Expanding the PIE: Building a Plurilateral Innovation Ecosystem for Critical & Emerging Technologies

Building a “Plurilateral Innovation Ecosystem” for Critical & Emerging

Technologies

January 2025

Expanding the PIE: Building a “Plurilateral Innovation Ecosystem” for Critical & Emerging Technologies

Authors:

Michael Chapman

Ji Eun Kim

Jeremy McKey

Nathan McQuarrie

Uma Mengale

Lauren Piper

Faculty Advisor:

Teddy Nemeroff

Visiting Lecturer, Princeton University School of Public and International Affairs

This report is the outcome of a graduate policy workshop at Princeton University’s School of Public and International Affairs (SPIA). The policy workshop is a graduation requirement of the Master in Public Affairs (MPA) degree program at SPIA. The report’s conclusions reflect the consensus views of the members of the policy workshop, and not necessarily the views of any individual who we met with to discuss our project or any organizations they might be affiliated with. Teddy Nemeroff, our faculty advisor, facilitated our policy workshop in his personal capacity.

Suggested citation:

Princeton University. (2025, January). Expanding the PIE: Building a “Plurilateral Innovation Ecosystem” for Critical and Emerging Technologies. School of Public and International Affairs.

Executive Summary

In recent years, U.S. administrations have increasingly characterized the relationship between the United States and the People’s Republic of China (PRC) as one of strategic competition. Critical and emerging technologies have become the new frontlines of this competition due to their transformational potential. The United States has relied heavily on restrictive tools to prevent the PRC from advancing in these technologies, and it has often coordinated with partners in doing so. However, less attention has been given to coordinating with partners on tools that promote such technologies.

This report aims to shift the focus toward tools that would facilitate enhanced cooperation between the United States and its partners to promote the development of critical and emerging technologies and enable the United States to maintain a lead over the PRC in this key arena.The report focuses on four technologies that are particularly important in this competition: artificial intelligence, semiconductors, quantum information science, and biotechnology. The report explores the strategic importance of each technology, how the United States has coordinated with partners on each technology, and the effectiveness of such coordination.

Ultimately, the report presents three actionable recommendations to enable the United States and its partners to promote the development of these technologies through a “plurilateral innovation ecosystem”:

1. Establish principles to integrate market forces with strategic investments in critical and emerging technologies to prevent the risk of duplicative efforts and maximize returns on investments.

• Focus on strategic technologies

• Prioritize multi-sector policies

• Establish high performance standards

• Commit to non-discrimination among partners

• Maintain transparency

2. Launch a critical and emerging technology cybersecurity initiative to strengthen the cybersecurity infrastructure surrounding key technologies, ensuring better research security to facilitate greater collaboration.

• Promote strong cybersecurity standards

• Provide technical assistance and capacity building support

• Consider establishing a cybersecurity equivalency requirement for some export licenses

3. Optimize restrictions with partners to mitigate their negative effects and better enable coordination with partners on promoting critical and emerging technologies.

• Consult with partners on forthcoming export controls

• Continue to narrowly scope restrictions

• Encourage partners to strengthen inbound and outbound investment screening

• Incorporate license exemptions for partners with similar restrictions

Acknowledgments

We are grateful to the many individuals who have contributed their time, knowledge, and effort to the development of this project.

First, we would like to thank Teddy Nemeroff––who facilitated our policy workshop in his personal capacity––for his guidance, patience, and dedication to our learning. Our thanks also go to Dean Amaney Jamal, Senior Associate Dean Paul Lipton, Associate Dean Karen McGuinness, Finance and Operations Manager Shannon Presha, and the rest of the Princeton University School of Public and International Affairs Graduate Program team for their efforts in making this workshop possible.

In addition, we wish to express our appreciation to the following individuals and organizations for their invaluable contributions, insights, and support in advancing the research and discussions presented in this work:

Individuals

Adam Segal

Ira A. Lipman Chair in Emerging Technologies and National Security and Director of the Digital and Cyberspace Policy Program, Council on Foreign Relations

Akira Igata

Project Lecturer at the Research Center for Advanced Science and Technology, the University of Tokyo

Aya Ibrahim

Senior Advisor, Policy Planning Staff, The Department of State

Brian Egan

Partner, Skadden

Chris McGuire

Former Deputy Senior Director for Technology and National Security, U.S. National Security Council

Dr. Alondra Nelson

Professor and Harold F. Linder Chair of School of Social Science, Institute for Advanced Study

Dr. Casey Mahoney

Associate Political Scientist, RAND Corporation

Dr. Motohiro Tsuchiya

Vice-President for Global Engagement and Information Technology at Keio University; Professor at Keio University Graduate School of Media and Governance

Dr. Young Ja Bae

Professor of Political Science and Diplomacy, Konkuk University

Jun Osawa

Senior Research Fellow, Nakasone Peace Institute; Senior Fellow, Sasakawa Peace Foundation

Katrina Mulligan

National Security Lead, OpenAI

Ken Jimbo

Managing Director, International House of Japan (I-House); President of the Asia-Pacific Initiative

Matt Cronin

Former Chief Investigative Counsel and Deputy General Counsel, U.S. House Select Committee on the Chinese Communist Party

Robert Strayer

President of The Critical Minerals Forum

Organizations

Japan AI Safety Institute

Taga Kazuhiro

Digital AI System Director

Japan Ministry of Economy, Trade and Industry

Hiroki Ichikawa

Principal Deputy Director of the Economic Security Policy Division, Trade and Economic Security Bureau

Sho Udagawa

Director of Global Cooperation on Governance Strategy, Digital Economy Division

Takahiro Kudo

Deputy Director of the International Affairs Team, IT Industry Division

Yukihiko Koga

Section Chief for IT Industry Division, Software and Information Service Strategy Office

Japan Ministry of Foreign Affairs

Genki Koshiishi

Assistant Director, Economic Security Policy Division

Keidanren

Kubo Kohei

Manager, International Affairs Division

Special Competitive Studies Project

Channing Lee

Associate Director for Foreign Policy

Dr. Lydia Sizer

Researcher

Jafer Ahmad

Director of Future Technology Platforms

Joel Nelson

Director of European Policy and Senior Editor

Stephen Nordin

Directory for Foreign Policy

Acronyms and Abbreviations

AGI Artificial General Intelligence

AI Artificial Intelligence

AUKUS Trilateral Security Partnership between Australia, the UK, and the United States

BIS Bureau of Industry and Security

ChatGPT Chat Generative Pre-trained Transformer

CFIUS Committee on Foreign Investment in the United States

DARPA Defense Advanced Research projects Agency

EU European Union

EUV Extreme Ultraviolet

5G Fifth-Generation (usually in reference to telecommunications technology)

GDP Gross Domestic Product

GPAI Global Partnership on Artificial Intelligence

ICT Information and Communications Technology

IP Intellectual Property

NASA National Aeronautics and Space Administration

NIST National Institute of Standards and Technology

NM Nanometer

OECD Organization for Economic Cooperation and Development

PRC People’s Republic of China

QED-C Quantum Economic Development Consortium

QIS Quantum Information Science

QUAD Quadrilateral partnership between Australia, India, Japan, and the United States

R&D Research and Development

SCSP Special Competitive Studies Project

SOE State-Owned Enterprise

STEM Science, Technology, Engineering, and Mathematics

TSMC Taiwan Semiconductor Manufacturing Company

TTC U.S.-EU Trade and Technology Council

UK United Kingdom

U.S. United States

USRA Universities Space Research Association

USCC U.S.-China Economic and Security Review commission

Section I: Introduction

The most powerful assets the United States brings to its technology competition with the People’s Republic of China (PRC) are its innovation ecosystem and network of partners. How can we multiply these strengths by more effectively linking them? How can the United States and its partners build a “plurilateral innovation ecosystem” to lead in critical and emerging technologies?

These are the central questions of the report that follows. Written in the fall of 2024 by policy students at Princeton’s School of Public and International Affairs as part of a workshop on U.S.-PRC technology competition, the report reflects months of reading and research, conversations with high-level government officials and experts on critical technologies, and our own diverse backgrounds and areas of expertise.

A pivotal input for our work was a week-long trip to Japan. In meetings with Japanese economic policymakers, diplomats, industry leaders, academics, and others, we sought to understand technology competition from a Japanese perspective and explore ways to strengthen our bilateral relationship. A clear theme emerged. When it comes to policies designed to restrict the PRC’s access to critical technologies, our two countries have established systems and structures—however imperfect—for coordination. But the same cannot be said for policies that aim to promote critical technologies, such as subsidies, tax incentives, and investments in research and development (R&D). With respect to technology promotion, the United States and Japan appear to be operating in parallel, disconnected universes.

This asymmetry is not unique to the U.S.-Japan relationship. Across its broader network of partners, the United States tends to focus its coordination efforts on policies designed to prevent, protect, and restrict access to critical technologies. In contrast, promotion policies—those aimed at advancing technological leadership—often remain uncoordinated. Without alignment, the United States and its partners risk triggering a race to the bottom, marked by duplicative investments, inefficient resource allocation, eroded trust, and a zero-sum mindset that strains partnerships precisely when they are most essential.

The central question then becomes: How can we better coordinate technological promotion efforts to ensure mutual benefit—for shared economic prosperity, national security, and democratic resilience?

In Section II, we provide an overview of the U.S.-PRC technology competition and catalog the “restrict” and “promote” tools available to the United States. Section III transitions from abstract principles to specific case studies on four key technologies—Artificial Intelligence (AI), semiconductors, quantum information science (QIS), and biotechnology. For each, we provide a high-level overview, evaluate the tools currently prioritized by the United States, and identify opportunities for improved coordination. Section IV offers three crosscutting recommendations—what we term “enablers for plurilateral innovation”—to deepen innovation partnerships between the United States and its partners, thereby securing the lead in the technology competition with the PRC. Finally, Section V concludes the report by discussing a recent technological breakthrough that illustrates the importance of building a plurilateral innovation ecosystem.

Section II: Background and Context

Overview of the U.S.-PRC Technology Competition

In recent years, U.S. administrations have increasingly characterized the U.S.-PRC relationship as a strategic competition. This report does not take a position in the vigorous debate over the ideal “end state” for this strategic competition (Blanchette & McElwee, 2024). However, the report takes it as a given that the United States’ immediate goal in regard to technology competition is to maintain “as large a lead as possible” in order to retain an advantageous position in the broader strategic competition—a general point of consensus among policymakers (Sullivan, 2022; Dou, 2024).

The race to develop critical and emerging technologies has become a central element of the U.S.-PRC competition. The PRC has aggressively pursued technological advancement through its “Techno-Security State” model to position itself at the forefront of high-tech sectors (Cheung, 2022). Civil-military fusion is central to the PRC’s strategy, which blurs the lines between civilian innovation and military application (Economy, 2023). By leveraging technological advantages such as 5G, the PRC enhances its global influence and further reshapes global standards, exemplified by initiatives like the Digital Silk Road (Schuman et al., 2023).

Both the PRC and the U.S. recognize that securing a first-mover advantage in fields such as AI, biotechnology, and QIS, will carry far-reaching economic and geopolitical advantages. Both are acutely aware, too, that we are currently living in a critical window of technology development. Decisions made over the next 5-10 years will shape the balance of power between our two countries for generations to come (Special Competitive Studies Project [SCSP], 2022).

The transition to a second Trump administration provides an opportunity to reassess America’s strategy in this high-stakes technological competition. As technological advancements continue to redefine global power dynamics, there is a growing recognition that a nuanced approach is needed—one that balances economic interests, national security, and global leadership. Optimizing technology restrictions and technology promotion policies will be key to maintaining as large a lead as possible over the PRC in critical and emerging technologies.

U.S. Restrictions on Critical and Emerging Technologies

For years, the PRC exploited the global free trade system to force technology transfers, flood U.S. markets with underpriced goods, and illicitly acquire dual-use technologies for military purposes. In response to these practices, the United States has implemented a range of restrictive measures to counter the PRC’s growing technological and economic influence, protect U.S. interests, and secure its leadership in critical sectors. These restrictions include—but are not limited to—export controls, information and communications technology (ICT) supply chain restrictions, tariffs, and investment screening, all of which restrict the PRC’s access to crucial U.S. technologies and capital:

Export controls, designed to limit the export of technologies deemed critical to national security, are particularly prominent in sectors such as semiconductors, telecommunications, and advanced computing. By preventing the PRC from accessing high-tech components and intellectual property (IP), the U.S. seeks to protect its technological advantage. However, these controls may compel the PRC to redirect resources toward independently developing technologies it cannot obtain from the U.S.—as evidenced by the Chinese

firm Huawei’s rapid advancements in technology innovation and diversification (The Economist, 2024). Over time, this reallocation could enable the PRC to close the technological gap, potentially heightening competition rather than mitigating it.

ICT supply chain restrictions and tariffs aim to restrict the PRC’s access to the American market to protect U.S. industries from PRC competition and reduce the national security threat posed by the presence of PRC technology in the U.S. ICT infrastructure, or other critical areas. However, both can also lead to unintended consequences: they may increase costs for American companies reliant on Chinese components, disrupt global supply chains, and impede U.S. technology growth as companies face higher input costs and production delays.

Investment screening mechanisms, such as those enforced by the Committee on Foreign Investment in the United States (CFIUS), examine and potentially block Chinese investments in sensitive U.S. sectors, including artificial intelligence, aerospace, and biotechnology. Outbound investment screening can block investments by U.S. individuals and companies into Chinese companies with strategic relevance. This scrutiny prevents Chinese companies from acquiring U.S. technologies and expertise, or funding, that could strengthen the PRC’s competitive edge. Nevertheless, strict investment screening can also drive Chinese investors toward less restrictive markets, allowing them to acquire similar technologies and expertise outside the United States, ultimately undermining the effectiveness of U.S. controls.

Restrict tools are an indispensable part of the U.S. policy toolkit for competing with the PRC in critical technologies. In the long-term however, the PRC’s response to these controls will likely be to invest in its own business networks, foster its own culture of innovation, and develop greater independence from the United States. A growing consensus among policymakers and experts has emphasized the need for more tools beyond restrictions that take “positive actions to nurture America’s own technological strength” (Bateman, 2022) as part of a larger “Techno-Industrial Strategy” (SCSP, 2022).

U.S. Policies to Promote Critical and Emerging Technologies

The United States’ greatest asset, ultimately, is its unparalleled innovation ecosystem. This ecosystem has produced more Nobel laureates than the rest of the world combined, continues to attract leading science, technology, engineering, and mathematics (STEM) talent from across the globe (including the PRC), and generates a significant share of the world’s most impactful patents. Securing long-term leadership in critical technologies will require harnessing and strengthening this ecosystem through what we call “promote” tools: policies such as subsidies, concessionary loans, tax incentives, investments in education, immigration reform, and facilitating research partnerships.

The passage of the CHIPS and Science Act in 2022 marked a milestone in the U.S.’ promotion strategy. The act poured $174 billion into overall science and technology research, including R&D in AI, quantum computing, and biotechnology (Badlam et al., 2022) o address a sharp decline in the U.S. share of global semiconductor manufacturing—from 37% in 1990 to 12% today (Swanson & Gamio, 2024)—the legislation allocated $52 billion to incentivize semiconductor research and manufacturing domestically. In an early win, the Taiwan Semiconductor Manufacturing Company (TSMC) is currently constructing leading-edge chip fabrication facilities in Arizona, an investment projected to generate tens of thousands of jobs (Jolly, 2024).

However, “promote” policies need not be limited to manufacturing. Nor do they reflect a partisan divide. For its first of 32 recommendations in its 2024 report to Congress, the bipartisan U.S.-China Economic and Security Review Commission called on the U.S. government to “establish and fund a Manhattan Project-like program dedicated to racing to and acquiring an Artificial General Intelligence (AGI) capability” (U.S.-China

Economic and Security Review Commission [USCC], 2024). In biotechnology, leading researchers at the Special Competitive Studies Project (SCSP) propose a moonshot project to “create an open-source genetic library for the entire biodiversity” of the United States and the world—a “genomic GitHub” established through public-private partnerships (SCSP, 2023). The Defense Advanced Research Projects Agency (DARPA) is currently seeking funding for a “Quantum Benchmarking Initiative” designed to assess the feasibility of accelerating the development of industrially useful quantum computers (DARPA, 2024).

Rather than categorizing “restrict” and “promote” tools as strictly defensive or offensive, we view them as operating on both sides of the field simultaneously. While they represent distinct aspects of U.S. policymaking, they are not an “either/or” proposition. Both sets of tools are indispensable to sustain and strengthen the United States’ lead in technology competition with the PRC.

Restrict Tools

Export controls

Restrictions on ICT

Tariffs

Inbound & outbound investment screening

Sanctions

Promote Tools

Subsidies

Concessional loans

Education policy

Immigration policy

Research partnerships

Section III: Technology Case Studies

Critical and emerging technologies are assuming a central role in the global economy and are increasingly important for national power. Today, extreme ultraviolet (EUV) lithography machines, comprising over 100,000 individual components (Knight, 2021), manufacture semiconductors with transistors measured at an atomic scale. Advanced semiconductors, in turn, form the foundation of the AI technologies that are transforming our society. AI alone is projected to contribute $20 trillion to the global economy by 2030 (Fried, 2024). However, this figure likely underestimates its true impact when considering AI’s integration with biotechnologies, which are themselves poised to produce up to 60% of the physical inputs that go into the global economy (SCSP, 2023). Further on the horizon, the advent of quantum computing promises to accelerate an already unprecedented age of technological development, with computers that could perform calculations at an exponentially faster rate than current computers (Berman, 2024).

AI, semiconductors, QIS, and biotechnology are not the only critical and emerging technologies shaping the U.S.-PRC competition. Yet, we chose to focus on these four for several reasons.

First, each is critically important on its own, offering wide-ranging economic and geopolitical advantages to the country that secures a first-mover advantage. Second, these technologies are deeply interwoven, with progress in one often enabling advancements in the others. Third, for the purposes of analysis, they are meaningfully distinct, presenting varied profiles in terms of maturity, capital intensity, choke points, supply chain dynamics, and national security applications.

This section presents case studies on each of the four technologies. Each case study provides a high-level overview, describes the key tools—both “restrict” and “promote”—that the United States employs to advance its strategic goals, and explores examples, obstacles, and untapped opportunities for plurilateral innovation. Since AI is the most transformative technology discussed here, its case study is longer than the others. In the recommendations section that follows this section, we zoom out from individual technologies to present a broader perspective on enabling a plurilateral innovation ecosystem for critical and emerging technologies.

1. Artificial Intelligence

Introduction to AI

AI is a branch of computer science dedicated to “systems that display intelligent behavior by analyzing their environment and taking actions—with some degree of autonomy—to achieve specific goals” (Sheikh et al., 2023). These broad tasks include learning, reasoning, problem-solving, perception, and language understanding. AI technologies encompass machine learning, deep learning, neural networks, and natural language processing, enabling applications from autonomous vehicles to advanced data analytics. The rise of generative AI, like ChatGPT, is the focus of recent attention. Generative AI encompasses technologies that produce text or media based on human prompts using machine learning algorithms trained on large datasets (King’s College London, 2024).

AI drives economic growth, innovation, and national security, offering critical advantages in military, cybersecurity, and intelligence operations. For the United States and its partners, maintaining leadership in AI is essential to upholding democratic values, promoting human rights, and ensuring that the development and deployment of AI technologies align with principles of freedom and privacy. Doing so can counter authoritarian designs to leverage AI to boost surveillance and social control.

The PRC’s centralized control over technology, particularly through its state-owned enterprises (SOEs), has allowed the government to strategically direct resources into key sectors like AI, which potentially gives it a competitive edge over a purely free market approach (Omaar, 2024). This approach enables the PRC to rapidly scale AI innovations and distribute them across its economy, especially to SOEs that play critical roles in defense, energy, and telecommunications. The PRC’s New Generation Artificial Intelligence Plan highlights its intent to be the world leader in AI by 2030 (Webster et al., 2017). According to the National Institute of Standards and Technology, the top five facial recognition companies are all based in the PRC (National Institute of Standards and Technology, 2024). Furthermore, the PRC has invested at least $184 billion in AI firms over the past 20 years, signaling its commitment to the industry (Beraja et al., 2024).

U.S. and Partner Coordination on AI

The contributions of international talent and collaboration have been pivotal to creating the current U.S. lead in AI. Among the three so-called “Godfathers of AI,” for example, two are Canadian, and one is French, reflecting the deep intellectual and institutional ties between the United States and its partners. This international collaboration extends to the development of cutting-edge AI models, which rely on multinational research teams and shared academic and institutional resources. U.S. universities and labs attract top talent from around the world, fostering an ecosystem where ideas and innovations are enriched by diverse perspectives. Furthermore, joint research initiatives and transnational collaborations, such as those involving Canada’s Mila or Europe’s AI safety research networks, demonstrate how partnerships across borders are essential to advancing AI technologies. This global interconnectedness has not only propelled the United States to the forefront of AI innovation but has also ensured that it shares leadership in this space with its partners.

The United States is engaged in promoting peace, stability, and the shared economic benefits of AI by leveraging international organizations and initiatives that establish global norms and standards for governance and safety. Institutions like the Global Partnership on Artificial Intelligence (GPAI) and the network of AI Safety Institutes are instrumental in shaping these norms by fostering collaboration among governments, industry, and civil society. Through GPAI, the United States and its partners work to ensure that AI technologies are developed responsibly, emphasizing human rights, fairness, and transparency. By aligning efforts with global initiatives such as the United Nations Sustainable Development Goals, these organizations promote the creation of human-centric AI systems. Partnerships with entities like the Organization for Economic Cooperation and Development (OECD) further advance trustworthy AI policies that serve as global references. By actively engaging in these international efforts, the United States helps set standards that mitigate the risks associated with advanced AI systems—such as autonomous weapons and surveillance technologies—ensuring that AI development remains safe, secure, and aligned with democratic values.

To promote a competitive economy, the United States is maintaining its economic leadership by investing in cutting-edge AI research. Currently, this type of investment is either focused domestically or through corporate-driven international partnerships like the $100 billion Global Infrastructure Partners fund (Microsoft Corporation, 2024). Other corporate international cooperation proposals require significant government investment, like OpenAI’s North American Compact for AI, which envisions international cooperation on talent, infrastructure, financing, and supply chains (Davalos, 2024). By collaborating internationally and supporting a decentralized AI ecosystem, the U.S. drives widespread adoption of AI technologies across industries.

Effectiveness of Coordination on AI

The American and partner lead in AI is not an isolated achievement but a direct result of systemic technological and economic cooperation with partners. The United States and its partners—most notably Canada, the United Kingdom (UK), and the European Union (EU)—maintain a research and commercial advantage in AI. OpenAI, Google, Anthropic, and Microsoft are the leaders in advanced foundation models. Likewise, estimates show that almost 60% of the world’s top AI researchers work in the United States alone; however, this gap is closing with the PRC (MacroPolo, 2023).

Existing alliances could serve as formidable platforms for cooperation on AI research; all members of the Quadrilateral Security Dialogue (the Quad) rank in the global top ten in AI research citations and publications (Chahal et al., 2022). Each country has its comparative strengths: Japan in simulation and human-computer interaction; India in data mining and science; Australia in linguistics and theoretical science; and the United States in machine learning and natural language processing (Chahal et al., 2022). The U.S.-India Artificial Intelligence Initiative was launched in 2021 to promote R&D cooperation (Luong and Chahal, 2022), while the U.S.-Japan Security Consultative Committee has discussed intentions to expand cooperation on military AI applications (U.S. Department of Defense, 2024). However, current Quad AI investment is mostly U.S. investment into each member—the others invest little in one another and focus more on domestic investments (Chahal et al., 2022).

Cooperation around promoting AI faces challenges with misaligned private incentives. Most AI investment comes from private companies whose interests may not align with national security considerations. For example, testimony in a recent Senate Judiciary Committee hearing on Chinese cyberattacks recently highlighted how Big Tech companies may “underprice” the geopolitical risks of investing in the PRC while suppressing information about Chinese cyberattacks (Senate Judiciary Committee, 2024). Companies offering AI services and the underlying layers of the “AI stack,” such as data storage and cloud computing, may be reluctant to shirk Beijing and the lucrative Chinese market.

Despite its lead on the software side, vulnerabilities on the lower layers of the AI stack could undermine the current U.S. advantages in compute and AI models. ICT built by Chinese companies could build a presence for workers trained in Chinese technologies, allow the PRC to coerce third countries to adopt Chinese AI systems, or result in standards that make Chinese technologies more compatible with these initial investments.

The United States has recognized cloud capability as a “strategic asset” and “source of tension,” committing to work with partners and firms to build out cloud infrastructure in countries where it is lacking (U.S. Department of State, 2024). Without abundant compute power, researchers could lack the capacity to train cutting-edge models, potentially hindering research and ceding power to others to chart the course. The United States has built a significant lead in cloud computing, claiming 67% of the global market share between Amazon, Microsoft, and Google. Meanwhile, China only controls 8% of the global market (USSC, 2024). The U.S. advantage is fueled by export controls on high-end semiconductors, which have hampered the PRC’s ability to acquire sufficient compute power to develop and train highly advanced AI models. However, the PRC is ramping up efforts to spread its computing internationally, with large companies like Alibaba outpacing the United States in Southeast Asia and targeting other regions (USSC, 2024). Likewise, the PRC has evaded the export controls regime on semiconductors by accessing cloud computing through U.S. companies, leading to a significant loophole in the American effort to prevent the PRC from building a leading-edge foundation model (Olcott et al., 2023).

Through the Digital Silk Road, the PRC is also expanding its presence in underlying infrastructure such

as ICT, cloud computing, surveillance technology, smart cities, and other high-tech solutions (Council on Foreign Relations, n.d.). The United States is up against lavish, bundled aid agreements from the PRC. In 2014, for example, the PRC entered into a loan agreement with Mali for a project that included fiber optic cables, a data center, ICT modernization, and a video surveillance system. A 2015 cooperation framework agreement between the PRC and Zambia provided over $65 million for three data centers and an ICT talent training center (Bouey et al., 2023). The PRC is tying local economic development priorities to its AI-related investments, including connectivity and human capital development, providing economic stimulus in exchange for long-lasting digital influence. Through generous aid, political support, and other assistance, the PRC has created leverage that may be employed for espionage or coercion while potentially fracturing the global internet (Council on Foreign Relations, n.d.).

The location and ownership of data centers can also impact how the underlying data is governed. Digital sovereignty movements have erupted as countries like Indonesia, Vietnam, and Bangladesh seek to reassert possession of their citizens’ data and determine how it should be governed (Cory et al., 2022). The PRC could be better equipped to export “digital authoritarianism”—authoritarian-enabling digital practices such as surveillance and suppression—by detaching countries from U.S.-led transnational data norms (Yayboke et al., 2021).

The PRC also has the upper hand on green technologies, another prerequisite for AI industries. The energy intensity of AI is well recognized; a simple ChatGPT query consumes nearly ten times the energy of a Google Search, and data center power demand could grow 160% by 2030 (Goldman Sachs, 2024). As AI becomes more ubiquitous and advanced, it will place extreme burdens on electricity grids worldwide. Thus, energy infrastructure could serve as another bargaining chip that enables the Digital Silk Road as the PRC courts potential partners. The PRC is outspending the United States two-to-one on pushing nuclear fusion toward commercialization while dominating critical pieces of clean energy supply chains (Kearney & Hansmann, 2024;Araya, 2018). The PRC also produces 80% of the world’s solar panels, as opposed to the 2% U.S. market share, while contributing about two-thirds of the global supply of electric vehicles, wind turbines, and lithium-ion batteries (Shepherd. 2024). Additionally, the PRC has been accused of flooding markets to eliminate competition in lithium and secure control over that critical input for batteries (Goncalves, 2024).

The United States relies heavily on export restrictions to prevent unwanted technology transfer, as noted in other sections of this report. However, this approach is more difficult in the case of AI because of the ease of model proliferation. As generative AI, in particular, grows in importance, the United States will likely move aggressively to protect foundation model weights to prevent harms and maintain its security and economic interests (Bloomfield, 2024). Given the multinational nature of cutting-edge foundation models, this will likely include coordination with partners to ensure that models in other countries, like France’s Mistral, are also subject to restrictions.

Already, U.S. lawmakers have proposed a bill prohibiting the export of specific advanced AI models that may pose a risk to national security (House Foreign Affairs Committee, 2024). This act ambiguously outlines which models are covered, leaving political room for interpretation and consensus with partners. However, this could mean innovation would slow down under such a bill, as labs and universities may not be able to rely on foreign workers to build such models (Villasenor, 2024). Such a restriction would also imply a ban on open-source and open-weight models of a certain level of advancement, like Meta’s Llama. Likewise, it would also require sufficient cybersecurity protection of AI model weights, necessitating the participation of U.S. and foreign agencies (Nevo et al., 2024).

There are other proposed rules on technology that implicate AI technology, particularly on facial recognition and data transfer. The U.S. Bureau of Industry and Security (BIS) proposed a rule that bans the transfer of

facial recognition technology to countries of concern that may use it for mass surveillance, which would allow it to enforce the re-export of similar products from countries that use any portion of U.S. technology (Bureau of Industry and Security, 2024a). Notably, this proposed rule does not cover lower-risk facial recognition use cases like building or phone access. Furthermore, there are already rules that arguably could cover the export of some types of models and datasets under the Commerce Control List, which could be enforced to include AI used for social control, censorship, and surveillance (Flynn, 2020).

In summary, cooperation has helped propel the United States toward a sizable lead in AI models and cloud computing, such as through compliance with export controls, research partnerships, and standards agreements. However, in technology-needy countries, the United States and its partners have failed to produce a compelling full-stack strategy to match the PRC’s Digital Silk Road strategies, including bundled foreign aid packages and AI-enabling infrastructure. Without efforts to reduce the PRC’s leverage over the foundation of the AI stack and preempt its advances, the U.S. software advantage in AI could be overcome.

2. Semiconductors

Introduction to Semiconductors

A semiconductor or “chip” is an information processor used for data storage, numerical calculations, and logical operations. They are found in almost every electronic device, from smartphones and computers to defense systems (Kizuna, 2023). Semiconductors have significant security and economic implications. A Chinese lead in the industry would mean that the PRC could weaponize supply chains, develop better military technologies, and lead in other critical technologies like AI. Therefore, it is a must-win technology for the United States in its competition with the PRC.

Currently, U.S. companies account for 50.2% of the global market share, followed by South Korea with 13.8%, the EU with 12.7%, Japan with 9%, the PRC with 7.2%, and Taiwan with 7.0% (Semiconductor Industry Association, 2024). However, only about 10% of global semiconductor supply is produced on U.S. soil, with East Asia dominating the market with 75% of global production. In addition, the United States produces none of the most advanced chips—currently 2-3 nanometers (nm) (The White House, 2022b). Semiconductor supply chains are complex—a typical integrated circuit chip has parts from more than 70 countries (Thadani & Allen, 2023). Despite U.S. restrictions, the PRC currently has a limited ability to produce 7nm chips, which are two generations behind the cutting-edge chips (Kaur, 2024). For the United States to maintain as large of a lead as possible over China, resilient supply chains and the development and manufacturing of next-generation chips under 2nm are crucial.

U.S. and Partner Coordination on Semiconductors

The United States’ partners in semiconductor-related issues include the EU, the Netherlands, the UK, Japan, and South Korea. The United States can only maintain predominance in this field by cultivating and complementing the respective comparative advantages of its key partners.

The CHIPS and Science Act of 2022 aims to reduce the United States’ reliance on foreign-manufactured semiconductors while also bringing high-tech innovation back to the United States by providing $52.7 billion for R&D, manufacturing, and workforce development. Currently, 70 semiconductor fabs are under construction in Texas and Arizona, including TSMC facilities which expect to start chip production in 2025 (Badlam, et al., 2022). Others such as Japan, South Korea, and the EU are also making substantial investments, promoting domestic chip production, and working to strengthen supply chains.

In recent years the United States has introduced export controls to restrict the PRC’s access to advanced semiconductors and semiconductor manufacturing equipment. In addition, as of March 2023, 603 Chinese persons were listed on the Entity List, which requires the listed persons to obtain a license to import almost all U.S.-origin products (Kilcrease & Frazer, 2023). The United States has also negotiated with its partners to replicate and harmonize export controls so the PRC cannot access Western technology through other countries. This has seen early success, with the Netherlands and Japan announcing new export controls in 2023 (Allen et al., 2023). However, the most recent U.S. semiconductor export controls were criticized by some analysts for being too porous, which was partially a result of the United States being unable to get key partners to align their export controls fully with U.S. controls (Allen, 2024).

Effectiveness of Coordination on Semiconductors

As countries with the most advanced technology are racing to be the first to produce the next generation of chips (2nm chips), the competition has partly turned into a subsidy war among the United States and its partners, resulting in duplicative industrial policies and investment redundancies. This poses challenges to semiconductor cooperation. The competition between the United States and its key partners to bring semiconductor production back home is causing inefficient investments and policy redundancies that do not leverage countries’ strengths. For example, Japan specializes in simpler chips used in automobiles, household appliances, and consumer goods. At the same time, the United States, Taiwan, and South Korea are highly skilled in producing complex, high-value chips (Hufbauer & Hogan, 2022). However, Japan has invested up to 920 billion yen ($6 billion) in Rapidus, its leading semiconductor startup, aiming to mass-produce 2nm chips by 2027, despite early signs that this goal will not be met. In fact, the company estimates an additional 4 trillion yen ($27 billion) would be necessary to keep the planned timeline (Izawa & Kasai, 2024).

Joint R&D projects among like-minded countries provide economies of scale for investment and attract more talent, leading to a better chance of breakthrough innovation. For example, Japan and the United States established a joint task force to explore the development of next-generation semiconductors in May 2022. Such efforts could be improved by setting up new visa categories for highly skilled researchers, allowing expedited processing, longer stays, and simplified renewal requirements. These immigration changes would reduce the travel cost for researchers and further promote exchanges among researchers. As the U.S. semiconductor industry expects to face a labor shortage of 67,000 technicians and engineers by 2030, the reduced travel costs between partner countries would help reduce the talent gap (Semiconductor Industry Association, 2023).

In summary, the use of protect and restrict policy tools in conjunction with partners has partially cut off the PRC’s access to cutting-edge semiconductors. However, the PRC has tried to circumvent such U.S.led initiatives by pouring greater resources into the development of domestic technologies. This shows again that protect and restrict measures alone cannot prevent the PRC from catching up to the U.S.’ lead in semiconductors.

3. Quantum Information Science

Introduction to QIS

Quantum information science (QIS) is poised to fundamentally transform modern life (Howell, 2024). Quantum technologies could result in breakthroughs in materials science, pharmacology, risk analysis in the financial sector, imaging, and communications (Hidary & Sarkar, 2023). Of the various quantum technologies, quantum computing carries the greatest promises and risks. Quantum computers could

theoretically bypass traditional encryption methods, jeopardizing vast amounts of commercial data and compromising military and intelligence communications (The White House, 2022a). This capability could be reached by the early 2030s, which has led U.S. adversaries to collect vast amounts of encrypted data to decrypt later with quantum computers (Berman, 2024).

While the United States leads in the field of QIS overall, the PRC has made significant advancements in the last decade. The PRC currently leads in quantum communications, having launched the world’s first quantum satellite in 2016. The PRC’s rapid advancement in QIS is the result of concerted top-down direction and a society-wide marshaling of resources, with Xi Jinping heralding QIS as a “major disruptive technological innovation” (Xinhua News Agency, 2020). Cumulative PRC public spending announced on QIS amounted to $15.3 billion by 2021—more than all other countries combined, and surpassing the United States’ $1.9 billion (Smith, 2024; Masiowski et al., 2022). Many other countries have also announced large public investments in QIS, though private spending makes up the bulk of funding for QIS in Western countries.

U.S. and Partner Coordination on QIS

The key advantage of international cooperation on QIS is that it increases the chance that the United States will be able to identify and pursue the most promising quantum technology pathways before the PRC can. At this relatively early stage in the development of QIS, it is unclear which of the variety of specific technology pathways will ultimately prove the most fruitful, such as which quantum computing methods and designs will be the most efficient and scalable (Parker, 2023). International cooperation gives the United States an asymmetric advantage over the PRC by widening the net for research.

To better facilitate international collaboration, the United States has entered 11 bilateral partnerships on QIS since 2019 (National Quantum Coordination Office, 2024). Each partnership creates high-level dialogues between relevant government agencies and seeks to deepen collaboration between research institutions, universities, and industry. In addition to these bilateral partnerships, the United States has expanded QIS collaboration in multilateral forums such as the U.S.-established Quantum Economic Development Consortium (QED-C), the Quad, and Pillar II of the Australia-U.K.-U.S. agreement (AUKUS) (The White House, 2024b).

The United States has also coordinated with partners to restrict the PRC’s access to quantum technologies. In September 2024, the United States announced new export controls on quantum computers and related materials that closed several loopholes in previous controls (Bureau of Industry and Security, 2024b). In response to partner concerns that export controls could depress collaboration and QIS development, the United States established a license exemption in the new export controls for countries that implement equivalent national controls (Dickson & Harding, 2024). In October 2024, the United States also restricted outbound investments to the PRC in critical technologies, including quantum technologies, and those restrictions were informed by input from partners (U.S. Department of Treasury, 2024).

Effectiveness of Coordination on QIS

U.S. efforts to coordinate QIS development with partner countries vary in success. Several bilateral partnerships on QIS have already helped facilitate meaningful collaboration, such as a partnership between IBM, the University of Chicago, and two universities in both Japan and South Korea (IBM, 2023). However, most bilateral partnership agreements are generally high-level with few policy specifics, resulting in a limited number of private or public partnerships on the ground (Parker, 2023). Additionally, while the partnerships facilitate joint research and information sharing, they do not contain mechanisms to coordinate strategic

Above: A Rapidus Fab, the centerpiece of Japan’s effort to reclaim the lead in chips.

Headquarters of Sensetime, one of the PRC’s leading AI firms.

Above: TSMC’s Arizona Fab, subsidized by the 2022 CHIPS Act.

The Doubou AI assistant. Doubou, developed by ByteDance, is the world’s most used AI app.

Left: Miscius, the world’s first quantum satellite, was launched by the PRC in 2016.

Right: The headquarters of BGI Group, one of the PRC’s leading biotechnology firms.

Agriculture is just one of several fields which biotechnology could revolutionize.

investments in QIS, raising the risk that partner countries could direct resources towards redundant projects rather than additive, complementary projects. In summary, existing U.S. partnerships have considerable room to grow and deepen before they begin to have a paradigm-shifting effect on QIS development.

As the United States has entered into an increasing number of partnerships on QIS, the risk has also grown that it could end up spreading itself too thin by engaging in duplicative or unproductive partnerships. While many countries have expressed a desire to collaborate with the United States on QIS, there is often a mismatch in technical capability, funding systems, and scientific and strategic priorities in proposed partnerships (National Science & Technology Council, 2024). Expanding the net too wide also creates more opportunities for the PRC to access quantum technology illicitly. The PRC often targets international researchers to fast-track its QIS development through illicit technology transfer (Federal Bureau of Investigation, 2024). Beyond direct recruitment, the PRC also conducts widespread cyber espionage, and U.S. quantum partner countries do not always have sufficient cybersecurity practices to thwart such efforts. Deeper research exchange with partners is hobbled as a result.

Regarding coordinated controls on QIS, it is too early to judge how effective they will be in slowing the PRC’s development of quantum technologies, given their relatively recent introduction. In contrast to the AI and semiconductor supply chains, QIS has relatively few “choke points” that the United States and its partners can control (U.S.-China Economic and Security Review Commission, 2024). The PRC is also devoting significant resources to developing a homegrown quantum supply chain that would be insulated from Western export controls. For instance, the PRC recently began mass production of dilution refrigerators, an essential component that keeps superconducting quantum computer chips cool enough to function (China News Service, 2024).

However, the attempt to harmonize U.S. and partner export controls will likely make them more effective than they would have been otherwise. Providing exemptions for partner countries with similar export regimes has also helped guarantee that export controls do not become unnecessary hindrances to international collaboration, preserving the United States’ advantage over the PRC in joint R&D (Dickson & Harding, 2024). For QIS, more than other more developed sectors like semiconductors, implementing such controls is easier since there are fewer actors who would be negatively affected by controls.

4. Biotechnology

Introduction to Biotechnology

Biotechnology is a vast and rapidly growing field with intersecting applications across numerous industries––medicine, pharmaceuticals, defense, agriculture, manufacturing, clean energy, and environmental conservation, to name a few. Driven by advancements in genomics, synthetic biology, and biopharmaceuticals, and coupled with other critical and emerging technologies––particularly AI, and eventually quantum computing––the global biotechnology market is on track to reach a $3 trillion valuation by 2030 (Stanton et al, 2023). Rapid biotechnology innovation has outpaced the development of both national and international regulatory frameworks. The rise of do-it-yourself biology and openaccess genetic databases make it easier for non-state actors and hostile governments to acquire and produce biological weapons that can directly harm human populations as well as decimate entire industries (National Academies, 2020).

The United States is home to the world’s leading biotechnology firms and maintains a strong industry edge over global competitors, thanks in part to its decentralized apparatus (Chui et al, 2020). However, the PRC has made significant investments in its biotechnology sector and has made large foreign direct investments in

firms in the U.S., EU, and other global biotechnology centers (Barbosu, 2024). Its regulatory environment––and arguably, ethical framework––remains less stringent than that of the United States and its partners, which has raised fears that the PRC’s rapid advancements in biotechnology could outpace its ability to regulate and contain potential biosecurity threats. The PRC has integrated biotechnology into its national security strategy, as evidenced by its inclusion in the “Made in China 2025” and the “14th Five-Year Plan for the Bioeconomy” initiatives, which aim to make the PRC a global leader in biotechnology (China Daily, 2022; Zhang et al, 2022).

U.S. and Partner Coordination on Biotechnology

Coordinating with partnered nations on biotechnology enables the U.S. to explore diverse application pathways in emerging areas like synthetic biology, gene editing, and biomanufacturing. This collaborative approach is particularly valuable given the rapid pace of biotechnology advancement, where breakthrough potential exists across multiple technical approaches. By working with scientifically advanced partners, the United States can more effectively identify and pursue promising research directions while sharing costs and reducing duplicative efforts.

To strengthen international scientific collaboration, the U.S. has established extensive bilateral biotechnology partnerships with key countries. These partnerships operate through multiple channels, including the U.S.-EU Trade and Technology Council’s (TTC) Working Group on Biotechnology, the U.S.-Japan Competitiveness and Resilience Partnership, and dedicated biotechnology cooperation frameworks with Australia and South Korea (The White House, 2024a). These arrangements facilitate joint research projects, harmonize regulatory approaches, and enable technology transfer between trusted partners. The partnerships emphasize areas of mutual interest such as pandemic preparedness, sustainable biomanufacturing, and medical biotechnology advancement (The White House, 2021).

The U.S. has also taken a leadership role in developing plurilateral biotechnology initiatives. Key forums include the Global Bioeconomy Summit, the International Bioeconomy Forum, and specialized working groups within the OECD (OECD, 2009). These plurilateral efforts focus on establishing shared principles for responsible biotechnology development, creating common technical standards, and coordinating research priorities. Additionally, biotechnology cooperation features prominently in broader strategic frameworks like the Quad Biotechnology Working Group and the U.S.-EU Joint Technology Competition Dialogue.

Recognizing the dual-use potential of advanced biotechnologies, the United States coordinates with partners in implementing export controls on sensitive biological materials and equipment, harmonizing research security protocols, and establishing common frameworks for reviewing foreign investments in biotechnology companies (Chui et al, 2020). The United States and partners have also strengthened cooperation on biosecurity through initiatives like the Global Health Security Agenda and the International Biosafety and Biosecurity Initiative. These measures aim to promote beneficial biotechnology development while preventing misuse (Stoiber, 1999).

Effectiveness of Coordination on Biotechnology

International coordination efforts in biotechnology development have had mixed results in maintaining technological leadership. While there have been notable successes in research collaborations across public and private domains, and even across industry sectors within a country, many cross-national partnership frameworks remain largely aspirational (Chiesa & Toletti, 2004). The challenge lies in translating high-level agreements into concrete, coordinated research programs that effectively leverage each partner’s strengths and resources.

A significant concern in international biotechnology coordination is the balance between breadth and depth of partnerships. As the United States expands its network of biotechnology partnerships, it faces increasing complexity in managing different regulatory systems, research priorities, and funding mechanisms across partners. Not all potential partner countries possess comparable capabilities in advanced biotechnology R&D. Furthermore, differences in regulatory approaches to genetic modification, stem cell research, and other sensitive areas can create obstacles to deeper collaboration (Chui et al, 2020). These challenges can lead to partnerships that consume diplomatic and administrative resources without producing proportionate scientific or economic benefits.

The effectiveness of coordinated technology protection measures in biotechnology presents unique challenges. Unlike physical technologies, biological innovations often involve living organisms and genetic information that can be difficult to control through traditional export restrictions. Moreover, the inherently dual-use nature of many biotechnology tools and techniques complicates efforts to restrict sensitive capabilities while maintaining beneficial scientific exchange. Partly due to this dilemma, many PRC biotech companies still have legal access to vast swaths of U.S. genomic data and access to many U.S.-made biotechnologies through their acquisitions of U.S. companies, local subsidiaries, and local partnerships (NSCS, 2021). Partner countries’ varying approaches to IP protection and research security also affect the robustness of joint protection efforts. Some partners have stronger frameworks for protecting sensitive research and preventing unauthorized technology transfer, while others may have gaps that could be exploited (Stoiber, 1999).

Section IV: Recommendations

The four technologies discussed in the previous section are not monolithic; they require different strategies, policies, and a unique balance of roles between the government and the market. While international coordination might look somewhat different for each technology, coordination remains essential to compete with the PRC. Part of the rationale for coordinating with partners is economic. Alone, the United States accounts for 25% of global GDP. However, when acting in concert with the world’s democracies—which together account for over 60% of global GDP—the reach and impact of U.S. economic power expands dramatically.

Fortunately, competition with the PRC has reinvigorated U.S. alliances rather than weakened them. A shared sense of urgency has breathed new life into the Quad, a key platform for promoting a free and open IndoPacific, and an increasingly important venue for technology coordination. In 2021, the United States, the United Kingdom, and Australia launched AUKUS, a trilateral security pact that seeks to equip Australia with nuclear-armed submarines and advance collaboration in AI, QIS, hypersonic capabilities, and other defenserelevant technologies. Two years later, the U.S., Netherlands, and Japan achieved a landmark agreement to restrict the PRC’s access to leading EUV machines (Sterling et al., 2023).

But increased cooperation over the past four years has mostly been limited to the “restrict” side of the policy toolkit, and especially export controls. The logic is clear: it makes little sense for the United States to impose export controls if the PRC is simply able to source the same technologies from other countries. However, when it comes to the “promote” side of the policy toolkit—proactive actions to strengthen our innovation ecosystem—our ability to collaborate is much weaker. To better promote technology advancement, the United States must build a plurilateral innovation ecosystem with its partners.

The

United States benefits from cooperation with partners because it allows us to:

Capitalize on partners’ comparative advantages

The U.S. and its partners have different comparative advantages in critical and emerging technologies. In QIS, for instance, Germany excels in quantum sensing, while Australia’s startup ecosystem facilitates riskier innovations, resulting in quantum computing breakthroughs (Omaar & Makaryan, 2024; Dargan, 2024). In contrast, the PRC must develop all elements of QIS simultaneously using its limited comparative advantages. Cooperation allows the United States to save time and resources, while increasing the likelihood that the United States and partners will be able to identify and pursue the most promising quantum technology pathways.

Fill talent shortages

Talent shortages exist in several critical and emerging technology sectors. In QIS, the United States has only one qualified candidate available for every three job openings (Masiowski et al., 2022). Similarly, the lack of semiconductor talent forced TSMC to delay mass manufacturing at its Arizona fab (Ting-Fang & Li, 2024). By expanding joint R&D, work visa programs and academic exchanges with partners, the United States can bridge talent gaps while investing domestically in education and workforce development.

Strengthen export controls

Multilateral export controls minimize the risk of controlled technology proliferation through third-party

countries. If the United States imposes controls on its own without extraterritorial reach, the PRC may be able to acquire the technology from nations that do not enforce the same restrictions, with detrimental effects on U.S. industry. For example, the United States unilaterally imposed strict controls on the export of satellite technology in 1998, even though non-US companies were able to produce cutting-edge satellite technology and export it freely. BIS maintained the controls until 2014, resulting in U.S. satellite companies losing global market share, and lower R&D expenditures (Bureau of Industry and Security, 2014). In the long run, unilateral controls may also incentivize U.S. firms and foreign companies to develop technology outside the United States without U.S. inputs, undermining the United States’ efforts to maintain a technology lead.

Reduce supply chain vulnerabilities

By working together, the United States and its partners can more quickly reduce vulnerabilities to the PRC’s coercion. For example, the United States does not have reserves of some rare earth metals and other critical minerals, like graphite, that are crucial inputs to semiconductors and other critical and emerging technologies. This leaves the United States dependent on the PRC, which is by far the top global producer of such minerals (Coyne & Bassi, 2024). By working with Australia and Canada, which have untapped reserves of these minerals, the United States can reduce its vulnerability to the PRC’s coercion.

This section offers three recommendations for how the United States can establish a plurilateral innovation ecosystem that promotes the development of critical and emerging technologies and prevents adversaries from accessing them.

For each of the recommendations, the United States should prioritize coordination with partners in specialized bilateral and plurilateral venues, rather than general, broader grouping like the T12 (Cohen & Fontaine, 2020). These specialized, smaller-scale arrangements provide several advantages over broader frameworks:

First, bilateral and small plurilateral arrangements are more efficient and adaptable, making it easier to address specific technology-related issues and deepen coordination with the countries most critical to the competitive landscape. Broader groupings, by contrast, are more likely to include countries with varying technical capabilities, funding, and scientific and strategic priorities, which could slow efforts to promote a technology lead. Agility and efficiency is especially important given the rapid pace of innovation and the need to counter adversaries’ attempts to exploit gaps in governance or coordination.

Second, smaller venues afford the United States greater leverage compared to larger venues, where the influence of individual countries is diluted. This dilution allows the United States greater influence over the agenda, priorities, and outcomes, and ensures these groups remain focused on U.S. strategic interests. The chance for successful negotiated outcomes also increases as the number of participants decreases. Smaller venues also ensure that participating countries equally pull their weight, because there is less flexibility to rely on numerous other actors.

Finally, smaller venues allow the United States to act as the central node in a web of distinct partnerships. For example, the United States can deepen cooperation on semiconductor restrictions with Japan and the Netherlands while advancing quantum technology partnerships with Australia and the UK separately.

While recommendations for implementing these smaller-scale arrangements extend beyond the scope of our paper, the United States can leverage multiple channels:

First, it could impose conditionality on trade agreements.

Second, it could license critical technologies that prioritize partners who promote advancement on joint R&D investments and commit to rigorous export control enforcement.

Third, the United States could develop targeted technology funds for priority emerging technologies, which would support workforce development and technology sharing under clear IP frameworks.

Finally, it could embed these initiatives into existing diplomatic forums to ensure these arrangements adapt to evolving competitive dynamics.

The following recommendations can act as “enablers” of a plurilateral innovation ecosystem.

Recommendation 1: Establish Principles to Integrate Market Forces with Strategic Investments

In recent years, the United States and its partners have made significant investments in semiconductors and other emerging technologies through the CHIPS and Science Act and Inflation Reduction Act in the United States, EU CHIPS Act, and similar measures in Japan, South Korea, and other countries. These measures are crucial for reducing supply chain vulnerabilities, promoting technological innovation, and revitalizing our industrial bases. However, these policies may fracture our partnerships and drive up costs if they overly prioritize domestic production over partner alternatives (Kamin & Kysar, 2024). These policies could allow for inefficient or duplicative investments that reduce political will for future investments, undermining our collective position in technology competition with the PRC.

The United States should reduce these risks by working with partners to establish non-binding principles for technology promotion policies to ensure that strategic investments reflect market conditions and respective capabilities. As the incoming Trump administration focuses on government efficiency, these principles would benefit the United States by reducing the risk that partners subsidize wasteful projects that drive down global prices, exacerbate labor shortages, or otherwise lower returns on investment in the United States. These principles could be proliferated through existing cooperative mechanisms, like the G7, Quad, AUKUS, Chip4, and U.S.-EU Trade and Technology Council (TTC), and should reflect the following:

Focus on Strategic Technologies

The United States and its partners should jointly identify strategic technology sectors to support. Industrial policies, like those used in the CHIPS and Science Act and the Inflation Reduction Act, should not be used to prop up non-strategic sectors, as doing so may reduce the momentum behind efforts to maintain a lead and reduce vulnerabilities in strategic technology sectors, provoke trade disputes, increase costs, and distort market forces. While governments will still have incentives to prioritize domestic industry, agreeing on which technologies are strategic could reduce the risk that partners use competition with the PRC to justify subsidies in non-strategic sectors that hurt U.S. industry. Furthermore, better international cooperation on strategic investments will ensure that new R&D funds stay at the cutting edge of emerging technology, like in QIS, where international cooperation is strong but the risk of duplicative efforts is high.

Prioritize Multi-Sector Policies

The United States and its partners should design technology promotion frameworks that address a range of strategic sectors rather than concentrating on single technologies. This approach will reduce the risk of wasteful, duplicative investments because providing support across a range of sectors empowers market forces to steer investments toward the most competitive projects. By increasing the role of the market in industrial policy efforts, the United States and its partners will increase the likelihood that resources are distributed across technologies critical to economic competitiveness, supply chain resilience, and military advantage. It also reflects the complementary nature of many emerging technologies, where advancements in one technology, like semiconductors, accelerate the development of another technology, like AI, and vice versa. To address varying capital intensity across critical and emerging technology sectors, the United States and its partners could offer baseline incentives, such as grants, across sectors and allow firms to apply for additional support if their projects demonstrate higher capital needs. Countries could also consider introducing uncapped tax credits, like the U.S. Electric Vehicle Tax Credit, and other incentives that facilitate scalable support to sectors with high capital intensity, like semiconductors.

Establish High Performance Standards

To reduce the risk that grants, tax credits, and other subsidies prop up inefficient firms, foster wasteful investments, or crowd out private capital, the United States and its partners should also establish shared performance standards that projects must meet before qualifying for subsidies. These performance standards must strike a careful balance between promoting market discipline and the need for efficiency. They could include targets around return on investment, scalability, market viability, innovation, export competitiveness, and supply chain resilience, with some exceptions for projects with high strategic value. Projects should also undergo periodic reviews to assess adherence to performance standards.

Commit to Nondiscrimination Among Partners

The United States and its partners should ensure that industrial policy benefits, such as grants, tax credits, and concessional loans, are accessible to entities from partner nations that adhere to shared principles and standards. This commitment would benefit the United States by encouraging reciprocal investments in technologies in which partner nations hold unique capabilities that the United States lacks. For example, countries like South Korea and Japan lead in battery manufacturing and advanced materials.The United States can attract partner expertise and investment by creating a non-discriminatory environment, bolstering critical supply chains while maintaining a technology lead.

Maintain Transparency

By openly sharing information about planned subsidy programs, funding priorities, and performance outcomes, the United States and its partners can align efforts to address shared strategic goals without undercutting each other. Transparency also allows for more effective oversight, ensuring subsidies are directed toward impactful, high-priority projects rather than inefficient or non-strategic initiatives.

Recommendation 2: Launch a Critical and Emerging Technology Cybersecurity Initiative

While conducting fieldwork in Japan, our policy workshop group heard on several occasions that poor cybersecurity in Japan impedes deeper cooperation on the development of emerging technologies, due to

the risk that PRC hackers could steal jointly developed technologies (see Box A below). This is true outside of Japan as well, with many potential economic partners falling short of U.S. cybersecurity standards. The United States should launch a cooperative cybersecurity initiative to strengthen technology protections. This initiative should focus on strengthening the collective cybersecurity of the United States and its partners to protect the integrity of strategic technology ecosystems. Such an initiative benefits the United States by reducing the risk of technology leakage to adversaries, especially the PRC, through IP theft. It could also accelerate innovation by enabling greater joint R&D in critical and emerging technology sectors.

The initiative should:

Promote Strong Cybersecurity Standards

The United States should encourage partners to promote strong cybersecurity standards for critical and emerging technology industries. This effort could focus on establishing baseline requirements for data protection, encryption, and access controls, and ensuring the integrity of ICT infrastructure and emerging technology hardware and software components.

Provide Technical Assistance and Capacity-Building Support

The United States should deploy cybersecurity experts to provide cybersecurity technical assistance and capacity-building that is specifically geared towards protecting critical and emerging technologies from PRC hackers. These efforts would complement other programs that bolster partners’ cyber defenses.

Establish a Cybersecurity Equivalency Requirement for Some Export Licenses

The United States should consider making exports of certain critical and emerging technologies contingent on the recipient country demonstrating adequate cybersecurity protections to safeguard against theft or espionage.

Cybersecurity Considerations in U.S.-Japan Cooperation

Several people that the group met with on its trip to Japan expressed concerns around Japan’s cybersecurity and acknowledged that Japan is far behind in the field compared to the United States and other major partners. The 2011 hacking of Mitsubishi Heavy Industries, the 2014 hacking of Sony Pictures, and the 2015 hacking of Japan’s pension service alarmed policymakers and the public and highlighted Japan’s cybersecurity vulnerabilities. Although there is an ongoing discussion in Japan on introducing a bill on “active cyberdefense,” which would enable the government to better detect signs of cyberattacks and take preemptive measures, the legislation was not submitted to the Diet (Japan’s parliament) due to its inconsistency with the strict privacy protections under the Japanese Constitution (The Japan Times, 2024). Without proper cybersecurity measures, it would be risky for the United States to share its most advanced and sensitive technologies with Japan, as it increases the risks of Chinese cyber espionage.

Recommendation

3: Optimize Restrictions with Partners to Enable Promote Policies

Export controls, investment screening, and other restrictions are formidable tools for preventing the PRC from legally or illegally acquiring technology, capital, and know-how from the United States and its partners. However, if restrictions are poorly scoped or introduced unilaterally, they may undermine the United States’ efforts to promote technological innovation. The United States should take the following steps to optimize restrictions in conjunction with partners so that it can maintain as large a lead as possible over the PRC:

Consult with Partners on Forthcoming Export Controls

The United States should maintain strong communication with partners as it develops and expands export controls on critical and emerging technologies. Communicating with partners on restrictions enables them to impose similar controls, reducing the risk that U.S. firms are disadvantaged or that the PRC gains access to sensitive technologies. Communicating also does not preclude the United States from imposing unilateral, extraterritorial restrictions, like the Foreign Direct Product Rule, if partners do not align with the United States.

Continue to Narrowly Scope Restrictions

The United States should continue to target export controls and investment screening restrictions on technologies that the United States and its partners have a “choke point” in, and that directly contribute to the PRC’s military modernization and human rights abuses. Narrower controls benefit the United States by limiting negative effects on jobs, investment, and innovation, and making it easier for the U.S. Department of Commerce to enforce controls.

Encourage Partners to Strengthen Investment Screening Regimes

Even if the United States and its partners align on export controls, there is a risk that the PRC gains access to or develops sensitive technologies through inbound investments, like ChemChina’s 2017 acquisition of agribiotech giant Syngenta (Shields, 2017), or outbound investments where the United States and its partners transfer capital and know-how to the PRC. To address these risks, the United States should encourage partners to strengthen their inbound and outbound investment screening regimes.

Incorporate License Exemptions for Partners With Similar Restrictions

The United States should tailor export controls to ensure that restrictions do not undermine efforts to increase joint R&D. Future export controls could be modeled after the exports controls released in September 2024 on quantum computing, semiconductor equipment, and other items, which established license exemptions for countries that implement equivalent national controls (Bureau of Industry and Security, 2024b). Countries that do so will no longer need to submit license applications to export such sensitive items, allowing easier exchange and joint research among partners who have committed not to export those items to the PRC, Russia, and other countries of concern. These controls have been well-received by partners and are likely to ease the regulatory burdens that have often become the chief obstacle preventing partner collaboration on sensitive technologies (Dickson & Harding, 2024). Incorporating license exemptions based on similar protections also incentivizes partners to strengthen their export controls, inbound and outbound investment screening programs, and cybersecurity, making it easier for the United States to win the technology competition with the PRC.

While these recommendations are not comprehensive, they present actionable ways for the United States to begin building a plurilateral innovation ecosystem that better blocks PRC access to critical and emerging technologies, while promoting the development of these technologies at a faster pace among the United States and its partners.

Conclusion

In December 2024, as our report was going to press, Google Quantum AI—a joint research initiative of Google, NASA, and the Universities Space Research Association (USRA)—announced a milestone in quantum computing. Thanks to a new quantum chip known as Willow, Google Quantum AI’s latest computer broke the so-called “error correction threshold” (Metz, 2024). The achievement allowed Google to aggregate an unprecedented number of qubits within a single device that completed in under five minutes a computation for which the world’s most powerful supercomputers would have required longer than the age of the known universe to perform. Quantum computing remains in its infancy. Yet Google’s milestone— arriving sooner than many anticipated—accelerates the timeline for commercially viable applications. No longer a science fiction idea beyond a distant horizon, that future now feels just around the corner.

One might be tempted to conclude from Google’s breakthrough that the American innovation ecosystem can win the technology competition with the PRC alone. Once again, an American company took the lead in a critical technology. Once again, a key innovation emerged from Silicon Valley, a place that has produced so many others. Why invest in a plurilateral innovation ecosystem, one might reasonably ask, when American innovation seems perfectly capable on its own?

To draw this conclusion would be a mistake however. Consider that the founder of Google Quantum AI is from Germany, the chief scientist from Spain, and that USRA, one of the project’s partner institutions, includes universities in Canada, the U.K., Europe, Israel, Australia, New Zealand, and Korea. Google itself has offices around the world, and an estimated 30% of Google’s employees are from India alone. Yes, Google’s quantum breakthrough is an American milestone. But its discovery would not have been possible without a vast network of international partners.

Future breakthroughs in the critical and emerging technologies that will shape the wider U.S.-PRC competition, including semiconductors, AI, QIS, and biotechnology, are also likely to come through international collaboration. Optimizing U.S. cooperation with partners will help accelerate the pace of innovation to enable the United States to better compete with the PRC.

Building a plurilateral innovation ecosystem does not mean backing away from national interest, making concessions to our partners as a polite gesture, or paying homage to an abstract ideal of multilateralism for its own sake. Building a plurilateral innovation ecosystem is about leveraging one of the United States’ key competitive advantages to win the technology race with the PRC.

Appendix: Japan Fieldwork

From October 11th to 20th, the authors traveled to Japan to meet with government officials, academics, and business associations to gain key insights into the U.S.’ cooperation with partners on critical and emerging technologies. The meetings helped the group better understand the opportunities and challenges of U.S.Japan cooperation on different technologies, which in turn helped shape the recommendations in this report.

Japan in recent years has accelerated policy discussions, investments, and international cooperation regarding various economic security issues, as seen in the enactment of the landmark Economic Security Act of 2022. Japan hopes to revitalize its semiconductor industry with huge investments totalling $25.7 billion over three years, which equals 0.71% of GDP (Ogata, 2024). Meanwhile, Japan seems to be less ambitious in seizing a role as a leader in AI, and it is far behind in cybersecurity.

Although the two countries share many interests, Japan takes a threefold approach that slightly differs from the United States, emphasizing promotion, protection, and partnership, rather than promotion, protection, and restriction. The group learned that some U.S. policy tools, such as export controls, risk inadvertently causing friction or conflict with its partners’ nuanced policies which often try to minimize possible PRC retaliation. Drawing from these findings, this report attempts to provide policy recommendations to build an environment conducive to cooperation between the United States and its partners like Japan.

About the Authors

The authors of this report consist of the following Master in Public Affairs (MPA) graduate students from the School of Public and International Affairs (SPIA) at Princeton University:

Michael Chapman is specializing in emerging technology policy, focusing primarily on AI’s intersections with climate resilience and national security. From the island of O’ahu, Michael has advised Hawaii’s state legislature, executive branch, and Honolulu City Council. After graduation, he aims to support international cooperation on emerging technologies, especially in the Indo-Pacific region.

Ji Eun Kim is specializing in international relations at Princeton, focusing primarily on U.S.-China relations and security-related issues. She is a Korean foreign service officer, and prior to Princeton, worked on issues related to ASEAN, Indo-Pacific strategies, and North Korea.

Jeremy McKey is specializing in international development at Princeton, focusing primarily on democracy and technology issues. Before coming to Princeton, he worked in philanthropy at the Rockefeller Brothers Fund (RBF) with thematic focus areas of U.S. democracy policy.

Nathan McQuarrie is specializing in international relations at Princeton, focusing primarily on U.S.-China relations and great power competition. Prior to Princeton, he spent three years as a second-grade teacher through the Teach for America program. After graduation, he plans to work on China policy in the federal government.

Uma Mengale is specializing in international relations at Princeton, focusing primarily on peace and conflict studies. Before Princeton, she worked as a consultant with Accenture Federal Services, where she collaborated with the Department of State on refugee issues, and at Deloitte, where she worked on transforming overseas Department of Defense technical infrastructure. She hopes to pursue a career in diplomacy following Princeton.

Lauren Piper is specializing in international relations at Princeton. Prior to Princeton, she was a Senior Analyst at Rhodium Group, where she focused on U.S. policy towards China and issues in China’s economy, and a Research Associate in China Studies at the Council on Foreign Relations. She received her bachelor’s degree from American University.

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