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422. When the State Becomes the Only Buyer: Monopsony in China’s Public Procurement of Medical Technology
- Author:
- Fredrik Erixon, Oscar Guinea, and Anna Guildea
- Publication Date:
- 03-2022
- Content Type:
- Policy Brief
- Institution:
- European Centre for International Political Economy (ECIPE)
- Abstract:
- China’s centralised state procurement policies are moving the Chinese market of medical technologies in a monopsonistic direction. A monopsony means that a single buyer exerts strong power to move the market to its favour by gradually cutting prices and setting terms for producers that are extortionary. It is equivalent to a monopoly – with the only difference being that in a monopsony, it is the single buyer that acts in a market-predatory manner. Ultimately, a monopsonistic market empowers the buyer to capture most of the financial rewards from a contract. Competition gets undermined because a vibrant market also requires competition between buyers and, over time, fewer firms will be able to supply the procured goods at terms that are set by the single buyer. This shift towards monopsony does not happen overnight, it is a process that builds on a number of steps that tilts the balance of power in favour of the buyer. First, there is a concentration of buyers, sometimes down to a single buyer – such as the state. This concentration of buyers acts to extract value from sellers by creating pressure to reduce and converge prices. Buyers in monopsonistic conditions may also add other objectives to their agenda, using their monopsonistic position to abuse the market. For example, political objectives may be in place, which can include discrimination against foreign companies or corruption. Finally, there is a consolidation of the market, with fewer suppliers overall, and a focus on price rather than innovation. Several characteristics of a market could be indicative of a monopsony. One of these indicators is the price. In the case of the Chinese market for medical technology, price reductions have been sustained across medical devices, with price cuts exceeding 90 percent in some medical products. When the buyer’s primary focus is to reduce prices, the risk is that low-quality products will drive out high-quality products. Another indicator is price convergence: the idea that one price should apply to the whole market. Price convergence can be observed as the distance between the average and maximum price reduction offered by companies. The small differences seen in the Chinese procurement of medical technologies for these two indicators indicates that prices are converging downwards. Forcing a convergence of prices breaks with natural market behaviour and overall leads to a market with fewer participants. In a monopsony, the buyer tends to capture the dominant part of the market value of the product, which squeezes the margins of sellers. Over time, this leads to fewer competitors as only a few companies can survive under such conditions. These dynamics have real consequences: the number of winning companies in the procurement of medical technology per one million people in China is substantially lower than in the EU. In addition to a reduced reliance on multiple suppliers, the Chinese centralised state procurement reinforces China’s industrial policy to support Chinese firms growing their domestic market shares to the detriment of non-Chinese companies. These are the consequences of a market that is increasingly taking a monopsonistic form. Public procurement does not have to follow the Chinese recipe of centralised state procurement. There is a substantial body of evidence, research, and studies that recommend specific procurement policies that tackle the monopsonistic tendencies embedded in public procurement markets. These recommendations emphasize the importance of competition without lowering the number of firms in the market, underlining the need for a long-term view on how the market delivers continuous innovation. The danger for China is that monopsony will collapse the future market by making it less attractive for companies to innovate and compete. Chinese centralised state procurement and the move towards monopsony will not go unnoticed. These policies clearly breach basic principles and norms of international exchange, and how governments should behave to avoid a distortion of competition. First, Chinese centralised state procurement favours the Chinese medical technology industry to the detriment of non-Chinese companies. Second, given the low prices achieved in Chinese centralised state procurements, there is a risk that firm’s margins are severely cut, putting a lid on global spending on R&D. The EU and the US should coordinate their policies to counter the monopsonistic tendencies of the Chinese market of medical technologies. Their markets for medical technologies are significantly larger than the Chinese market and Chinese companies rely on the US and the European market to maintain their growth. The EU-US Trade and Technology Council (TTC) offers a setting to take these discussions forward and agree on policies to counter Chinese market distortions.
- Topic:
- Science and Technology, Health Care Policy, Public Procurement, and Monopsony
- Political Geography:
- China and Asia
423. Is Russia a threat in emerging and disruptive technologies?
- Author:
- Katarzyna Zysk
- Publication Date:
- 05-2022
- Content Type:
- Policy Brief
- Institution:
- NATO Defense College
- Abstract:
- jor stakeholders, including the United States, China, and Russia, is of paramount impor- tance to the transatlantic community. The Russian authorities, including Vladimir Putin, perceive gaining or losing ground in this rapidly advancing technolog- ical competition in existential terms: either a nation will successfully ride the wave, or it will be crushed by it. Emerging and disruptive technologies (EDTs), and their mutual convergence, are increasingly regarded as sources of strategic and operational advantages in fu- ture warfare. They create a new set of conditions and potentially consequential defence applications that may increase Russia’s – and other key actors’ – military ad- vantage over competitors. Accordingly, EDTs may al- ter the trajectory and character of future warfare and human involvement in it. Stakes seem high for both national and international security, with a likely impact on deterrence, arms control, and strategic stability, as well as the distribution of power in the international system, along with Russia’s share of it. One of the key objectives during Putin’s presiden- cy has been to rebuild the country’s military capacity. A large-scale modernization programme launched in 2008 has focused on strengthening the nuclear arse- nal and reducing the conventional inferiority that took hold in the military organization during its post-Cold War decay. The Russian authorities have been con- cerned, however, that it would take too long to catch up with the West’s military development. Conversely, EDTs promised a rapid, non-linear way to close the capability gap. As a result, Russia has been systemati- cally expanding its pursuit of cutting-edge military and dual-use technologies. This Policy Brief explores Russia’s technological eco- system with examples of the major programmes and strategies that have been prioritized to pursue excel- lence in EDTs. It examines constraints that affect EDT development, including the impact of the invasion of Ukraine, and considers what possible implications Rus- sian EDT development may entail for NATO.
- Topic:
- Security, Defense Policy, NATO, Science and Technology, Military Strategy, and Alliance
- Political Geography:
- Russia, Europe, and North America
424. Are Gender Inclusive Militaries Better at Integrating Disruptive Technologies?
- Author:
- Shira Eini Pindyck
- Publication Date:
- 05-2022
- Content Type:
- Policy Brief
- Institution:
- University of California Institute on Global Conflict and Cooperation (IGCC)
- Abstract:
- Recent advances in big data and analytics, cyber security, automation, and artificial intelligence can make critical contributions to the demonstration of power on the international stage. New technologies not only offer militaries the ability to conduct operations with greater effectiveness but also reduce the potential human cost of operations. In an increasingly digitized world, organizations that do not adopt and leverage these advances can become inefficient and even fall by the wayside. Yet, despite the immense promise of emerging technologies, many organizations struggle to integrate and utilize them. This is true in both the military and business sectors. For business organizations, a failure to adopt and use novel technologies may threaten profits and even their survival. For militaries, where soldiers’ lives are on the line, the consequences can be even more severe. Why is the integration of new technologies often so difficult? This policy brief highlights an important and overlooked reason, namely how gender policy can affect resistance to organizational change. Gender policy reform requires organizations to invest resources in the recruitment and retainment of an inclusive workforce, and therefore demands that organizations be flexible and resilient. Flexibility and resilience are also required to integrate disruptive innovations. Rather than trying to chain a new technology to old systems of ascension and reward, organizations that want to advance technologically must rethink their incentive systems and work hard to restructure entrenched hierarchies.
- Topic:
- Defense Policy, National Security, Science and Technology, International Security, Military Affairs, Innovation, and Geoeconomics
- Political Geography:
- Global Focus
425. Competition and Content Moderation
- Author:
- Jennifer Huddleston
- Publication Date:
- 01-2022
- Content Type:
- Policy Brief
- Institution:
- The Cato Institute
- Abstract:
- Section 230 of the Communications Decency Act has played a pivotal role in fostering the internet ecosystem we have today. Although the law applies to millions of websites of all sizes, critics often misconstrue it as a special exemption for “big tech” companies, shielding them from legal scrutiny; however, platforms large and small are liable for all content they create or develop, even if only in part. Yet many lawmakers see Section 230 as a stumbling block impeding fairness and accountability online. Their arguments fail to consider the expansive impact that Section 230 has had in fostering and preserving a competitive online marketplace over the past 25 years. Its protections for both platforms and users have proven essential to increasing competition.
- Topic:
- Science and Technology, Social Media, Legislation, Content Moderation, and Competition
- Political Geography:
- North America and United States of America
426. Big data and national security: A guide for Australian policymakers
- Author:
- Miah Hammond-Errey
- Publication Date:
- 02-2022
- Content Type:
- Commentary and Analysis
- Institution:
- Lowy Institute for International Policy
- Abstract:
- Data abundance, digital connectivity, and ubiquitous technology now enable near complete coverage of human lives across the planet, often in real-time. The Covid-19 pandemic, by forcing more interactions online and greater social reliance on technology, has significantly added to the global pool of data. Advances in the scale, application, and commercial uses of data significantly outpace regulation of the big data landscape. Technical and analytical capabilities that are essential for the functioning of societies are increasingly concentrated in the hands of a small number of commercial entities. The implications of big data for surveillance, real or potential interference, and kinetic war are underappreciated in policy and public discussions. Identifying and protecting the uses of critical data should be a national security priority for government on par with safeguarding critical digital infrastructure.
- Topic:
- Government, National Security, Science and Technology, Surveillance, and Data
- Political Geography:
- Global Focus
427. The State of AI Policy: The Democratic Values Perspective
- Author:
- Merve Hickok and Marc Rotenberg
- Publication Date:
- 03-2022
- Content Type:
- Journal Article
- Journal:
- Turkish Policy Quarterly (TPQ)
- Institution:
- Transatlantic Policy Quarterly (TPQ)
- Abstract:
- In a world where data means power, vast amounts of data are collected every day by both private companies and government agencies, which then use this data to fuel complex systems for automated decision-making now broadly described as “Artificial Intelligence.” Activities managed with these AI systems range from policing to military, to access to public services and resources such as benefits, education, and employment. The expected benefits from having national talent, capacity, and capabilities to develop and deploy these systems also drive a lot of national governments to prioritize AI and digital policies. A crucial question for policymakers is how to reap the benefits while reducing the negative impacts of these sociotechnical systems on society.
- Topic:
- Science and Technology, Artificial Intelligence, and Data
- Political Geography:
- Global Focus
428. Ethics of AI and Democracy: UNESCO Recommendation's Insights
- Author:
- Gabriela Ramos
- Publication Date:
- 03-2022
- Content Type:
- Journal Article
- Journal:
- Turkish Policy Quarterly (TPQ)
- Institution:
- Transatlantic Policy Quarterly (TPQ)
- Abstract:
- This article focuses on the impact of Artificial Intelligence (AI) on democracy. It provides an overview of the various ways in which the AI technologies affect the democratic values and processes and the social and political behaviour of citizens. It notes that the use of AI, and its potential for abuse by some governments, as well as by big private corporations, poses a real threat to the institutions, processes, and norms of rights-based democracies. As governments worldwide mull over their AI strategies and policies that would protect citizens against AI-powered dangers, UNESCO announced a remarkable consensus agreement among 193 member states creating the first-ever global standard on the ethics of AI that could serve as a blueprint for national AI legislation and a global AI ethics benchmark.
- Topic:
- Science and Technology, United Nations, Ethics, and Artificial Intelligence
- Political Geography:
- Global Focus
429. People or Technology: What Drives Democracy
- Author:
- Paul Nemitz
- Publication Date:
- 03-2022
- Content Type:
- Journal Article
- Journal:
- Turkish Policy Quarterly (TPQ)
- Institution:
- Transatlantic Policy Quarterly (TPQ)
- Abstract:
- There is no doubt that technology has shaped democracy. However, it is also the legal rules concerning technology which have shaped and have been shaped by democracy. Developing and using technologies according to democratic rules is what we need. There are libertarians today who deliberately design technological systems in a way that makes control by democratic states increasingly difficult. However, there is sufficient counter power and engagement, at least in Europe, to ensure that democracy functions and we work together to produce rules that are sensible for the future of democracy and confirm the supremacy of democracy over technology and business interests.
- Topic:
- Science and Technology, Democracy, Business, and Rule of Law
- Political Geography:
- Global Focus
430. AI Challenging Sovereignty and Democracy
- Author:
- Paul Timmers
- Publication Date:
- 03-2022
- Content Type:
- Journal Article
- Journal:
- Turkish Policy Quarterly (TPQ)
- Institution:
- Transatlantic Policy Quarterly (TPQ)
- Abstract:
- AI is wonderful. AI is scary. AI is the path to paradise. AI is the path to hell. What do we make of these contradictory images when, in a world of AI, we seek to both protect sovereignty and respect democratic values? Neither a techno-utopian nor a dystopian view of AI is helpful. The direction of travel must be global guidance and national or regional AI law that stresses end-to-end accountability and AI transparency, while recognizing practical and fundamental limits. We also need a deeper understanding of tensions between AI and sovereignty and democratic values, in order to address them in the interplay of the social construction of sovereignty and democracy and the technological construction of AI
- Topic:
- Science and Technology, Sovereignty, Democracy, and Artificial Intelligence
- Political Geography:
- Global Focus