Australia risks getting caught in the middle of a war between the US and China in an area where we depend on them both.

Australia risks becoming collateral damage in a technology war between the US and China according to a new report calling on the Government to intervene.

The report comes from the Foreign Policy and Defence Programme at the University of Sydney's United States Studies Centre, which receives funding from the Department of Defence.

The new report warns last year's war waged by the Trump administration on Chinese technology companies like Huawei and ZTE is only the beginning, and represents a "significant shift" in the nature of the technological relationship between the US and China.

Advertisement

The US is Australia's main scientific partner but China is our biggest economic partner, and closer to us geographically.

But while the US may be further away, the decisions being made there can have a big impact here and around the world.

"Allies will face growing pressure to limit their science and technological interaction with China in critical dual-use fields and may be required to adopt restrictive export control policies in order to continue technological collaboration with the United States in some emerging technologies," report author Brendan Thomas-Noone said.

"Australian research universities — often collaborating with both US and Chinese government agencies, state-owned enterprises and defence companies — could face significant disruption and limitation in who they partner with, how they structure their laboratories and the way they source funding."

Thomas-Noone said "large parts" of Australia's research and development base "may not endure the fragmentation of the world's innovation ecosystem".

He said the at-risk sector was a source of strategic as well as economic strength for our country, warning continued collaboration with America will be predicated on Australia's relationship with China.

Thomas-Noone said President Donald Trump has been "highly inconsistent on technological issues", but Congress and the executive branches of the administration were slowly executing the National Security Strategy Trump introduced in 2017, which protects the "US National Security Innovation Base".

In that time, Congress has expanded what the committee that overlooks foreign investment reviews to include investments in technology companies even when the investor doesn't get a controlling stake of the company.

Advertisement

New export controls have been established lowering the bar for what is classed as "foundational" and "emerging" technologies.

The Department of Justice launched the "China Initiative" in the hopes of prosecuting technology theft and enforcing the existing regulations designed to stop it.

Thomas-Noone said draft bills also indicate the US Government could stop funding overseas partners involved in joint hi-tech research and development with China, which will have an impact in Australia.

The report urges the Government to consider lobbying for an exemption to existing and future legislation, as well as increase investment in local research and development, with a strategy to build a technological "counterweight" to growing nationalisation of global technological ecosystems.

It also warns of pressure being placed on Australia in the future to limit our science and technology interactions with China if we want to keep collaborating with the US.