Globalization Requires Skepticism

Along with telling children to be kind to others, part of raising kids involves cautioning them to avoid being lured into a van to see or search for a puppy and to avoid being touched in areas covered by their swimsuits. James Bond's dictum to trust no one is a bit too much, but healthy skepticism about ulterior motives is a useful life lesson. If playmates tap them on their left shoulders, while others on the right steal their bags of chips, they get the message.

     Even adults can be duped. Wisconsin's Republican Governor, Scott Walker, and President Trump received splashy news coverage, when they announced the Chinese Foxconn company would bring new jobs to Wisconsin. The State soon learned its taxpayers were expected to contribute $3 billion to the project. The amount grew to a little over $4 billion which required borrowing from the State's transportation budget to build new roads to the plant. Foxconn's environmental plans and ideas about water usage from Lake Michigan required negotiation. The promised 1300 jobs were reduced to an initial 300, and, since the plant site is on the border with Illinois, there was no guarantee that all these jobs would go to employees from Wisconsin.

     The Foxconn deal began looking like an albatross Democrats could hang around Governor Walker's neck. So, the Chinese offered to bring more jobs to Wisconsin to help bail the Governor out from the unfulfilled promise he made to bring 250,000 jobs to Wisconsin during his first campaign in 2010. Foxconn announced additional innovation centers were in the works for Wisconsin in Milwaukee, Green Bay, and Eau Claire. According to Foxconn, these job-creating centers are designed to inspire local companies and entrepreneurs to create new solutions.

     Here's where skepticism comes in. Why would China seem eager to help a Republican Governor in a fly-over State not uppermost in many minds? The innovation centers and investments China already has in Silicon Valley provide some clues. With the U.S. preoccupied with Russian interference, Chinese tech companies associated with Beijing's government have been taking advantage of opportunities to pour venture capital billions into U.S. startups in fields, such as virtual reality, AI, financial software, cyber security, quantum computing, robotics, 3D printing, and biotechnology. Since the U.S. military does not purchase technologies from startups with foreign investors, Chinese investments can not only buy up technological advances from Wisconsin's startups, but they also prevent these innovations from improving U.S. defenses.

     Delayed skepticism about the technological advantages the Chinese government can gain from U.S. startup innovations and increased concern about the national security implications involved caused Congress to pass the Foreign Investment Risk Review Modernization Act (FIREMA) to enhance the oversight provided by the Committee on Foreign Investment in the United States.
Already, China is thinking about how to get around the crack down by making a move to Canada a condition for a venture capital investment or by hiring a team of employees from an innovative startup, the way the Chinese online giant, Alibaba, does this in China.