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THE BROAD VIEW

Fear and loathing in lost Davos

With the potential of sidelining of Western companies in the technology race as China takes the lead, there is a discernible lack of leadership, cohesion and coordination among the West.

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Now celebrating its fiftieth anniversary, the WEF takes over Davos, a small mountain village with only 11,000 inhabitants with 3,000 delegates and another thousand innovators, do-gooders, investors, and the inevitable glitterati and sycophants. They assemble to learn of global trends, both good and bad. They come to drink and eat themselves crazy, courtesy of corporate sponsors and their governments.

WE were somewhere in the Cloudfare pavilion on the edge of Davos' Promenade when the third martini set in. Barry, the legendary piano player who has for years entertained the fur-wearing Eurocrats, corporate social responsibility hacks, and Gallic insomniacs during the World Economic Forum (WEF) was playing Ain't No Sunshine when my Chinese interlocutors smiled.

These twenty-something cryptocurrency entrepreneurs from Shanghai and Beijing were sticking to the script: the Coronavirus, ravaging Wuhan in the People's Republic and forcing some 11 million residents indoors and under curfew, was related to snakes. And suddenly I yelled out "Bats". It turns out the virus jumped from bats to humans, just like Ebola, Severe Acute Respiratory Syndrome, and the Middle East Respiratory Syndrome. The disruptors from the East maintained there was nothing to worry about and that all was well.

But that is the world we live in. Two parallel realities. Two global economies. Two technology meta-strategies. And soon, two internets - ours in the West and the Chinese one that is not as much fun but makes more money and allows for greater surveillance.

Earlier that day, Ren Zhengfei, chief executive officer of Huawei, the Chinese behemoth technology company and global leader in 5G telecommunications equipment, spoke at a panel of the World Economic Forum called "A Future Shaped by a Technology Arms Race".

The Huawei pavilion this year was under lockdown, not allowing unannounced journalists or visitors inside. Mr Ren spent some time complaining that his company and over 100 of its non-US affiliates remain on the US Commerce Department's Entity List, meaning that there is an effective ban on US exports of products and software to them. That same day, President Trump, the leader of a fragmented so-called Free World, took his victory lap in the walled off Congress Centre: "America is winning again, like never before." If this is winning, I'd hate to experience losing.

The first "win" is a new trade deal to replace the North American Free Trade Agreement and the second "win" is another trade deal with China. The only trouble with the first win is that United States-Mexico-Canada Agreement is pretty much the same as the impugned original agreement from 1994 - only this time with a few adjustments to bring in labour and environment rights into the agreement and some rules of origin rules and minor IP changes. We managed to upset our traditional trading partners with whom we share our continent and a vertically integrated supply chain in the process.

The second "win" is the recently inked Phase I trade pact between the People's Republic of China and the United States, which was, well, just Phase I.

Phase II, the one with the most fraught issues - Chinese investment and subsidies for its state-owned enterprises and other combines like Huawei, China's national industry policy (Made in China 2025), and China's penchant for corporate espionage - is to be negotiated and concluded after the Presidential elections this November. That probably means never.

While it was not yet clear whether there would be a decoupling of the two leading economies in the world, it was clear from the WEF sidelines that the days of Western domination in technology are numbered.

 Increasingly, technology is about more than maximising wealth; it is also about growing our information society, who controls our data, and what these digital intermediaries do with it all. This will affect macroeconomics and geopolitics.

With the potential of sidelining of Western companies in the technology race as China takes the lead, there is a discernible lack of leadership, cohesion and coordination among the West. The European Union has rendered itself irrelevant and expensive with its onerous General Data Protection Regulation. Despite the high-profile roasting of Mark Zuckerberg, the US has been asleep at the regulatory switch. And, meanwhile, the Chinese have been filing tons more patents, developing public-private partnerships at a rapid pace, and seeding far more companies to take leadership in all things tech (particularly in artificial intelligence, 5G, autonomous vehicles, and semi-conductor chips).

And it is not just these industries of the future. China is about to disrupt the global monetary system with its new Digital Currency/Electronic Payment mechanism (DC/EP), an RMB-backed virtual currency that is currently being tested in Suzhou and Shenzhen right now. It will be ready to go live in the next 18 months. While the central banks of the West continue to naval ing cryptocurrencies and blockchain - the Chinese have studied this new financial technology and deployed in a stealth-like manner. Once the 71 country partners of China's One Belt One Road initiative get hooked in, the DC/EP will displace the US dollar as the global reserve currency.

Not much leverage

Meanwhile, US government leaders were in Davos to start their trade war with their European Union counterparts over a proposed digital tax. They still had the chutzpah to lobby the same people to not buy Huawei's 5G technology and instead wait until the US had perfected its own version. Not much leverage there, even if the Chinese have the ability to breach security through the backdoor and learn all our secrets - corporate, governmental and personal.

It is not surprising that Davos was rife with discontent and concern. And it was not just about climate change. Now celebrating its fiftieth anniversary, the WEF takes over Davos, a small mountain village with only 11,000 inhabitants with 3,000 delegates and another thousand innovators, do-gooders, investors, and the inevitable glitterati and sycophants. They assemble to learn of global trends, both good and bad. They come to drink and eat themselves crazy, courtesy of corporate sponsors and their governments.

The WEF and its parallel programmes were once like Burning Man for rich people, except now Burning Man is Burning Man for rich people. So where does that leave the World Economic Forum? It feels like there Ain't No Sunshine.

  • The writer is a Professor of Law at California Western School of Law in San Diego. He has been an adviser to the US government and governments around Latin America and Asia on technology, intellectual property and legal disruption.

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