jamie Horsley, a senior fellow at Yale Law School’s Paul Tsai China Center, told Protocol. “They permeate everything in a modern economy.”

“Unchecked platform power is a fundamental threat to democracy, both around the world and in the United States,” Laleh Ispahani, co-director of the Open Society Foundations-U.S., writes in a Protocol op-ed. Ispahani makes the case that Washington must consider the costs of consolidation on democracy, not just the economy.

Protocol continues to track the tech fallout in Russia relating to the war in Ukraine.

Around the world

The European Union is taking the ban on Russian state media to new extremes. The European Commission sent a notice to Google requiring the search engine to purge all results that even link to RT or Sputnik or contain “short textual descriptions” of content from those sites.

The EU and U.K. opened probes into Google and Meta ad-services agreements. The European Commission and the U.K.’s Competition and Markets Authority will look into a 2018 agreement between Meta and Google to assess whether the companies intended to stifle competition.

Twitter launched a Tor service on Wednesday that could help Russians circumvent suspected state censorship against the platform. Twitter refuted initial reports that Russia blocked the service last Friday. Since then, however, many Russians have reported difficulty accessing Twitter.

A Belgian parliamentary institution ruled against Clearview AI, deciding that police in the country should not be allowed to use the facial recognition service. Earlier in the week, an Italian watchdog reprimanded Clearview AI for privacy violations and levied a €20 million fine.

In the media, culture and metaverse

Meta’s new policy: it’s ok to threaten to kill people, as long as they’re Russian soldiers. The threats also can’t be “credible,” as defined by Meta. You can read all the unpleasant details about the policy here.

Some of the conspiracy theorists who thought DuckDuckGo would serve their interests in a way Google doesn’t appear to be pretty mad at the privacy-focused search engine’s decision to downrank Russian disinformation.

Tech is challenging proposed legislation in Texas that would punish parents who allow their children to undergo medical gender transition procedures. A coalition of tech companies — including Google, Meta, IBM and Salesforce — took out a full-page advertisement in the Dallas Morning News imploring Texas Gov. Greg Abbott to block the legislation.

In data

7.9%: That’s how much U.S. inflation rose in the year through February, marking the biggest spike since 1982. Meanwhile, overall wages fell 2.4% on average last year and a recent Pew survey identified low pay as the primary reason workers quit their jobs.

A MESSAGE FROM INTEL

As a form of distributed computing, edge computing enables processing to happen where data is being generated. The convergence of 5G networks with edge computing means data is not only traveling faster, but can be quickly translated via media, inferencing and analytics into insights and action, enabling new, ultra-low latency applications to come to life.

Learn more

Billionaires — they’re just like us!

Don’t you hate when your space suit doesn’t fit quite right? According to Bloomberg, Jeff Bezos had to deal with this exact issue: A source told the outlet that “Bezos was volubly upset that the jumpsuit fit poorly around the crotch — and had his tailor flown to his Texas ranch to fix it.”

Thanks for reading — see you Monday!

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