Pacific Stratagems

Photo by The White House

The flowering of Asia-Pacific’s pivotal April 10th

The Japanese cherry blossoms barely had time to bloom around the tidal basin near the Jefferson Memorial before the newest buds in U.S.-Japan relations flowered this week. President Joe Biden rolled out as extensive a red carpet as the U.S. can possibly offer to a foreign leader to Japanese Prime Minister Fumio Kishida, announcing dozens of new initiatives and spending programs on April 10th followed by a state dinner at the White House replete with Paul Simon of Simon & Garfunkel. Kishida then offered a memorable joint session of Congress on Thursday, belting out Fred Flintstone’s “Yabba Dabba Doo” in a rare moment of comity in the House chamber.

Science and technology was a pervasive theme, with the U.S. and Japan committing to expanding research and collaboration on artificial intelligence, quantum computing, satellite development, hypersonics, biotech, semiconductors, materials science, and space tech. The April 10th state dinner included Jeff Bezos and David Zapolsky of Amazon, Apple’s Tim Cook, IBM’s Arvind Krishna, Sanjay Mehrotra of Micron, Brad Smith of Microsoft, SoftBank’s Masayoshi Son, and Kent Walker of Alphabet. That’s a pretty robust crew of tech royalty, although not entirely on par with Narendra Modi’s state dinner last year (to be fair, it probably helps that two of the top five tech companies are helmed by Indians).

As always with these bilateral summits, the two leaders highlighted economic development projects, but the skew between the two countries was quite uneven. On the Japan ledger, billions of dollars are flowing from American tech giants into Japan’s cloud and AI infrastructure, with Microsoft announcing “it will invest $2.9 billion over the next two years” and Amazon Web Services reiterating its announcement that “it will invest approximately $15 billion in Japan by 2027.” Meanwhile, Google is investing in fiber through “plans to invest $1 billion in digital connectivity for North Pacific Connect, which expands the Pacific Connect Initiative, with NEC.”

The Japanese investments in America paled in comparison, and mostly emphasized mid-level manufacturing jobs in key battleground states (it is an election year, after all). The top highlight by the White House was “Daiichi Sankyo intends to invest $350 million in constructing a new manufacturing building, laboratory and warehouse at its facility in New Albany, Ohio,” while “UBE Corporation has invested $500 million in its Waggaman, Louisiana, a Justice40 community, electrolyte solvent facility project for batteries which it expects to create 60 new jobs.” The largest investment (and strangely not receiving the top billing) came from Toyota, which “announced an additional investment of nearly $8 billion that it expects will add an estimated 3,000 more jobs to increase capacity to support battery electric vehicles and plug-in hybrid vehicles battery production in Greensboro, North Carolina.”

That skew between the two countries isn’t surprising, and even harder to overcome considering the Japanese Yen is at its weakest point since the 1990s. Investment dollars are smarter heading east than west right now (one of many advantages of Lux’s investment in Japanese AI leader Sakana), but still, the lack of more marquee Japanese investments into America was a bit of a surprise.

Technology partnerships bled into defense, which was one of the other pillars of the week’s festivities and announcements on April 10th. This came in two flavors. First, the U.S. and Japan upgraded their joint command and control operations, which will allow the armed forces of the two countries to operate more closely together. Despite America’s mutual-defense alliance with Japan, operationally, the two countries are much less integrated than the U.S. is with Korea, where the militaries share a joint operational command structure with a U.S. general at its head and a Korean general as deputy. There were also talks about embedding Japan in some way in the relatively new AUKUS alliance between the U.S., United Kingdom and Australia, although a specific action wasn’t forthcoming.

The other flavor was one of the more unusual diplomatic moments I have seen, which was the arrival of Philippines president Ferdinand Marcos Jr. in the midst of Kishida’s state visit to turn the bilateral into a trilateral. Biden and his team’s goal was to demonstrate a deep commitment between America’s mutual-defense treaty partners, particularly in the South China Sea and the growing crisis of the Second Thomas Shoal. Marcos got a White House press moment, although little of the pomp offered to Kishida.

For all the amity and Kishida’s Super Mario gifts to Biden, frictions in the U.S.-Japan relationship remained present. The Department of Justice opened up an antitrust investigation into the takeover of U.S. Steel by Japan’s Nippon Steel on — you guessed it — April 10th, an election-year protectionist move designed to shore up support among steelworkers in critical rust-belt states like Pennsylvania. The symbolism was hard to miss, a reminder that while the U.S. promises to be open for business particularly to its allies, it’s really hard given domestic politics to actually follow through on that pledge.

While the Philippines jetted in, the key trilateral missing from much of the conversation pertained to South Korea. There was a small note buried in the lengthy announcements list published by the White House (“The University of Chicago, the University of Tokyo, and Seoul National University established a partnership to train a quantum workforce and strengthen their collective competitiveness in the global economy”), but the only deeper mention of fixing America’s most important Asia-Pacific triangle was a comment that “we welcome progress on establishing an annual multidomain exercise between the United States, Japan, and the Republic of Korea (ROK).” I welcome progress too. I also welcome a billion dollars be sent to me, but that doesn’t mean it happens.

That progress is likely to get much harder, since on the same day as the joint Biden-Kishida summit, South Korean voters went to the polls on April 10th for a general election that will all but neuter Korean president Yoon Suk Yeol’s remaining three years in office. Yoon has prioritized upgrading Japan relations, despite fervent resistance from the Korean public. Such efforts are now trickier without any political mandate and fervent opposition in Korea’s National Assembly. The situation will once again mean that America’s alliance partners in the Asia-Pacific are still not able to fully collaborate in the shadow of China’s rise.

Since China was on the mind of everyone this week in Washington, it’s prudent to highlight the country’s own excellent diplomatic statecraft this week. Chinese president Xi Jinping hosted former Taiwan president Ma Ying-Jeou for a meeting in Beijing also on April 10th, as part of Ma’s 11-day “journey of peace” across China. This sort of bilateral meeting is extraordinarily rare, given that China considers Taiwan to be a breakaway province and doesn’t recognize the island’s political leadership.

The goal of the meeting was to emphasize the peaceful paths to reunification of the two Chinese-speaking polities, an extremely well-choreographed counterpoint to the militaristic urgency emanating from this week’s DC events. Once more coinciding with April 10th, former Trump deputy national security advisor Matt Pottinger and former House CCP Committee Chair Mike Gallagher (who has resigned from Congress and is now at Palantir) published an aggressive piece in Foreign Affairs titled, “No Substitute for Victory” and subtitled, “America’s Competition With China Must Be Won, Not Managed.” For the global south, the belligerence of America’s rhetoric was matched by a rare moment of comity between China’s current and Taiwan’s past president. That’s not the positioning America wants in the global narrative battle between the two superpowers.

April 10th isn’t a turning point, for ultimately nothing changed. But much like the cherry blossoms that flash their beauty for a breathtaking moment before decomposing into the Earth below, this past Wednesday offered a rare moment of diplomatic élan, of a world in which our agency over the future is very much our own.

We need more of that, just as we need more cherry blossom trees. And thankfully, that’s coming too with another agreement that will see Japan improve Washington’s National Mall with 250 more cherry blossom trees. “Let a hundred flowers blossom,” said Mao to open him and China to internal criticism, only to flip the switch and demand his critics be destroyed. Maybe 250 (more) flowers blossoming will instead carry the day for peace.

Congress is still killing startups through Section 174

Photo by traffic_analyzer via iStockPhoto/Getty Images
Photo by traffic_analyzer via iStockPhoto/Getty Images

Back in January, I highlighted in an article in the Manhattan Institute’s City Journal how DC inaction on R&D tax credits suddenly threatened the financial viability of many startups. Well, tax day is coming next week on Monday, the bills are due, and Congress still hasn’t acted on a tax reform proposal that would fix the crisis.

It’s possible that a bill will pass the Senate in the next week or even sometime in the near future. It’s also possible for these R&D tax credits to be offered retroactively, which would mean that startups would pay their higher taxes now but then get their funds back at some indeterminate moment in the future. But for early-stage startups just getting underway, strategizing around tax sheltering and huddling with financial advisors should be much farther down a founder’s priority list than building an excellent product. It’s an incredible self-inflicted wound in America’s innovation economy.

Lux Recommends

  • While speaking of government inaction and incompetence, I enjoyed this New York Times piece by Jay Root on “How Long Does New York Take to Fix a Staircase? 10 Years and Counting.” “‘The continued deterioration will sooner or later turn it into a complete ruin,’ according to the 1924 article, which put the estimated repair cost at $1 million, or about $91 million in today’s dollars. Yet, according to the 2014 report, no appropriation was made until 1951, when the staircase had to be closed to the public for fear of collapse, as it is again today.”
  • Our scientist-in-residence Sam Arbesman loved Stuart Buck’s piece “Hot Dogs, Cancer Cells, Replication, and AI,” a whimsical title for a very serious challenge. “Whether you’re studying breast cancer cells or making hot dogs, the task may be more complicated than you can imagine. You can get wildly different results based on factors that you never even thought of.”
  • A bunch of new orgs are attempting to break down the inhibitions between the tech industry and the hard problems of defense and manufacturing. Archimedes Labs, founded by Mene Mazarakis and Kai Han, is connecting founders and thinkers around America’s national prosperity with a successful debut last week in SF. The Hill and Valley Forum, organized by Jacob Helberg and Varda Space’s Delian Asparouhov, is bringing together a star-studded bipartisan group of political and business leaders on the challenges of defense innovation at the end of the month. And finally (and for much longer), Nick Whitaker and his editorial team have been doing an excellent job with Works in Progress on driving new ideas around improving American and global quality of life through a fusion of policy and technology.
  • Sam loves the history of computing, and Gareth Edwards delivers a great note on the lost history of Lore Harp McGovern in “She Built a Microcomputer Empire From Her Suburban Home.” “The rest of the day would see a steady stream of men in suits visiting the house. A short while later, they would leave. It would stop when Lore left to pick up the children and Bob got home. The men were computer parts dealers, but the neighbors didn’t know that. ‘I think our neighbors thought we had a brothel going,’ Harp said.”
  • Finally, Andy Greenberg has an excellent profile of Alejandro Caceres, who as P4x, hacked his way into disrupting the entirety of North Korea’s internet, making him a marked target of the Hermit Kingdom. “In late January of 2022, he began running custom hacking scripts designed to target a few key North Korean routers responsible for internet traffic into and out of the country, repeatedly checking whether they were online and, if they were, amplifying his waves of malicious data requests to cause them to crash.”

That’s it, folks. Have questions, comments, or ideas? This newsletter is sent from my email, so you can just click reply.