Trump Administration Should Do More to Restrict Emerging Tech Exports to China, Senators Say

The Trump administration should be doing more to restrict sales of emerging technologies to China, lawmakers said in interviews earlier this month. Senators commended the administration for increasing foreign direct investment restrictions (see 2002260042) and going further than previous administrations in confronting China’s unfair trade practices, but said they will continue pushing for tighter restrictions.

“We think a lot more needs to be done,” Sen. Marco Rubio, R-Fla., said. The U.S. has been “way too sanguine” about allowing China to take over supply chains once controlled by the U.S., said Sen. Josh Hawley, R-Mo. “It’s coming back to bite us,” he said.

The senators’ comments came before senior administration officials reportedly agreed to increase restrictions on foreign exports to Huawei containing a certain percentage of U.S.-origin content (see 2003260036). The move, if approved by Trump, may restrict Huawei’s suppliers but will likely be unrelated to the emerging technology effort under the Export Control Reform Act, which was passed in August 2018 and mandated that the Commerce Department place export controls over certain sensitive technologies. The agency has yet to propose an export control using that authority despite officials predicting they would be released last year (see 2002040057 and 1910290062).

Although the controls are proposed by Commerce, outside factors may be slowing the rollout, Rubio said. “I wouldn't say Commerce has always been the problem,” he said. “I’d say if there's a problem, it usually comes out of Treasury.” The Treasury Department did not comment. Hawley said he has not heard of “deliberate” efforts to delay the controls but urged the administration to speed up. “I would like them to move a little bit more quickly,” he said. “I think the sooner the better on this.”

Sen. Chris Coons, D-Del., said he would like the administration to take more aggressive steps but acknowledged he may not know the full extent of what officials have done. He said the administration has taken “fairly aggressive action” to limit Chinese acquisition of U.S. technology, pointing to the February implementation of the Foreign Investment Risk Review Modernization Act (see 2002110042), which gave the Committee on Foreign Investment in the U.S. the ability to review transactions involving critical technologies. “I think this should be a bipartisan effort,” Coons said. “I don't want to be critical when they may be doing more than I realize.”

But he also said the U.S. needs a more comprehensive approach to restricting technology exports to China. “What I think we need is a broader strategy that is well communicated to and developed with Congress that is sustainable and bipartisan,” Coons said. The strategy should address “how to deal with hitting the midpoint of extremes between decoupling and returning to a sort of tech Cold War -- which I don't think is fully possible -- or continuing with business as usual,” Coons said.

The bipartisan framework may already be in place -- former government officials have called Chinese technology theft the “most bipartisan issue in Congress” (see 2003060023), and lawmakers on both sides of the aisle have asked the administration to more quickly control emerging technologies (see 1911190042). “I think they've done more than any administration up to this point. I think every day you're seeing them do more,” Rubio said. “But obviously we're pushing for more.”

Commerce is working on two export control efforts: controls over emerging technologies -- items that are not yet widely commercially available -- and foundational technologies -- technologies that are already on the market but are not controlled. Although Commerce released an interim final rule in January that controlled exports of certain artificial intelligence software (see 2001100027), that rule was issued under a process in place before ECRA was passed. Despite Commerce officials telling industry it would release an advance notice of proposed rulemaking for foundational technologies last year, that notice is not expected soon (see 2002210026)

The Commerce Department “continues to identify emerging technologies that warrant control,” a Bureau of Industry and Security spokesperson said in a statement. “To date, the Department has imposed controls on six emerging technologies,” the spokesperson said, referencing controls that were issued under pre-ECRA authority (see 1905220051 and 2001030024). Commerce will continue to “evaluate additional technologies for unilateral and multilateral control,” the spokesperson said.

Companies have cited fears of overbroad controls, which could harm U.S. technology competitiveness, despite current and former Commerce officials stressing that the controls will be narrow (see 1912100019). Some in industry have grown impatient waiting for the controls on emerging technologies, which has impacted business planning (see 1911070014).

Some companies, however, are relieved Commerce’s foundational technology effort has taken so long, and hope the rules are postponed for as long as possible, trade lawyer Doug Jacobson said. Others say that is false hope. “I think what they’re saying is, the longer we wait, the longer we can maybe push it off, and hopefully there's a new administration, and we don’t have to deal with this anymore,” said a trade policy director for a large car manufacturer. “If that happens, that’s great. But what you don’t want is uncertainty. And right now all we have is uncertainty.”

The senators said they recognize the impact increased export controls may have on industry. Rubio suggested the administration and Congress are sometimes forced to choose from two bad options: Increased export controls will hurt industry, but fewer export controls will encourage Chinese technology theft. “It's a Catch-22,” Rubio said. “We have industries that depend on China as a major market, and it would be damaging to them.”

While the controls might hurt some companies, Hawley said, industry should take the opportunity to begin rebuilding a manufacturing hub in the U.S. “There's no doubt that we need to do some decoupling [from China],” he said. “We have a major high-tech manufacturing problem where, over a series of decades, we have watched high-tech manufacturing, and really almost all manufacturing, leave this country. That's a huge problem.” Hawley said “all sensitive technologies” and “pretty much anything” on the Made in China 2025 list (see 1912120025) should be subject to U.S. export controls. “It doesn't mean they can’t be exported,” he said, “but it does mean there needs to be a hard look.”