Export Controls Likely to Become Higher Profile, Scholars Say

A panel of scholars and a former general consul in Hong Kong agreed that the Biden administration is likely to place more emphasis on export controls and industrial policy to support domestic semiconductor production, and less on the trade deficit and tariffs, even as the new president has to decide what to do about Section 301 tariffs at some point. They were speaking on a virtual panel about U.S.-China relations hosted by the Washington International Trade Association on Feb. 8.

Princeton University professor Aaron Friedberg said the results of the tariffs “would suggest we don’t have as much leverage as we thought we did when we imposed those. It doesn’t seem to have really budged the Chinese position, not very much.”

Kurt Tong, the former consul general for Hong Kong, said Joe Biden's promise to review Trump's trade policies is going to take a long time. But he predicted actions on export controls are likely to come before moves on tariffs on Chinese goods because export controls are where the national security and trade interests intersect.

Susan Shirk, a former deputy assistant secretary of state and chair of the 21st Century China Center at the University of California-San Diego, said technology is central to the strategic competition between the U.S. and China, and China is fearful of the U.S. coordinating with other advanced technology powers to curtail exports to Chinese manufacturers. Chinese government officials want to reduce the country's dependence on semiconductor imports while “they would like the world to be very dependent on them,” she said.

Friedberg agreed, and said that China has responded more strongly to export controls than it has to tariffs, as the restrictions on semiconductors “turned out to hit them very hard.” He said they are both “pushing even harder for so-called technological self-reliance” while also lobbying to remove restrictions.

He said there's already pressure on the new administration not to be too restrictive on technology exports, as companies complain about the costs it will impose on them. The new administration will have to decide how to steer between these competing interests, and decide how much they want to engage in industrial policy to compensate companies for lost exports.

“Trade is going to be important, even if it’s not as central as it was to the previous administration,” he said.

Tong said he hopes that as part of the policy review, the administration will think clearly about what its asks will be to allies, and will not ask for too much. He said the rumors that the U.S. may try to organize a boycott of the 2022 Winter Olympics, scheduled to be held in China, trouble him, as he thinks such a boycott would achieve nothing and distract from the need to maintain U.S. advantage in technology over China. To not hurt U.S. companies with export controls, the U.S. has to get other chipmakers to agree, he believes.

Friedberg said the philosophy behind trade has changed for politicians, and said they no longer assume “what was good for GM was good for the United States of America or what was good for Apple was good for the United States of America.”

“The administration has to have some conception of what is in the nation’s interest and take steps that [are] going to impose costs on particular groups,” he said. “Some of this is going to be painful. We’re not going to be able to have an effective policy in this domain and make everybody happy.”