Time for Congress to establish a US digital development fund

As impeachment deliberations roil Washington, Congress will be tempted to look inward and dial back on efforts to address the challenge China poses to American security, prosperity, and values. This would be a mistake: Beijing does not play by America’s domestic timetable. Legislators on both sides of the aisle have managed to sustain U.S. China policy as a rare area of convergence. At what is a moment of unprecedented political acrimony, Congress should continue to translate bipartisanship on China policy into action — or it will cede ground to Beijing’s ambitions to set the rules and values of the 21^st century.

One of the most pressing fronts for Congress is the competition between the United States and China to shape the digital future of the developing world. Under what Beijing now calls the “Digital Silk Road,” China is rapidly expanding its presence in the information technology ecosystems of many developing countries. Chinese-involved projects include everything from telecommunications equipment to online payment platforms to urban public security networks to undersea cables.

Unchecked, these digital activities will translate into enduring advantages for Beijing.

As China’s digital footprint in developing countries grows, it is increasingly positioned to set local technology standards that will privilege its companies. To the extent that Beijing can dominate a handful of key product lines — mobile devices and 5G next-generation wireless hardware — it will attain a wider market edge. Moreover, China’s growing digital presence in developing countries will afford Beijing access to new types of data that will bolster its artificial intelligence industry.

China’s digital activities also confront the U.S. military with new risks. Chinese firms’ inadequate attention to cybersecurity and their legal obligation to support intelligence collection by Beijing means that the “Digital Silk Road” has the potential to compromise the networks of U.S. allies and partners, particularly in the developing world. This will create opportunities for China to gather intelligence on American forces operating forward. Over the long term, China’s digital investments could render some developing countries off-limits to U.S. forces.

Lastly, China’s digital expansion is empowering autocracies and undermining democracies. Beijing is exporting technology for surveillance and censorship, as well as providing complementary funding and know-how to recipient states. In the developing world, this type of digital engagement enables robust authoritarian regimes to become more intrusive and cost-efficient, provides a boost to fragile dictatorships that might otherwise falter, and encourages governments with weak democratic institutions to pursue new forms of online censorship and public monitoring.

Despite having the world’s most dynamic technology sector, the United States today is losing the competition with China to shape the digital future of the developing world. Thus far, America’s approach to China’s digital expansion has largely centered on telecommunications security and focused primarily on convincing — with mixed success — advanced-economy allies in Europe and the Indo-Pacific to eschew 5G wireless solutions supplied by Huawei.

To compete with China in developing countries, the United States must present credible digital alternatives. Current American efforts to promote digital development, whether under the auspices of the U.S. Agency for International Development, or whole-of-government initiatives such as the Indo-Pacific-facing Digital Connectivity and Cybersecurity Partnership, remain inadequately resourced. The new U.S. Development Finance Corporation opening its doors this fall holds promise, but its mandate is to catalyze investment by American private sector companies in developing countries across all sectors, not just in digital.

Moreover, none of these efforts focuses squarely on a key impediment to America’s digital engagement with the developing world: China’s information technology companies, which receive financial and political support from Beijing, benefit from an uneven playing field. American firms may typically offer better quality and more secure digital products, but in developing countries where price matters most, they operate at a disadvantage.

Leveling the playing field for U.S. companies will require Congress to translate today’s bipartisanship on China policy into concrete action. Specifically, Congress should pass legislation to establish a new U.S. Digital Development Fund that would support information connectivity projects across the developing world.

Congress should specify the new Digital Development Fund as a standalone agency — this will give it a singular focus and raise its profile as a symbol of American economic engagement in the developing world. Given the diverse set of activities that Beijing has bundled in its “Digital Silk Road,” Congress should grant the Digital Development Fund broad latitude in the types of projects it supports. In the current fiscal climate, a new, large-scale appropriation is unlikely to win backing from both Congress and the Executive Branch. Instead, Congress should authorize lines of credit, a model that will enable the Digital Development Fund to deploy resources at scale.

Congress should mandate that the Digital Development Fund focus on projects with strategic value while advancing broader U.S. development priorities. An emphasis on women’s empowerment and digital inclusion — in addition to more narrowly defined U.S. economic and military interests — will positively distinguish America’s digital engagement from China’s. In legislation, Congress should direct the Digital Development Fund to exhibit preference for American firms while leaving room for U.S. allies and partners — and prohibit support for projects featuring participation by companies beholden to countries that fail to adhere to widely recognized norms of online freedom of expression and privacy.

No single agency can substitute for what must be a comprehensive U.S. effort to promote digital development against the backdrop of strategic competition with China. However, establishing a new Digital Development Fund would represent a major step forward. Congress should act now — or it will see America increasingly excluded from the digital future of the developing world.

Daniel Kliman is Senior Fellow and Director of the Asia-Pacific Security Program at the Center for a New American Security (CNAS) and previously served at the U.S. Department of Defense as Senior Advisor for Asia Integration. This op-ed encapsulates his recent CNAS policy brief, “Why the United States Needs a Digital Development Fund.”