Commission Analysis

The U.S. and its likeminded allies and partners are committed to the freedom of expression, the rule of law, impartial judiciary systems, and the protection of property rights. These political features consequently undergird economic systems characterized by open markets, fair competition, international collaboration, robust capital investment, and regulatory frameworks that lead to historic accomplishments in innovation and enterprise. These features have allowed companies located in the free world to become the world’s leading innovators in key emerging technologies: think ASML (semiconductor manufacturing equipment) in the Netherlands, Palantir (artificial intelligence) in the United States, or Samsung (5G and 6G) in South Korea.

Perhaps most importantly, the likeminded nations of the free world are bound by shared values and a history of collaboration that has established high levels of trust. Many nations have their military or economic ties formalized through the NATO alliance and the European Union and have a history of cooperating to combat shared threats, whether it was Soviet communism during the Cold War or Islamist terrorism in the Global War on Terrorism. Consequently, these nations can trust that the others are generally committed to pursuing similar geopolitical ends, thereby laying a basis for eager cooperation. The power contained in these alliances is the free world’s most powerful competitive advantage in the geopolitical arena.

Freedom also presents inherent challenges. Passing national security-focused legislation through democratic legislative processes marked by open and transparent debate is often a complex and slow-moving process. Coordinating efforts across sectors and countries is also difficult, given the differing objectives between public and private sector actors, as well each country’s views of what is in its own national interests. Over the last several years, for instance, the European Union’s strategic orientation toward China has been inconsistent, in part because of divisions within the bloc over allowing China to invest in or acquire European tech companies. Consequently, nations of the free world have not forged a durable, coordinated strategy amongst themselves for responding to emerging techno-authoritarianism.

Free nations, such as those in Europe, are also being forced to rethink the conditions they must set to be conducive to tech development. Former Italian Prime Minister and head of the European Central Bank Mario Draghi has noted that, “the core problem in Europe is that new companies with new technologies are not rising in our economy.”[viii] No company with a market cap over EUR 100 billion had been set up in the last fifty years.[ix] Today, notes Draghi, Europe would need EUR 750-800 billion per year to meet its existing environmental, security, innovation, and digital infrastructure goals—a figure that is approximately twice the size of GDP which Europe dedicated to the Marshall Plan each year in the aftermath of World War II.[x] Europe’s self-assessment of its long-term strategic failure to prioritize its tech competitiveness pinpoints its inability up to now to achieve broader societal objectives.

Finally, citizens in the free world have typically viewed national security as strictly a responsibility for national governments to bear. But not every national security decision is one that involves deployments of troops, appropriations of money, or economic sanctions. Business leaders have the opportunity – and duty – to make decisions that serve their respective nations’ security interests, in ways that go far beyond mere compliance with government rules. As Krach Institute CEO Michelle Giuda has emphasized, “The real strategic impetus for winning the technology race will come not from government but from our enterprising business leaders from Silicon Valley to Indianapolis to New York to Austin, with help from allies in places like Tallinn, Montevideo, Tel Aviv, and Taipei.”[xi] Much work remains to normalize this attitude within the private sector and stop free-world companies from partnering with purveyors of untrusted technologies who are dedicated to the free world’s demise. A safe, free, and prosperous world is good for business.

[viii] Mario Draghi, Address to the EU Parliament: Presentation of the Report on the Future of European Competitiveness, (Strasbourg, France: September 17, 2024), p. 3, https://commission.europa.eu/document/download/fcbc7ada-213b-4679-83f7-69a4c2127a25_en?filename=Address%20by%20Mario%20Draghi%20at%20the%20Presentation%20of%20the%20report%20on%20the%20future%20of%20European%20competitiveness.pdf.

[ix] Ibid.

[x] Ibid, p. 9.

[xi] Michelle Giuda, “Winning the Tech Race: Why American CEOs Must Lead, Not Follow,” The National Interest, August 23, 2024, https://nationalinterest.org/blog/techland/winning-tech-race-why-american-ceos-must-lead-not-follow-212435.

The world’s 12 largest democracies (by GDP) and the European Union make up nearly two-thirds of the world’s GDP, giving them enormous economic leverage within the geopolitical arena—if they can act in a coordinated fashion. Additionally, free-world companies are still the world’s leading innovators of emerging technologies, giving them opportunities to secure new market shares. National governments also have opportunities to stifle technology transfers to authoritarian states and cut off the capital investments that bolster adversaries’ militaries. Where the private sector is concerned, as global geopolitical tensions rise, business leaders who limit business relationships to trusted tech partners will enjoy greater degrees of product and supply chain security, stakeholder confidence from customers, investors and regulators alike.

Authoritarians have exhibited a track record of exploiting free societies’ freedoms and economic openness to achieve their goals. As just a few examples, RT—a Russian propaganda network—operated with relative impunity on American television until 2022, and companies partnering with the Chinese military have listed on American stock exchanges. Chinese military personnel posing as innocent graduate students have infiltrated campuses in countries like Australia, Germany, Singapore, the UK and the U.S. with the intent to steal high-tech research.

Additionally, many companies and state/local/federal governments have adopted technologies produced by companies owned by or headquartered in authoritarian states (e.g. Huawei routers, DJI drones, Kaspersky Labs software, or ZPMC cargo cranes). Now spread across the free world, those technologies become access points for authoritarians to steal, spy and sabotage.

In total, authoritarian regimes have a sustained appetite to defy international norms and sacrifice the interests of their own people to achieve their geopolitical goals, thus creating pressure on free societies to decide whether, or how, they will impose costs for rogue behavior.

[xii] “Investigation by Select Committee on the CCP, House Homeland Finds Potential Threats to U.S. Port Infrastructure Security from China,” House Select Committee on the Chinese Communist Party, Press Release , September 12, 2024, https://selectcommitteeontheccp.house.gov/media/press-releases/investigation-select-committee-ccp-house-homeland-finds-potential-threats-us

Authoritarian states can compel or incentivize all aspects of their tech and business sectors to participate in achieving regime goals. Thus, even nominally private firms can become weaponized as arms of state power, especially in the tech sector. Thanks to a patchwork of national laws, the Chinese government can order Chinese firms to engineer technologies, appropriate Western technologies, and allocate personnel to serve the state’s national security imperatives. In 2022, the Russian government effectively legalized intellectual property theft, issuing a decree that allows Russian firms to use intellectual property from “unfriendly countries” without consent or compensation. According to the website IP Watchdog, “This essentially means that Russian firms can access publicly available patent databases and practice the patents to boost struggling technological production.”[xiii]

As a matter of techno-economic strategy, Chinese state planning and subsidies have greatly contributed to China becoming the world leader in the production of LED screens and green technologies such as electric vehicle batteries and solar panels. The success of state-funded support in concentrating production of these technologies inside China’s borders has inspired Beijing to attempt to achieve similar domination in other key technologies such as semiconductors and electric vehicles.

Additionally, authoritarian regimes have developed technologies purely for battlefield use, and in many cases already deployed them. Iran has shipped Shahed drones to Russia, where they are deployed on the battlefield in Ukraine, and the Houthi rebels in Yemen have also deployed Iranian drones in their attacks on Israel and commercial ships transiting the Red Sea. North Korea is well-known as a proliferator of ballistic missile knowhow to Iran, and Russia has shipped its S-300 missile system there as well. Disinformation operations targeting democracies, such as those performed by Russia, can also move faster than the “speed of truth”—forcing governments to address lies at a slower rate than they can be pumped out.

More broadly, authoritarians, unconstrained by complex and time-consuming democratic processes, excel at rapidly exploiting geopolitical opportunities. They are comfortable to operate outside of international norms, create economic dependencies, and bypass ethical standards in areas such as human rights, labor, respect for the environment, and application of the rule of law. Authoritarian regimes seek to exploit the technological vulnerabilities and resource wealth of developing nations, thereby leveraging financial dependencies to impose their own interests. These tactics have helped countries like China and Russia gain substantial tech-economic footholds in developing countries throughout Africa, Asia, and Latin America. The Chinese Communist Party’s now-famous Belt and Road Initiative and Digital Silk Road have expanded China’s global influence.

[xiii] Raj S. Dave, “What it Means that Russian Businesses Can Now Legally Steal Intellectual Property from ‘Unfriendly Countries’,” IP Watchdog, March 16, 2022, https://ipwatchdog.com/2022/03/16/russian-businesses-can-now-legally-steal-intellectual-property-unfriendly-countries/id=147528/

[xiv] Jamie Gaida et al., “ASPI’s Critical Technology Tracker,” The Australian Strategic Policy Institute, March 1, 2023, http://www.aspi.org.au/report/critical-technology-tracker.

Authoritarian regimes are not without their own dramatic weaknesses. Lack of political and economic freedom stifles a culture of innovation and drives aspiring entrepreneurs and thinkers overseas. From October 2020 to January 2021, Jack Ma, the ordinarily high-profile Chinese founder of Alibaba Group, was nowhere to be seen in public view. Speculation persists that the Chinese government forcibly detained Ma or ordered him to keep a low profile after he gave a speech criticizing China’s regulators and banks.

Authoritarians’ broken promises and aggressive behaviors on the world stage have shattered trust within the international system and curtailed the free world’s willingness to share certain technologies with them, creating their own dependencies on foreign technologies and hindering them in their race to catch up to the leading companies of the free world. Finally, while China, Russia, Iran, and North Korea have increased geopolitical and military coordination with one another in recent years, these nations’ aggressive behaviors have substantially alienated other countries, and hence they have zero true allies globally apart from other unstable and often impoverished authoritarian regimes. The world’s worst authoritarian regimes maintain only partnerships of coercion, convenience, and transaction, not true alliances.

Authoritarian regimes have strategically embedded their technologies with widespread global adoption such as TikTok, Huawei cell phones, or BYD electric vehicles. Besides the potential for these items to serve Chinese or other authoritarian state interests through theft, surveillance and sabotage, the economic activity associated with the production or importation of such items leads to political leverage for Beijing. Authoritarian regimes routinely exploit free societies to launch legal and illegal influence campaigns, manipulate public opinion through misinformation and disinformation, and co-opt business leaders.

Additionally, authoritarian nations continue to seize the opportunity to grow influence in poor nations with weak democratic norms or resilience. Developing nations in Africa, Asia, and Latin America with growing populations, and increased technological capabilities, will be home to a significant portion of the world’s future workforce and consumer and innovator base, enhancing their influence on global markets. Without a concerted effort to steer these nations toward a model of techno-freedom, they risk falling permanently into the technological-economic orbit of authoritarian countries, thus deterring foreign private sector investment, stifling their development, and saddling them with crushing debts or loss of sovereignty.

Authoritarian regimes are more unstable than they look. Because they are willing to use repression and fear as prime tools of governance, their citizens often quietly simmer with grievances toward the regime. Hence, authoritarian regimes are consistently at risk of being overthrown by their own publics.

Moreover, state-directed economies tend to underperform nations distinguished by free markets. The Freedom & Prosperity Index developed by GTSC Commissioner for Prosperity Partnerships Dan Negrea demonstrates a strong correlation between economic prosperity and freedom, showing that as freedoms in areas such as the economy, governance, and individual rights increase, so does overall prosperity. Higher levels of freedom support a more robust economy, enhance innovation, and improve quality of life, indicating that nations with greater personal and economic liberties tend to enjoy higher prosperity levels. Externally, a growing international consensus among free societies to exclude authoritarian countries from trade relationships is putting new economic pressure on them, and countries like Iran, Russia, and North Korea have almost entirely alienated themselves from the global economy because of acts of aggression. In the case of Russia, its invasion of Ukraine triggered the expansion of NATO, the departure of more than 1,000 companies from Russia, and a wave of international sanctions.