Council on Foreign Relations' Raimondo: Want to Reduce Reliance on China

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00:00It seems like China is a common factor here when you take a look at some of the different issues.

00:06Yes, good afternoon. Thank you for having us.

00:09China is certainly the common factor.

00:12In fact, this entire report argues that when it comes to critical technologies like artificial intelligence, quantum, biotech,

00:22we need to out-compete China.

00:24And we need to reduce our dependency on China so they don't have leverage over us.

00:29They're investing incredibly in these technologies, and it's important that we stay ahead of them.

00:34So, you know, primarily what we're saying is that America's national security, keeping us all safe and secure,

00:42depends as much on leading the AI race vis-a-vis China as it does on tanks, missiles, and drones.

00:48And that's what this report is about.

00:50Well, Justin, let's talk a little bit more about how a nation does that, how they compete and stay ahead,

00:55because you make the great point in this report that private capital tends to avoid quantum and biotech

01:01due to long time horizons.

01:02But you think about just some of the capital needs that are here,

01:06and it seems like the private sector needs to be an important component.

01:10Yeah, the private sector has to be the backbone of it.

01:15And what the report argues is that the government has an important role to play in bringing private capital

01:21to these industries, especially in quantum and biotech, where the investments will pay off after many, many, many years.

01:29The government can help bring private capital into the picture for the U.S.

01:35We have the deepest capital markets in the world, the freest and most robust markets in the world.

01:40And with a small nudge from the government, there's a lot the country can do.

01:44I am curious what you think, Justin, about some of the nudges that we've gotten from the government already.

01:49I mean, we have seen the government take stakes in some companies in this space.

01:54We've seen, even prior to this current administration, the desire or the effort, I should say,

01:59to extend loans and other financing to some of these companies.

02:02Is that not what you had in mind? What more needs to be done?

02:08Well, we're looking at a whole toolkit.

02:11And I think the administration is actually being very creative in their approach.

02:15I mean, you look at, for instance, rare earths.

02:17They just struck a deal with Australia.

02:20They're signing offtake agreements or price floor agreements with a variety of companies to develop rare earths in the U.S.

02:27So I think, you know, the U.S. government has a whole range of tools at its disposal.

02:32We're talking here about national security, as Gina said.

02:36And when you're dealing with national security and making sure an authoritarian country cannot cut off the U.S. from vital inputs,

02:45it's important we look at all tools.

02:46But, Gina, this brings up a quandary that I think a lot of investors have raised.

02:49The idea that so much of the United States' strength in producing things, whether it's goods or services,

02:55has also been about this idea that we kind of export that to a certain extent or maybe people come here and take it.

03:01Obviously, with A.I. and the need, as Justin points out, to protect our national security,

03:06is that going to potentially limit just how far this industry can go if they're not able to, say,

03:11freely sell chips to China or share other information with academics in Europe or elsewhere?

03:15Only at the very, very, very cutting edge, which is not new.

03:22You know, the U.S. has used export controls for decades to deny our adversaries, in this case China and the past Russia,

03:31our very most sophisticated technology.

03:34And it only makes sense.

03:36If we have sophisticated technology that they don't have, that they want,

03:40that they can use to modernize their military, then, you know,

03:44you cannot put a price on our American national security.

03:48And so the right thing to do is to deny China.

03:50But what we really want is for the world to run on A.I. rails.

03:56We want the world to use A.I. chips, A.I. technology, A.I. software, A.I. infrastructure

04:02to power their own A.I. movement and modernization.

04:09And so that's very much in the U.S. interest.

04:12And there's nothing in this report or in our policy which would restrain that.

04:17And, you know, you talk about technological leadership, the role that the U.S. should play here.

04:22A lot of people talk about A.I.

04:24That's one of the most urgent questions.

04:25But it's not just A.I., right?

04:27Talk to us a little bit, Gina, about the biotech industry here,

04:31because we know that a lot of drug development that happens overseas.

04:34We know that a lot of raw ingredients are sourced overseas.

04:38And I wonder, you know, how you can keep a place leading when it comes to being innovative,

04:44particularly in biotech, if you start to try to pull back a little bit from the rest of the world.

04:51Well, quite to the contrary, we do not want to pull back from the rest of the world.

04:55But we want to reduce our concentration and reliance upon China.

05:01So what the report identifies and calls out is that in the past five to ten years,

05:08the U.S. biotech industry has become increasingly dependent on China,

05:14not just for clinical trials or low-end manufacturing,

05:19but increasingly for drug discovery and licensing of more sophisticated medicine.

05:27And if you look at that, we're increasing our dependence on China.

05:32Twenty years ago, China produced a tiny amount,

05:37negligible amount of global biotech patents and IP.

05:43Today, they produce close to 30 percent more than the U.S.

05:47And that's that's the wrong direction.

05:50And if we need to diversify that supply chain away from China towards our allies,

05:56towards the United States, so that we can make sure America not only leads,

06:01but can get access to the medicine we need when we need it.

06:05With regards to the overall strategies coming out of this report,

06:07and I'll pose this question to you, Justin, this idea of talent, which is I think Gina gets to,

06:13you know, there's been a lot of discussion about our education system,

06:17meaning, you know, secondary education, collegiate education,

06:20whether it's up to snuff for the new technological age.

06:23You layer in some of the immigration issues that are ostensibly going to keep

06:27some folks from coming to this country that would have contributed to that brainpower.

06:32What's the strategy for addressing that long term?

06:34Sure. Talent is a hugely important question.

06:39It's not one which we took up in this in this report.

06:43I would say what we're really focused on in this report is getting the private sector involved

06:48in making sure the U.S. wins, especially in some of these very long term races like quantum and biotech.

06:55And I think if we get the private sector involved, talent will come to the space,

06:59because once you start bringing private incentives into the picture,

07:05talent can to some degree take care of itself.

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