The China Threat: Silicon Valley and the Great Uncoupling

In this session from the CFI American Dynamism Summit, Representatives Mike Gallagher (R-WI) and Jake Auchincloss (D-MA) discuss why the United States must strengthen its technological advantage in areas like AI, develop next-generation manufacturing capabilities domestically, and rethink how Silicon Valley does business with China. Gallagher is Chair of the House Select Committee on the CCP, on which Auchincloss also serves.

Here is a transcript of their conversation:

Katherine Boyle: The China threat, and this is an audience that would know it well, is a very broad topic, spanning from an app that might be on some people’s phones in the room, called TikTok, to Taiwan. What is the scope of the issue as you see it? And what should we be most concerned about? Big question. We’ll start with you, Congressman Gallagher.

Mike Gallagher: Well, first of all, thank you for having me. Thanks, to all of you, for being part of this. I see a lot of friendly… I can’t really see, but I think I see some friendly faces in the audience.

Katherine Boyle: Lots of friendly faces. 

Mike Gallagher: And some enemies, too. I see a lot of enemies, which is good. It means I’m doing something right. I think, to take your second question first, the risk, in simplest terms, from China, is war, right? 

And we tend to discount the possibility that Xi Jinping could do something as stupid as try to take Taiwan by force, because it does look irrational from a Western perspective, but if the collapse of deterrence in Ukraine has taught us anything, it’s that particularly when you’re dealing with autocratic systems who just don’t have robust feedback loops, they could do something that looks irrational from our perspective, that we think is deterred or deterrable, and yet from their perspective of preserving the regime, makes sense.

And so, my concern is that despite what’s happening in Ukraine, despite the fact that the system is blinking red across the world, despite the erosion of the conventional balance of power, particularly in the Indo-Pacific, we still have not fielded a deterrence by denial posture. That makes absolutely no sense.

And if you look at what just happened in Jordan, right? This is something that should have been obvious to anybody that watched the Iranian attack on the Saudi oil facility a few years ago, the Abqaiq oil facility. The army can’t do its one JROC, its one joint function, which is defense for our expeditionary bases against missiles and drones like this. We’re on the wrong side of the cost curve. Look at all the SM-6s we’ve expended in the Red Sea right now. We haven’t moved to maximum production rates of long-range precision fire. 

So, beyond all the talk about decoupling and ideological warfare and TikTok, if we don’t get the hard power side of the equation right, we may stumble into war on someone else’s terms, and it’s going to be horrific. It will make the current crises in the Middle East and Ukraine look like child’s play in comparison. Other than that, I’m an optimist. 

Katherine Boyle: Congressman Auchincloss, I’d love to hear your take on it. 

Jake Auchincloss: Yeah. I appreciate the chance to be here, and it’s good to be here with the chairman of the China Select Committee. I think America is going to out-compete China. I think we’re going to win this contest if we want to. And those are the four words that I spend a lot of time thinking about, “If we want to.” Because the competition between America and China is a competition of world views. China views individuals as pawns of the state. The United States was founded upon the timeless ideal that individuals have inherent worth and value. [00:03:00] And those are mutually inconsistent ways of approaching governance, of approaching economics, of approaching diplomacy and great power competition. And we must win. And we can, if we want to. 

And the reason I am concerned about “if we want to” is that we are seeing increasing antibodies against the free and open society upon which the United States is premised. We’re seeing, on the right, this Blood and Soil nationalism, obviously articulated by Donald Trump, that is fundamentally about closing America off. And we see, on the hard left, a rejection of Western society and what it represents from the Enlightenment onwards. And both of those are wrong.

There is much for us to be proud of in what Western society has produced, and much of it has been crystallized in the U.S. form of government, and we should fight for it. But we should also fight for it, not as a Blood and Soil idea, but as the American Creed that every individual, regardless of the circumstances of their birth, should be free to pursue their aspirations in life.

Katherine Boyle: So one thing, from the outside looking in, it seems like there is bipartisan support agreement around how important this issue is. I’m sure there’s some sparring internally. It would be great to understand where you two are in alignment, where there’s consensus on the Committee, and then what are the major points of disagreement. 

Mike Gallagher: Yeah.

Jake Auchincloss: We’re laughing because, this morning, there was a little bit of fisticuffs on the Committee.

Katherine Boyle: I heard. 

Jake Auchincloss: I’ll let the Chairman start though. 

Mike Gallagher: It’s all good. Well, I do think it gets to… Like, we are trying to do our committee’s work amidst what is a very fractious, political environment, right? And I have yet to meet the person who is enthusiastic about this Trump v Biden rematch. And so there is a big black hole that is the 2024 election sucking everything into its wake. And that is a challenge. It’s a challenge to get anything done in Congress on a good day. 

I do think, and the last year of our committee’s work proves this, that there is broad agreement that, on the nature of the threat, that we must do something about it, that we’re not attacking it with a sense of urgency. When it comes to, I think the, sort of, military aspect of the competition, I actually think there’s more agreement than disagreement. On the ideological aspect of the competition, there’s disagreement within the Republican Party on what priority do you give ideological warfare. I give it a high priority, largely because Xi Jinping seems to think it’s important.

Having studied the collapse of the Soviet Union, he concluded that the main problem was insufficient commitment to ideology. And part of the reason we won the old Cold War is because Reagan was quite good at ideological warfare. But on the economic side, I actually don’t think it’s a clear “Republicans have an approach. Democrats have an approach.” There’s weird bedfellows. And I think Jake and I would agree on the fact, and he’s actually one of the loudest voices in his party for a pro…correct me if I’m wrong, a pro-trade agenda. 

And though we had somewhat of a disagreement about whether to revoke permanent normal trade relations with China, I think yes, Jake thinks no, I think we agree on the idea that as we adopt a more competitive economic relationship with China economically, we need to be enhancing intensifying our economic and technological partnerships with the rest of the world, and assume some intelligent risk.

And I do think the absence of a trade agenda is a huge grand strategic gap for both parties right now, if that makes sense. Just one… I think the primary point of disagreement sometimes is on the relative prioritization of climate change in the relationship with China as well as the prospect of engagement with the CCP at the highest levels, what that might yield. I’m more skeptical of that than some of my Democratic friends. 

Jake Auchincloss: I agree that it’s not always Democrat versus Republican where there’s disagreements. And I think the sort of productive dissent that I try to add into the committee is we spend a lot of time focusing on competition with China that can be zero-sum. It’s about export controls. It is about restrictions on licensing. It is about tariffs, obviously. It is about playing keep-away with intellectual property. And there is a place for that, and it’s important. But ultimately, I think in the Sino-American competition, 90% of the questions that matter are about America, not about China.

China’s got 1.4 billion people. They are a highly motivated, well-educated workforce. They’re going to create a bunch of impressive stuff. And the questions that I find most impactful for our future are about, are we investing in basic research and development? Are we trying to attract a high-skilled and, frankly, low-skilled immigration to the U.S. economy, which keeps us dynamic? Do we have rule of law and contract enforcement? Are we investing in quality infrastructure? Like, the boring stuff that we should be focused on before Washington gets distracted by quantum strategy. 

And my contention is here, in Washington, we’re not doing a good enough job in the boring stuff. We should take care of that. We should be asking ourselves, “Hey, in the latest PISA tests, Programme for International Student Assessment, American 15-year-olds went backwards on math scores.” That is what should be animating us. Because if American 15-year-olds can’t do math, we’re not out-competing anybody. I don’t care what our semiconductor strategy is. 

Mike Gallagher: Yeah.

Katherine Boyle: Yeah. Well, speaking of semiconductor strategy, that is one thing that is top of mind for this audience, for our founders, chip production. You know, it is something that if it is catastrophically disrupted… I would love to hear how you’re thinking about worst-case scenario, you know, how you even think about how to respond if something like that were to come to pass in Taiwan.

Mike Gallagher: Specifically with Taiwan? Well, I guess one of the reasons, though it’s not the only reason, that Taiwan is important because if there was even a blockade scenario that played out, it would be profoundly disruptive to the global economy. We’re talking trillions of dollars lost in even the low-end modeling for something like this.

And then if they were somehow able to take Taiwan, which admittedly is a very hard problem, just from a pure… Like, invading an island and doing an amphibious assault is a hard problem. Jake’s a marine, I’m a marine, this is something that we are raised to understand. Zach Shore is a marine, I think, although he was mostly drinking the entire time with me. We were roommates in Carlsbad. Luckily, Facebook had just started, so none of it’s online. So, just sneaked under the radar. It’s mutually assured destruction, bro. It’s like, “You launch your missiles. I’m launching mine.” 

And I also think maybe the conceptual mistake we made with the CHIPS Act…and I know there’s disagreement about the CHIPS Act, is that onshoring production of semiconductors to America would somehow enhance deterrence, but I wonder if the opposite could be true, right? The more we onshore, the less relevant Taiwan is, and therefore the more attractive of a target it is. Or, just as a question of investment, would it have been better to fund a CHIPS Act in order to make an invasion impossible, if not highly unlikely? Because even if they don’t establish a lodgment in an invasion, it’s gonna massively muck up the entire global economy.

But the economic reason is not the only reason Taiwan is important. If Taiwan falls, it will make our ability to fulfill our treaty commitments with Japan and the Philippines impossible. Las Vegas rules do not apply. What happens there will not stay there. And though we’ve had a brutal…and this is the third reason, debate about the nature and role of democracy promotion in American foreign policy, there’s something different in my mind about fending an existing, vibrant democracy from an authoritarian threat, that if America doesn’t stand for that, I’m just not sure what we stand for.

Jake Auchincloss: So we should also stand for Ukraine. 

Mike Gallagher: Agree. Yeah.

Jake Auchincloss: Let’s do it. Tell your speaker. 

Mike Gallagher: I will stand right now. 

Katherine Boyle: So, one thing that’s also on the agenda for this week… and I know we’re jumping around a lot, but you all cover such breadth on the committee, is you’re holding the CCC cyber threat to the homeland and national security hearing tomorrow. Most citizens, when they think about cyber threats until recently, they didn’t think about attacks on critical infrastructure, things that could take out the power grid by nation-states. What you’ve learned about these threats, how do you assure the American people that things are going to be all right? Or is it actually a bad scenario that we should be very concerned about as citizens? 

Jake Auchincloss: It’s a legitimate threat and we need to harden our targets. Electoral systems, public water supplies, utilities. They’ve made big strides in the last five years, and it’s been a bipartisan issue under CSUN  and Homeland Security to make themselves harder targets. A source of good jobs for young people as well. Massachusetts has created a lot of good cyber security certificates around this area. 

But actually, the, sort of, digital threat I’m by far the most concerned about is TikTok. We are ceding the ideological ground to our adversary to inculcate the next generation of Americans into a worldview that is really, I think, antithetical to a lot of what we stand for, and the Chairman has been articulate about this in the free press, which I read your essay on that.

Mike Gallagher: Oh, wow. Thank you. I read all your stuff, too. 

Jake Auchincloss: I think we’ve got to force a sale… We would never have allowed CBS, ABC, NBC to be owned by the Soviet Union in the 1960s. And that is, I think, if anything, understating the degree of influence that we are seething right now. And that’s not a speech issue. You can post whatever you want. It’s a question of reach. Just because we honor and respect the First Amendment, does not mean that we have to allow our biggest adversary to control, in a black box, an algorithm that influences hundreds of millions of people. That is not free speech. That is the control over reach.

Mike Gallagher: I just want to foot-stomp that and say, yes, there’s a concern with TikTok, that it can track your location and your browser history. That’s a huge problem for Zach in particular. But that’s not the primary threat. And Jake, I think, said it well. I mean, to allow a company that is owned by ByteDance, which is beholden to the Chinese Communist Party, to be the dominant news platform for the next generation of Americans, borders on national suicide. 

And by the way, if you are invested in ByteDance, I would assume you want TikTok to go public in America. That’s not going to happen under the current ownership structure. So it is in your interest for there to be a complete separation where none of the plumbing is connected and an American company controls TikTok U.S. and Douyin does Douyin things and there’s control of the algorithm. 

And just one final note on cyber. I do think, having chaired the Cyberspace Solarium Commission, beyond all the fancy things we can do, like giving CSA the ability to do threat hunting on .gov networks, I think it all just comes down to human beings, right? Our biggest threats are human threats, a contractor doing something they shouldn’t do. And our successes will be a function of our ability to get the best and the brightest in cyber to work with DoD and the federal government.

Katherine Boyle: Now, speaking of TikTok, many are concerned about the way that the tech community engaged with China in previous decades, how it engages now. What are your thoughts about the right way that technologists, that companies, should be engaging with China on a host of issues? 

Mike Gallagher: Listen, I don’t think anyone expects Andreessen or some tech company to be the State Department, but, I mean, if social justice or ESG is a big deal for you and your employees, I just would ask you to recognize that there’s no worse ESG actor and no greater offender of social justice issues than the Chinese Communist Party. They suck on the E, the S, and they really suck on the G. The G stands for anything. It’s the stand for genocide. So, speak up. 

Jake Auchincloss: We’re asking American companies to act like American companies.

Mike Gallagher: I mean, listen, Jake mentioned an issue that I think you’d think there’s no agreement on, immigration. And listen, immigration politics, speaking of things that suck, they really suck. But I wonder if our framework is actually the same, right? Like, make it difficult, if not impossible, for people to come here illegally. But when it comes to legal immigration, modernize the system where it could scale up or down depending on the needs of our economy. And then when it comes to high-skilled immigration, and you want all these smart people, like, we should actively be on a recruiting mission around the world to scoop up the best and the brightest. 

Jake Auchincloss: I’m gonna… Guys, don’t applaud that from him because I’m gonna throw a red flag on that play. Because we do have a Republican talking about immigration reform when…

Mike Gallagher: Things were going so well. 

Jake Auchincloss:  …we get Speaker Johnson and Mitch McConnell saying the quiet part out loud here, which is that they’d rather campaign on immigration than govern on it. And that’s not you, Mike, saying that, but at a certain point, the Republican Party is going to own the fact that, for 20 years, they’ve been telling the American people that immigration is broken. We have, in good faith, a bill to start fixing it, and the Speaker has said it’s dead on arrival.

Mike Gallagher: Do we have the bill? I’m actually not… This isn’t, like, a rebuttal. I don’t… And people keep asking me about the deal. I just don’t know what the deal is. I haven’t seen it. 

Jake Auchincloss: I was on “Fox News” on Saturday, and as far as “Fox News” is concerned, it is anathema. And it’s because… 

Mike Gallagher: If “Fox News” says we can’t vote on it.

Jake Auchincloss: …they’re cherry-picking the numbers. You’ve got Senator McConnell killing it. You’ve got Speaker Johnson killing it. 

Mike Gallagher: Damn you, Lachlan Murdoch. 

Jake Auchincloss: We have overlap on the policy, but on the politics, I just, I do feel like one side is serious about it and the other side has not been as serious about it. 

Katherine Boyle: Yeah. Well, moving to a more hopeful note. You know, 10 years ago, you know, when I first moved to Silicon Valley, no one was talking about China. I would actually say, even five years ago, no one was talking about China. I would love to hear from your perspective. You know, we have a number of great founders where that is the focal point of their business now. It is top of mind for engineers and for founders in Silicon Valley. How have you experienced that shift with Silicon Valley? And do you think it’s making real progress in the eyes of what you’re building towards as well? 

Jake Auchincloss: I’m going to actually put that question back on you. I mean, you’re the one running the American Dynamism portfolio. And I would imagine that “The Specter of China” has galvanized some of the entrepreneurs that you work with to want to work with the United States government, which is not a particularly fun customer to have to deal with.

But they’ve said, “If we’re serious about being in the 21st century what we became in the 20th century, the guarantor of the Pax Americana and the shining light, we have to do housing, we have to do military, we got to do utilities, we got to do energy,” all the stuff that, I think, in the first boom out of Silicon Valley, was really overlooked. So I think that’s inspiring. And I would just encourage everyone here to keep pushing the U.S. government to be a better customer. 

And I say this all the time to the Department of Defense, “We do not need the Department of Defense to be a venture capitalist. We don’t need it to be an equities investor. We need the Department of Defense to be a good, reliable, expeditious customer.” And until they get that right, I don’t think we’re going to fully realize the possibilities of your portfolio.

Mike Gallagher: I’m actually cautiously optimistic here. And it’s not just because we now have… I’ve always wanted to do, like, a time-lapse photo of the banner of sponsors at the Reagan National Defense Forum. And I actually think it tells a good story about new and interesting companies who want to work with DoD.

Katherine Boyle: Definitely. 

Mike Gallagher: Or at least want to hang out with me for two days at Reagan. We’ve had outspoken voices, obviously, who I think are great, like Dr. Karp at Palantir, like Palmer Luckey. Is he here? Is he wearing shoes? 

Katherine Boyle: Not this year. He was here last year. 

Mike Gallagher: Andruil. But I think there’s more people that want to get in that game, and want to try and break down the barriers to working with DoD. And it is ultimately, however, to Jake’s point, going to take DoD actually making big bets on a few companies that are non-primes. Because we just keep admiring the Valley of Death problem. And that’s, sort of, the less hopeful side of the equation. 

If you go to Reagan, almost every year the secretary comes, it doesn’t matter if it was Mattis or now Austin, it gives the same speech about “We’re gonna cross the Valley of Death,” and this and that, and that’s where we just need to appropriate money to DoD, right? We’re talking about a supplemental right now. What are we supplementing? We haven’t actually passed the DoD appropriation. 

And then we have to force DoD to make big bets on things. And then we in Congress have to make sure that if some of those bets don’t work out, which they all won’t, that we won’t just rake them over the coals. We need to celebrate original mistakes while vilifying and demonizing making the same mistakes over and over again.

Katherine Boyle: So this is the question that’s going to allow our audience to dream, but if there were a President Auchincloss or a President Gallagher, how would that administration address the relationship with China and technology differently? Would it be different? What would you do tactically? 

Mike Gallagher: Well, Jake and I are here today to announce… I would love to be president of an obscure liberal arts university. Actually, the politics of that would be…

Katherine Boyle: Would be brutal. 

Jake Auchincloss: Yeah, no, you wouldn’t. 

Mike Gallagher: Yeah, well, you want to tackle that first? 

Jake Auchincloss: if I were president, how would I tackle the U.S.-China technological relationship? 

Katherine Boyle: Yeah, is there something tactical you would do on day one?

Jake Auchincloss: So, and this is, I think, a point of, I think, a genuine maybe intellectual disagreement here. Jake Sullivan has talked about a small garden with a high fence and this idea that there are some things that we’re gonna protect with all measures available. I would be a little bit tougher on how we describe that garden than, I think, the current approach is. Because I worry that it becomes really an excuse for lobbying, frankly, where every industry comes and tells us how strategic they are. And ultimately, it actually makes our economy more sclerotic and less dynamic.

I would… I’m persuaded that cutting-edge semiconductors belong in that garden. I have not been persuaded of basically anything else. I believe in markets that have global access, particularly for high R&D, high fixed cost industries that are so important for our future utilities, biotech, semiconductors, etc. And so, I really…I want to see the maintenance and expansion of the U.S. operating system as a global commercial entity. 

Mike Gallagher: So I would…and I actually do think this is… And Jake’s descent on some of our econ recommendations was productive. I think it made the final product better, and I respect his position. I would cut off the flow of U.S. capital, both [00:22:00] passive and active, public and private, to a greater number of sectors. I think a sector-specific set of guardrails is actually much easier to implement than the multi-list whack a mole we currently play right now, which is a total shambles.

And so we have billions, probably hundreds of billions of dollars, American dollars, that are flowing into Chinese technology and military companies that are building things like aircraft carriers, artillery shells, fighter jets, things that are designed to kill Americans in a future conflict. And I think that’s perverse. I think we should close the loopholes for licensing exemptions. Like, right now, Huawei is off the mat. It’s coming back with semiconductors in part because they still have access to U. S. technology, right? We’re funding our own destruction. To me, it’s crazy. 

I would tighten up our CFIUS loopholes so that people can’t buy land, for example, near military bases or critical infrastructure. But…and maybe this is where we agree, on the positive side, I’ve long argued for it, we need a gold standard free trade agreement with the U.K. post-Brexit that could have a docking provision that other countries could join. 

When it comes to AUKUS, I give the Biden administration a ton of credit for AUKUS, but in some ways, the most important part of AUKUS is not the Pillar 1 nuclear sub thing. Which, we could screw that up. We should not screw that up. That’s a big deal. We need to build more subs, 2.5 Virginias a year. Let’s do that. Pillar 2 on the technology side, we still have all these outdated barriers to cooperation with the Aussies and the Brits. Our closest allies. Who doesn’t love the Aussies and the Brits?

Because of ITAR regulation, we can’t share our best technology and people. That’s a huge own goal. I would be for a digital trade agreement. Like, we have IPEF, which is our only trade thing in Indo-Pac, is not a real thing, and it’s less of a real thing now that they’ve neutered IPEF, and it was neutered to start with.

So I think, again, to get to the basic balance, I would adopt a more restrictive framework with respect to China and our bilateral relationship, but in return, and simultaneously, I would deepen our engagement with other countries and assume some intelligent risk in the rest of the world. 

Katherine Boyle: So I want to end with a personal question from my 88-year-old aunt in Chicago. A couple months ago, I sent her a video of Palmer Luckey, and she called me very upset, said, “Katie, I didn’t know that I needed to be worried about China too.” And I think that’s something that a lot of Americans feel. The world feels like it’s on fire. It feels like another thing that they have to worry about. The work you’re doing, what can you tell my 88-year-old aunt and other Americans that would assuage their fears and make them feel like we’re on the right course on the China threat? 

Mike Gallagher: Well, don’t be sending your grandma Palmer Luckey.

Katherine Boyle: I really shouldn’t have. I regret it. I sure… No. Eighty-eight-year-old aunt, but yeah, I shouldn’t have done it. I shouldn’t have done it.

Mike Gallagher: I’m sure Palmer sends his grandma videos. I’ll give you a hopeful story that happened this week in my district. And I think it gets to, sort of, the generational…she’s part of the greatest generation. The boomers screwed it up, they continue to screw it up, there should be no boomers allowed to run for president ever. Although Biden’s not a boomer. He’s so old, he’s not a boomer. 

Katherine Boyle: Silent. 

Mike Gallagher: He’s a member of the greatest generation, or the silent generation. 

Katherine Boyle: Silent generation. 

Mike Gallagher: Yeah, yeah, yeah. He’s older than the People’s Republic of China, if you can believe it. True. Fact-check me. Fact-check me. Okay. We had an event in my district, like, six years ago. I was a new member of Congress. We dedicated this fitness trail to an army general who had passed away unexpectedly. His widow raised the money. It was a beautiful thing. This girl came up to me. She was in eighth grade at the time. Raised by her grandparents. Shawano, Wisconsin, rural area. 

And she’s like, “You know what? This event has so inspired me, and General Cohen’s example inspired me. Like, I want to go to a service academy one day.” Well, on Wednesday, this week… I’m going to get a little choked up. No, I’m not. I got to tell this young lady that she got an appointment to the United States Naval Academy. Just, like, incredible, young American, like… Man, it’s awesome. So, there’s still humans like that in America. Patriots. 

Jake Auchincloss: Yeah, he stole my answer. I would tell her to join me on my phone calls telling young people they got appointed to the service academies. You read those resumes, you look at their achievements, and then you talk to them about why they want to serve, and it is restorative for your sense of optimism. And to tell them to come knock on doors with me in my district and you find, talking to the average American, there’s a deep reservoir of common sense and decency that, in aggregate, gives me great hope that America is a land of possibilities, and don’t bet against us. 

Mike Gallagher: Awesome.

Katherine Boyle: Congressman Auchincloss, Gallagher, this was a lot of fun.

Jake Auchincloss: Thank you.