The US needs a 'Digital Marshall Plan' to counter China's Digital Silk Road

Authors: Orit Frenkel, Jennifer Hillman, and Kent Hughes as published in The Hill, July 12, 2021

The United States is poised to launch a much-needed initiative to advance American global competitiveness. Done right, such an initiative could usher in a U.S. era of strong, inclusive and sustainable economic growth, along with reinvigorated global leadership. Both Congress and the Biden administration are contemplating major initiatives. They should take bold action, lest they squander this moment.  

The new focus on competitiveness has been prompted by a confluence of factors: a global pandemic that highlighted supply chains and the importance of domestic manufacturing; a digital revolution that has emphasized the importance of digital inclusion, training and infrastructure; and the technological competitiveness of a risen China.

One of the few issues on which Congress and the administration appear to agree is the importance of maintaining American leadership in critical technologies as part of an expanded vision of national security. Bipartisan support has evolved in favor of an industrial policy for a limited number of key technologies, such as semiconductors, 5G, the ORAN alliance (open radio access network) and others essential to maintaining American innovation and technological leadership. 

The Senate has adopted the United States Innovation and Competition Act of 2021 (USICA). Passed with strong bipartisan support — 68 to 32 — USICA provides $250 billion to support research and development work, the development of key technologies, K-12 and graduate education, and more than $50 billion to support the semiconductor industry. Also with bipartisan support, the House has passed two bills adding significant funding for research at the National Science Foundation and Department of Energy.  

Yet, while the administration and Congress have taken some important steps in the right direction, more are needed.   

The pandemic drove home that America’s future is digital. But with more people on the web than any other country, China has aspirations to be the global internet leader, remaking cyberspace in its own image. China’s Digital Silk Road ($200 billion and growing) has become an increasingly important part of its larger Belt and Road Initiative (BRI). When China sells its equipment to middle-income and developing countries, their governments receive the tools to censor and control the internet while leaving their networks vulnerable to Chinese government cyber theft and interference. The Digital Silk Road also gives China a sufficiently dominant market share in many markets to set the technical standards to favor Chinese products over all others.

During the G7 summit in Cornwall, President Biden and other allied leaders announced a global infrastructure plan to counter the Chinese initiative. The program, which the White House calls the “Build Back Better World (B3W),” has the right ambitions but is not sufficient to the task.  

Under the Trump administration, a number of agencies were merged to form the International Development Finance Corporation (DFC). However, with lending power capped at $60 billion, the DFC’s funding is small compared with China’s BRI. The Senate-passed USICA would raise the lending limit to $100 billion, still far short of BRI funding and global infrastructure needs, estimated by the World Bank at $18 trillion.

To present a realistic alternative to China, the United States should launch a “Digital Marshall Plan” to do for the development of telecommunications, the internet and cutting-edge technology what the original Marshall Plan did to rebuild a war-torn world. The G7 leaders should work together, and alongside the World Bank, to create a robust, well-funded challenge to China’s Digital Silk Road. Congress must play its part, too.  

Will Congress rise to the challenge? Bipartisan action in the Senate and the House looks promising. But much more needs to be done. If these bills emerge as legislation, Congress will need to authorize the funding and resist the urge to water down everything. History points to times when the Congress has acted decisively. In the 1980s, for example, Japan posed a similar set of economic challenges to the United States and Congress responded. The Omnibus Trade and Competitiveness Act of 1988 set the nation on a competitive path with a national economic strategy. 

Today’s Congress has just begun. Now, the House must pass its own version of USICA, most feasibly by combining a number of Science Committee bills with a House companion to the Endless Frontier Act. It should add provisions to address critical competitiveness concerns such as China’s near monopoly of rare earth elements used in domestic and national security-related electronics.  

Once that work is complete, Congress must dedicate sufficient resources to the endeavor to ensure that the United States and its allies can offer developing countries a Digital Marshall Plan grounded in democratic values of openness, transparency and accountability.

Orit Frenkel is co-founder and CEO of the American Leadership Initiative and former director for trade in high-technology products at the Office of the U.S. Trade Representative.   

Kent Hughes is former director of the Program on America and the Global Economy at the Woodrow Wilson Center and a former associate deputy secretary at the Commerce Department.

Jennifer A. Hillman is a senior fellow for trade and international political economy at the Council on Foreign Relations and a professor of practice at the Georgetown University Law Center