Israel isn’t doing enough to ensure that China isn’t getting access to sensitive technology, David Schenker, the assistant U.S. secretary of state for Near Eastern affairs, complained this week at a conference on the U.S.-China rivalry. And, if Israel thinks it can somehow stay neutral in the trade war, he reminded Israelis who their real friend and ally is, and it’s not Beijing.
Under the circumstances, you might reasonably ask why his opinion still matters. Schenker’s boss, Donald Trump, is on his way out and in less than a month Israel will be answerable to the Biden administration. Let’s wait and see what the new assistant secretary of state has to say.
However, it seems it will probably be pretty much the same thing. At least, that was the consensus at the conference this week sponsored by SIGNAL, an Israeli policy organization that specializes in China-Israel relations.
The Biden administration may be more gentlemanly about how it pursues its cold war with China and it will almost certainly make better use of its allies, but its basic attitude toward China isn’t expected to be very different from Trump’s.
One of the few things about which there is a foreign policy consensus in Washington is that the old strategy of supporting China’s integration into the international community has failed. The U.S. now settles for trying to contain China’s superpower ambitions, and one important way to do that is by frustrating as much as possible Beijing’s goal of becoming the world’s preeminent technology power.
When Washington complains that Israel is giving China too much of a free hand, it’s usually referring to big infrastructure projects, like the new Haifa port and desalination plant. But as Schenker’s remarks show, the U.S. is just as concerned about Chinese investment in Israeli technology. The fear is that Beijing will gain access to dual civilian-military technology and/or use Israeli innovation to get a leg up on U.S. companies.
Too late to rein in China
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Dorian Barak, a technology investor, told the SIGNAL conference that U.S. fears are unjustified, and he makes a strong case. A couple of years ago, the Chinese were enthusiastic strategic investors in Israeli tech, snapping up whole companies; but they’ve since learned that early-stage startups don’t have products ready for the market and that makes them a lot less interesting. These days the Chinese are making relatively small financial investments in Israeli companies, which doesn’t give them any access to intellectual property, Barak says.
Meanwhile Israeli tech companies have become less welcoming of Chinese investment, Barak adds. The fact remains that America is still the biggest foreign player in Israel’s Startup Nation, with Europe a distant second.
With all the hysteria over Chinese competition and espionage, many Israeli tech companies see having Chinese shareholders as a liability when they try to sell products and services in the U.S. and Europe.
None of this means that Israel can steer clear of the battling giants, only that the terms of the warfare have changed, perhaps for the worse.
As much as the U.S. might want to rein in China, it’s too late. China has become powerful. Not only is the Chinese economy today too big and too thoroughly integrated into the world economy to isolate it, China has made major strides in developing home-grown tech. It is too late in the game for the U.S. to try to slow the Chinese by depriving them of U.S. (or Israeli) tech. In 5G mobile technology, for instance, China is the only game in town.
The coronavirus crisis and the Trump White House’s mismanagement of it have only strengthened China. Its share of global exports has reached a record, despite the Trump trade wars. China’s ability to bounce back economically so quickly from the pandemic has reinforced Beijing’s confidence that the economic balance of power is moving inexorably in its favor.
The Biden White House will be pressing Israel and other allies to keep China at arm’s length, but we can expect an increasingly confident China to press back.
Pressure from Beijing will be of a different order than even the bluntest measures taken by Trump. Take Australia, which enraged Chinese leaders by banning Huawei’s 5G technology and calling for an inquiry into the origins of the coronavirus. Chinese revenge has caused Australia to lose exports worth billions of dollars, and Australian journalists in China have been subject to harassment.
Israel is much less reliant on Chinese trade and investment than Australia is, but as Beijing under Xi Jinping becomes more aggressive, the tightrope act Israel has maintained until now – for instance, the mostly toothless mechanism for vetting foreign (meaning Chinese) foreign investment – may not be so easy to maintain. America may wind down the pressure a bit, but China is more than likely to wind it up.
China is the up-and-coming world economic power and since Israel’s strength is technology, that’s where the fighting will take place. The Chinese may have lost interest in startups, but they remain keenly interested in Israeli agriculture, water, environmental and other technologies where Chinese companies lag, according to another SIGNAL conference participant, Zhao Hai, a research fellow at the Chinese Academy of Social Sciences.
So, while Trump may be gone, Biden is no trade-war peacenik and Xi Jinping remains – and indeed seems likely to remain for some time. Israel will remain in the crossfire.