The Rule of Law in the U.S.-China Tech War

17 Pages Posted: 10 May 2021 Last revised: 31 Mar 2022

See all articles by Curtis J. Milhaupt

Curtis J. Milhaupt

Stanford Law School; European Corporate Governance Institute

Michael Callahan

Stanford Law School

Date Written: May 6, 2021

Abstract

U.S. policy is increasingly being influenced by suspicion of links between Chinese companies and the Chinese party-state and military. Competition over the technological future between the world’s two largest economies has produced a legal thicket of statutes, regulations, and executive orders in areas including foreign investment, data storage and privacy, and access to the U.S. capital markets. These regimes were created or bolstered due to legitimate concerns about the geo-economic impact of transactions that implicate control over advanced technology and data. Yet regulatory uncertainty engendered by the legal landscape has greatly complicated many aspects of the prosaic but fundamental work of producing innovative companies and technologies: cross-border investment and data flow, mergers and acquisitions, and talent recruitment.

In this chapter, we approach the big policy issues in the U.S.-China tech war from the ground up, by exploring how the legal regimes recently developed in both countries to wage the tech war and operationalize technological decoupling affect cross-border deal making and domestic innovation. We fear that ironically, the rule of law necessary to maintain continued vibrancy in U.S. high-tech sectors is being compromised by some of the very actions ostensibly taken to protect these sectors from malign foreign influence. We conclude by offering some concrete policy suggestions to improve the transparency and effectiveness of national security and data protection regimes in the U.S. while advancing a second crucial objective – maintaining a regulatory environment conducive to technological innovation.

Keywords: Technology, National Security, Rule of Law

JEL Classification: F21, F52, O38, P50

Suggested Citation

Milhaupt, Curtis J. and Callahan, Michael, The Rule of Law in the U.S.-China Tech War (May 6, 2021). Stanford Law and Economics Olin Working Paper No. 561, Available at SSRN: https://ssrn.com/abstract=3840584 or http://dx.doi.org/10.2139/ssrn.3840584

Curtis J. Milhaupt (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Michael Callahan

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305
United States

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