Export controls emerge as way to curb China’s rise
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There was a time when export controls were an obscure backwater of Washington’s trade policy, involving licences for the few technologies that could be put to both military and civilian use. But since he came to office, President Donald Trump has seized on them as a way to contain China’s use of innovation to gain an edge in military prowess and intelligence gathering.
“We are alert to China’s civil-military fusion strategy, and understand China’s tenacious pursuit of American technologies it needs to modernise its military,” Wilbur Ross, the US commerce secretary and former distressed-asset investor, said in a speech last July. “This cannot be tolerated, and we are updating our export control policies to account for this very real threat.”
Mr Ross was speaking less than two months after the Trump administration made its most high-profile and controversial move on export controls. Last year, after talks on a comprehensive trade deal with China collapsed in acrimony, the US commerce department placed Huawei, the Chinese telecoms network company, on its “entity list”, preventing American companies from doing business with it in the absence of a government licence.
The move by the Trump administration was met with strong opposition in Beijing and plenty of angst among US companies, from chipmakers to internet platforms, that sell their products to Huawei.
The backlash was so strong that the Trump administration effectively watered down the import ban by ensuring that some American businesses could continue to supply Huawei. But the Chinese group has nonetheless tried to quickly cut its dependence on American components and software.
US officials contend that they have good reason to monitor and block business with Huawei, given allegations of espionage, sanctions violations and links to the Chinese military that have been levelled against the company. And Huawei is not the only target.
As the US administration ratcheted up pressure on China over the past year in the midst of a trade war, which was paused just this month, it also imposed export controls on dealings with other companies including surveillance technology group Hikvision, on the grounds that their products are used by Beijing to perpetrate human rights abuses.
“In recent years, China has taken a sharp U-turn toward control and oppression of its own people,” Mike Pence, US vice-president, said in a speech in October.
“Today, China has built an unparalleled surveillance state, and it’s growing more expansive and intrusive — often with the help of US technology.”
The Huawei and Hikvision designations are only the tip of the iceberg — the US government is subjecting those who do business with Chinese tech companies to much greater scrutiny.
The US Export Controls Act of 2018 paved the way for Washington to widen the scope of the restrictions to include the most cutting edge technologies, from genomics to facial recognition, robotics and artificial intelligence. The commerce department has been busy translating that legislation into specific regulations. Silicon Valley companies are watching very closely, not only for signs that their sales might be jeopardised, but also to ensure that they are not cut off from innovative Chinese research that could help their businesses.
So far, fears that the Trump administration could implement the law with a hatchet have subsided somewhat, since the commerce department has moved slowly and deliberately to put it into practice. But the US tech sector remains anxious about the final regulations. The US said this month that it would apply the new export controls to geospatial imagery technology, in the first specific measure related to the 2018 law.
Samm Sacks, a cyber security policy and China digital economy fellow at the New America Foundation, has argued that the restrictions could backfire dangerously if they are too sweeping. “Unlike the Cold War space race with the Soviet Union, the line between US and Chinese technological development is not as clear as the political border between the two countries,” she told the House foreign affairs committee, just a few days before Huawei was placed on the export blacklist in May. “Efforts to segregate or ‘decouple’ the two systems will come at a steep cost to US innovation and technological leadership.”
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Since the US and China reached their “phase one” trade deal this month, a big debate in Washington trade circles has been whether the detente would also extend to areas like technology competition and export controls. But the prevailing assumption is that the US will continue piling pressure on Beijing through these measures.
“The decoupling of the US and Chinese tech sectors is already disrupting bilateral flows of technology, talent, and investment,” warned the Eurasia Group, a risk consultancy, this month. “In 2020, this decoupling will move beyond strategic tech sectors like semiconductors, cloud computing, and 5G into broader economic activity.”