Tech Regulations Through a National Security Lens

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Throughout Washington, D.C., there has been much discussion regarding the need for regulations and antitrust enforcement on large tech companies.

This has been proposed via a bill called the “Competition and Antitrust Law Enforcement Reform Act of 2021,” to reduce the possibility of monopoly formation, reduce mergers that will lessen competition, lessen political power concentration and exceed the quality of product development.

The bill suggests that “when dominant sellers exercise market power, they harm buyers by overcharging them, reducing product or service quality, limiting their choices, and impairing innovation.” This is not a new story for the defense industrial base, as many observers recall various abandoned acquisitions as a result of actions initiated by the Federal Trade Commission.

For a long time, the government has been a large influencer within the industrial base, which makes sense as it is its largest customer. But how does this translate to the tech industry? For example, Google and Amazon are also government contractors and operate globally much like traditional defense contractors, competing with foreign adversaries like China.

The difference between traditional defense companies and tech is that the latter also touches just about every other industry. Tech and cyber can be both a development tool and the weapon itself in the world of national security. But what are the implications of regulating big tech companies on U.S. national security?

In the summer of 2021, National Defense Industrial Association leadership commented on the Federal Trade Commission’s actions on vertical mergers and acquisition in the defense industry. It was suggested that “not only does discouraging vertical mergers and acquisitions stifle the innovation engine of American growth, but it also jeopardizes our national security.”

When it comes to the tech and defense sectors, small enterprises — or unicorns — generally have a goal of being purchased by other companies. Sometimes the purchase is asymmetrical, but ultimately leads to natural innovation and technological advancements. Scale is required for natural innovation and growth, and is especially critical if research-and-development funding is lacking. Furthermore, many of the defense contracting companies use advanced cyber technology in their military system production and at operational capacity.

Within the 2021 Interim National Security Strategy, the White House laid out issues that the United States faces pertinent to its national interest. It was made clear that the most notable threats to U.S. national security are Russia and China, requiring additional focus on technology and capabilities such as cybersecurity.

The larger threat to the United States is currently China and its immense tech and development ventures across the globe. One such example is China’s Belt and Road Initiative. This plan, announced in 2013 by the Chinese government, is an economic and political strategic endeavor spanning across various sectors and in nearly all regions of the world.

The issue of Chinese global influence has become so much of a problem that U.S. government agencies have utilized students and academia to better understand its role in various regions through research. Recently, the Department of State appointed both graduate and undergraduate students with regional and linguistic expertise to conduct open-source research on the various initiatives that China is pursuing throughout the Middle East and North Africa.

Through this research, it was found that China’s dominant ventures in Saudi Arabia, for example, have been via transportation infrastructural development, with the second largest sector of cooperation between China and Saudi Arabia involving military technologies. The third largest cooperation sector involved transportation vehicles. This data comes from open-source research on Chinese developments in the Middle East and North Africa in both English and Arabic.

By placing regulations on U.S. tech companies, the government is also limiting their abilities to compete strategically with large Chinese tech companies in various regions and sectors. Specifically, this impacts those sectors significant to U.S. national security. Countries in the Middle East, such as Saudi Arabia, have announced a 2030 Vision seeking to diversify and digitize advance tech in their economies, with the goal of being less dependent on oil.

In July, President Joe Biden visited the Kingdom of Saudi Arabia in part to discuss inflation and the role of oil in nearly every sector. Regulating big tech via antitrust hinders a potential leverage point and instrument of competition against China, and is not in line with the Interim National Security Strategy nor beneficial for innovation. Furthermore, it is worth repeating that technology plays a heavy hand in every sector and could have an impact beyond the scope of one’s imagination.

The proposed legislation that aims to regulate big tech via antitrust most certainly hinders the ability to be agile in foreign relations and deter and mitigate adversarial threats. It furthermore will impact the way both the defense industrial base, as well as civilians, interact with said capabilities.

These facts should be taken into account when formulating regulatory strategies that have significant impact on the nation and its ability to operate on a global scale.

Kelsey J. Canfield is a junior policy fellow at NDIA.

Topics: Government Policy