By Doug Kelly

The United States and its Western allies are in a high stakes battle for global technology leadership against determined authoritarian competitors. To ensure we win this race, Western policymakers need to aggressively stand up for U.S. technology and Western innovation while reducing our dependence on Chinese-owned technology.

Over the past two decades, short-sighted policy decisions by Western leaders have left the United States and its allies increasingly vulnerable to the unpredictable actions of our authoritarian rivals, including in such strategic resource areas as energy, microchips, pharmaceuticals, rare earth elements, manufacturing capacity, and even space launches.

Though the West is racing to remedy these past mistakes, unfortunately, we are on the verge of making a massively similar strategic blunder, this time with technology. Tech isn’t just another sector of the economy. It’s the backbone of our national security, economic prosperity, and the free flow of information across borders. Increasingly, technology power is geopolitical power. And America’s largest and most innovative tech companies are franchise players in this competition for geopolitical leadership.

China understands the power and importance of technology. That’s why it has invested trillions in developing its own technology and innovation capabilities, including its “Made in China 2025” initiative to boost China’s advanced manufacturing capabilities, an “Internet Plus” plan (2016-2020) to modernize and digitize the country, and a rolling series of initiatives in semiconductors, quantum computing, and most recently, extended reality. As a result of these investments and China’s outright theft of technology, the U.S.’s technological lead over China has slipped in key areas, and in some areas, like 5G, China is the global leader.

But boosting its own capabilities is just one part of China’s plan. The other part of its strategy is to make Western countries increasingly dependent on China, including on its technology. In fact, in a 2020 speech, President Xi Jinping explicitly stated, “we must tighten international production chains’ dependence on China, forming powerful countermeasures and deterrent capabilities based on artificially cutting off supply to foreigners.”

Instead of fighting back against China’s dependency strategy, a myriad of Western elected officials, unelected bureaucrats, and other actors are unwittingly assisting China in this effort by pushing for onerous new regulations on America’s largest and most innovative technology companies. If successful, however, their actions will not just hurt these American tech giants, but instead will undermine the United States’ global tech leadership, hinder the West’s ability to innovate, and hand China both more tech market share and a permanent tech advantage.

U.S. technology leaders are battling in multiple theaters of action. In Europe, lawmakers have passed a number of restrictive new laws (namely the Digital Markets Act and the Digital Services Act) specifically targeting the biggest U.S. technology companies with the aim of protecting far less innovative European companies. The new regulations exclude almost all European firms and most Chinese ones. Not only will these new laws cost U.S. companies billions of dollars in revenue and penalties for conduct that is almost certainly pro-competitive, but these bills will also reduce innovation across the entire technology industry. For example, the DMA will review all potential acquisitions by large tech companies, especially those involving startups.

But for the vast majority of startups, being acquired by a larger firm is the preferred exit strategy for both founders and investors, ensuring reward for risk, freeing up new investment capital, and allowing serial entrepreneurs to move on to the next big idea. Unfortunately, Europe’s DMA-like ideas are now spreading to other countries, including Saudi Arabia, Turkey, India, and others, who are considering upping the regulation of U.S. tech companies.

Additionally, some countries are pushing for “data localization” laws, requiring that data about a nation’s residents be collected, processed, and/or stored inside that country, often with a required on-the-ground local employee of the tech company. These laws create barriers to the free flow of data across borders, which has been essential to the development of the modern internet.

In Washington D.C., federal lawmakers previously introduced a series of anti-innovation bills that target America’s biggest innovators. Some bills would break up these companies, restrict their lines of business, prohibit mergers and acquisitions, and limit so-called “self-preferencing” of that company’s products on their own platform. Worse, many of the toughest restrictions in these bills would not apply to foreign technology companies, including China’s. These bills have supporters in both parties.

Additionally, American regulatory bodies, including the Federal Trade Commission (FTC), are pushing the boundaries of their authority in suing tech companies to prevent mergers, even asserting that a merger would “potentially” create a monopoly in an emerging, innovative market at an unspecified future time. Similar to Europe, these government actions will undermine innovation ecosystems by significantly curbing venture capital funding. Investors won’t invest in startups if there’s not a chance they’ll be acquired at a high price. If investors slow investment, then startups won’t be able to get off the ground.

It matters which country builds the future. U.S. tech companies have a global reach and help advance Western values of an open and accessible internet. China’s tech companies have fundamentally different values and are tightly intertwined with the Chinese government’s view of a closed, censored internet. The stakes are high, and we need to get this one right.

Doug Kelly is the CEO of the American Edge Project, a coalition of nearly two dozen organizations dedicated to advancing and protecting American technology and innovation.