Last month, lawmakers in the House unveiled a series of sweeping antitrust proposals aimed at building “A Stronger Online Economy.” We’re deeply concerned the legislative package would succeed in doing just that – albeit for foreign adversaries rather than for the United States. Beijing, in particular, stands to become the biggest beneficiary of anti-competition bills that could erase the technological edge our country currently enjoys and impose deleterious downstream effects on the American economy and entrepreneurial ecosystem.
For context, the antitrust package includes several provisions that would handcuff America’s most innovative tech companies with a more restrictive set of rules and hasten China’s hope of dominating the digital landscape.
Among the most alarming: the package invites state-owned or state-directed enterprises to sue domestic innovators, exempts most foreign tech corporations – including Alibaba, Tencent, and Huawei – from the oversight it creates, enables foreign competitors to leverage vertical efficiencies and innovate without risk, and forces domestic tech companies to share American data with foreign firms. Foreign corporations eager to buy American start-ups are also set to enjoy an unfair advantage. American companies investing the most in the research and development of augmented and virtual reality, meanwhile, would be sidelined – all but ensuring foreign dominance in the frontier of next-gen computing. And so, as former National Security Council member Michael Allen puts it, “under the proposed legislative package, Chinese and Russian technology giants would remain unscathed — in fact, they would directly benefit from greater access to U.S. technology as well as the data of U.S. citizens and businesses.” While the ramifications of these reforms are unintended, their hazardous impact would quickly become unmistakable.
Our concerns are only compounded by the economic climate in which some in Washington are threatening to kneecap the engine of growth that is America’s tech edge. During the darkest depths of the COVID-19 pandemic, America’s digital economy didn’t merely help keep us all connected – it helped keep our country’s small business sector afloat. Mere months into the crisis, for instance, nearly one-third of small businesses noted that “without digital technology, they would have been forced to close all or part of their businesses.” And as was reported just last week, “the number of entrepreneurs starting a business easily hit a record high in 2020” as “it’s now much easier…to start a small business selling goods or services online… [the entrepreneurs] were helped at every step of the process by e-commerce platforms.” U.S. consumers also spent “32 percent more online in 2020 than in the year prior,” and a full 93 percent of companies are now “conducting some portion of their business online” in the B2B sector.
Such meaningful statistics underscore why, per one recent poll released by the American Edge Project, 89% of voters believe “American tech companies have played an important role in helping the economy during the pandemic” – a view underpinned “by their observations that American tech companies create products that make our lives better (85 percent), connect small businesses to the global market place (84%), connect small businesses to new opportunities (84 percent), strengthen the U.S. economy (83%), make it easier to grow a small business (82%), and make it easier to start a small business (79 percent).”
Looking back prior to the pandemic, the digital economy played an equally indispensable role for small businesses, startups, overall job creation, and GDP growth. In 2018, for example, it supported 8.8 million jobs and accounted for 9 percent of U.S. Gross Domestic Product (GDP) or $1.85 trillion. That same year, “84 percent of small enterprises [used] at least one major digital platform to provide information to customers,” while “75% [used] tech platforms for sales.” Looking forward, policymakers should seek to bolster the burgeoning entrepreneurial ecosystem – according to PitchBook/NVCA’s recent report, “2020 proved to be a record year for the VC industry, positioning the industry to start 2021 on a strong footing.
The industry did not disappoint as Q1 investment, exit, and fundraising activity all exceeded first-quarter results from last year” – as opposed to bottlenecking it. As the National Venture Capital Association warns, the antitrust package’s Platform Competition and Opportunity Act would effectively “foreclose a key liquidity pathway for entrepreneurs” and “chill the creation of new high growth companies that produce new American jobs.” Accordingly, as China aims to “acquire ‘the crown jewels of U.S. technology” – Chinese investments in U.S. tech startups more than quadrupled between 2014 to 2015 for a total of $9.9 billion – Congress must consider the consequences of a prohibition on certain American companies from bidding. Doing so would open the door for Chinese companies to buy still more startups.
The pursuit of protecting consumers and the powerful driver of economic growth that is America’s technological edge need not be a mutually exclusive proposition. Accordingly, as they prepare to navigate the next steps of such a misguided proposal that departs from over a century of economic principles, we encourage our former colleagues to remain mindful of President Biden’s words about how China believes it will “own America” by the year 2035 – as well as how the antitrust package before them could amount to one of the single greatest accelerants of that ambition to soon become the world’s dominant tech leader.
Instead of voluntarily forfeiting America’s global tech leadership role and the economic gains it generates, Congress must work together to fortify it. They need to go back to the drawing board to put our national interest first.
• Former U.S. Sens. Saxby Chambliss (R-Ga.) and Kent Conrad (D-N.D.) are co-chairs of the American Edge Project’s Economic Advisory Board.