► Controlling the outflow of strategic goods and technologies and winning the high-tech competition is at the heart of securing national economic security.

► The tensions between the U.S. and China are expected to escalate as the USICA includes tougher regulations and sanctions against China.
► In the short term, Korea must prepare for the negative impact that might occur because of the expansion of either U.S. sanctions or Chinese countermeasures. In the long term, Korea should prepare to compete with other nations rapidly closing the technology gap.

U.S. National Interest
President Biden recently made the difficult decision to withdraw U.S. troops from Afghanistan despite strong criticism at home and abroad. In his speech, Biden mentioned continuing the war in Afghanistan is no longer the vital interest of the U.S. Biden specified that the national interest of the U.S. is to respond to threats pertinent to today, not threats 20 years ago. He claimed that “the world is changing and the U.S. is engaged in a serious competition with China.” In the same context, the Biden Administration's March 2021 Interim National Security Strategy Guidance describes China as “the only competitor potentially capable of combining its economic, diplomatic, military, and technological power to mount a sustained challenge to a stable and open international system.” Overall, winning the competition with China seems to be the current core interest of the U.S.

Importance of Economic Security and Technology

The most important feature of the U.S.-China competition is that it is an economic confrontation rather than a military one, and accordingly, the role of economic security has become increasingly more important. We can understand economic security as protecting one's economic survival and competitiveness from external aggression. Therefore, controlling the outflow of strategic goods and technologies as well as winning the high-tech competition is at the heart of securing national economic security.
Recent developments in advanced technology are changing the concept of hegemonic competition. The key characteristic of technologies in the 4th Industrial Revolution is dual-use. Emerging technologies such as 5G telecommunication, artificial intelligence (AI), big data analysis, robotics, aerospace, and quantum computer-related technologies can be used for both civilian and military purposes. The more a nation invests in the development of advanced technologies, the closer it becomes to economic and military hegemony. Therefore, it is no wonder that the U.S. steps up its vigilance against China’s rise in these advanced technologies.

U.S. China Policy
To better understand the challenges Korea would face as the U.S.-China technological rivalry intensifies, it is necessary to examine the intentions of U.S. policies first. Recent research shows that China is strong at “innovation” but weak at “invention.” In other words, China's state-led science and technology development strategy is quite effective at producing applied technologies using existing technologies, but it does not seem effective in developing fundamental technologies. The rise of China so far has been highly dependent on foreign core technologies, materials, parts, and equipment. Knowing this, the U.S. eventually began to target this vulnerability - a strategy referred to as 'tech-decoupling'.
However, the U.S. is not focused on  full-scale decoupling, but rather on decoupling target areas that could slow China's growth. The U.S. defines China as a strategic competitor, not an enemy. This is also revealed in the list of the U.S. export controls, import prohibitions, and investment restrictions targets, which are all concentrated only on high-tech companies. Moreover, these measures have been tightened under the Biden administration - a good example being the U.S. Innovation and Competition Act of 2021 (USICA).
The USICA incorporates all of the recent bills that meet the China challenge: CHIPS Act and ORAN 5G Emergency Appropriations, the Endless Frontier Act, the Strategic Competition Act of 2021, the Meeting the China Challenge Act of 2021, and the Homeland Security and Governmental Affairs Committee Provisions (which includes measures related to internal security and supply chain). The Senate passed this bipartisan legislation on June 8, aiming to provide $250 billion in support for technology development and production in key industries including semiconductors, artificial intelligence, advanced communications, quantum computing, biotechnology, advanced energy, and space exploration. The tensions between the U.S. and China are expected to escalate as the USICA includes tougher regulations and sanctions against China.

China’s Response
In response to U.S. pressure, China has chosen to embark on a new “Long March” rather than strikingback with a short-sighted tit-for-tat strategy. China has been setting long-term aims and responding to the U.S. sanctions by upgrading institutional arrangements, enhancing industrial policies, and strengthening R&D investment. The Chinese government’s recently adopted 14th Five-Year Plan (2021-2025) and its Long-Range Objectives Through the Year 2035 together emphasize two goals: “dual circulation economic strategy” and “breakthroughs in core technologies.” Such strategies may be understood as attempts to achieve economic self-reliance and technological self-support. In addition, China has been hastening to enact and enforce a series of laws and regulations to counter sanctions from foreign countries such as the U.S. In particular, the Anti-Foreign Sanctions Law (AFSL), adopted and enforced on June 8, allows for retaliatory countermeasures against a wide range of actors and actions that China perceives as harming its interests. Specifically, it threatens to penalize foreign entities and individuals who comply with sanctions against China. Also, China while deterring the U.S. from promoting USICA based on its AFSL.

Implications for Korea
As the strategic competition between the U.S. and China has been intensifying, there are three major challenges that Korea will face: the world’s division into blocs, supply chain restructuring, and the revival of industrial policy and the high-tech rat race.

First, the bipartisan anti-Chinese sentiment in the U.S. is likely to lead to an ideological confrontation and the result in economic blocs based on trust and values instead of economic interests, thus impacting the global trade environment. In return, it will become increasingly likely that Korea will be pressured to choose sides between the U.S. and China. this will subsequently increase uncertainty for Korean companies that have to simultaneously access the Chinese market as well as the U.S. Thus, to eliminate such uncertainty, Korea must establish its own clear trade and diplomacy principles, avoid extemporaneous measures, and show consistent rule-based responses. In addition, joint responses and cooperation with European countries should be strengthened in order to maintain a balanced stance between the U.S. and China should be strengthened. Now Korea is facing a pivotal moment in determining the future path of its economy.

Second, another challenge that Korea is facing is supply chain restructuring in major countries. Given that Korea has to survive in the global value chain, if the conflict between the two intensifies, Korea will lose its trade opportunities as the U.S. tightens its export controls against China and China speeds up the indigenization of the entire value chain. It is urgent not only to look for market opportunities in a changing world but to identify the vulnerability of Korea’s own supply chain. To seize an appropriate balance between efficiency and resiliency, it seems important to reduce excessive dependence on a specific country and diversify cooperation partners. At the same time, it is necessary to identify key technologies, intellectual property, data, and supply chain risks that form our economy's competitiveness and establish a concrete system that can secure them without excessively impeding free trade and foreign investments.

Third, the conflict between China and the U.S. is expected to be prolonged since the nature of the U.S.-China conflict lies in structural competition for technological supremacy. Increasing pressure from the U.S. is expected to strengthen China's R&D capabilities in advanced technology and accelerate its competitiveness in emerging industries. In return, the West - being wary of China - will perceive its efforts as a threat and expand their industrial policies to outperform China, which will eventually open an era of unlimited competition in high-tech industries. If Korea does not adequately respond to changes, it may be difficult to maintain a comparative advantage in major industries where Korea currently has a competitive edge.

In summary, in the short term, Korea must prepare for the negative impact that might occur because of the expansion of either U.S. sanctions or Chinese countermeasures. In the long term, Korea should prepare to compete with other nations rapidly closing the technology gap. Now that U.S.-China tensions are intensifying, maintaining global competitiveness in technological innovation has become a vital task for Korea.