Trade protectionism unfavorable for U.S. innovation development: experts

U.S. President Donald Trump signs a memorandum calling for a trade investigation of China, on August 14, 2017, in the Diplomatic Reception Room of the White House in Washington DC. [Photo: Imagine China]

As the United States has been taking various actions to restrict China's investment in high-technology sector, many insiders from the U.S. business and academic circles say those moves will be unfavorable for the country's own innovation development.

The U.S. has proposed tariffs that will affect a series of Chinese goods aligning closely with the manufacturing sectors covered by the "Made in China 2025" plan, which calls for the modernization of China's manufacturing sector and includes targets for the development of high tech industries, including artificial intelligence and robotics.

Some observers believe that the threats by the United States to slap tariffs on China's high tech industries highlights their fears about China's growing economic and industrial success.

Pete Walker, a senior partner of international management consulting firm McKinsey & Company, says that the United States’ trade restrictions stand in opposition to the principles of an open market.

"To me it's hypocritical for the United States to say 'we don't want China to challenge us in these areas', because the U.S. is supposed to be the champion of open markets, so open markets are all about open competition," says Walker.

The observer adds that the United States will eventually lose its advantages in innovation if it sticks to a policy of trade protectionism and closes itself off from market competition.

"So my attitude is the U.S. is 'sour grapes blowing off hot air,' and at the end of the day it's going to force the U.S. to either start investing in those technologies the way China is, or get ready to be number two in certain areas," says Walker.

Restrictions by the United States on technology exports to China are not necessarily a bad thing for China's development, according to Albert Ng Kong Ping, a managing partner with the consultancy firm Ernst & Young Global Limited.

"From another prospective, if the United States refuses to export certain products to China, China can conduct innovation independently and produce them on its own. The current situation in China is completely different from what it used to be. China has sufficient funds and other advantages to attract talents to conduct research and development work in the country," says Ng.

There has already been significant investment made into China's science and technology sector.

Geoffrey Garrett, the dean of the Wharton School at the University of Pennsylvania, says that China is an engine of both global economic growth and innovation.

"I was looking into renewable energy, and if you count both by investment and by jobs, about 40 percent of the investment and jobs in the world in renewable energy are in China. In 2017, there were more electric vehicles sold in China than in the rest of the world put together. China has only been in the high speed rail business for 10 years, it already has more high speed rail lines than the rest of the world put together," says Garrett.

The analyst expects that China's investment in artificial intelligence will allow it to surpass the United States in this field in the next five years.