US Needs to 'Break Down' More Tech Trade Barriers With Allies, Former Lawmaker Says

The U.S. will struggle to compete technologically with China unless it continues to loosen trade barriers around sensitive technologies for a broader range of allies outside just the U.K. and Australia, Mike Gallagher, a former member of Congress, said this week.

Gallagher, speaking May 6 during a conference hosted by the Milken Institute, said the U.S. needs to continue reducing technology trade restrictions for both its traditional and nontraditional allies. The Biden administration is removing export license requirements in both the International Traffic in Arms Regulations (see 2404300050) and the Export Administration Regulations (see 2404180035) for certain trade with the U.K. and Australia as part of the AUKUS partnership, and Gallagher suggested the U.S. should take a similar approach with other countries.

“There is no way to successfully compete against China, certainly economically or technologically,” unless the U.S. is “willing to assume risk and break down all the barriers to collaboration both within the free world, and then constantly trying to expand the bounds of the free world,” said Gallagher, a Republican from Wisconsin who most recently served as chairman of the House Select Committee on China (see 2402120054).

He said the U.K. and Australia are the two countries “with whom we share [the most] sensitive intelligence and sensitive technology,” but even with them, “there are significant barriers to technological collaboration that stem mostly from outdated ITAR regulations.” Gallagher said the U.S. is “struggling to realize the promise” of AUKUS “because our regulatory system is still so outdated,” and “it gets even harder as you expand out to the other concentric circles.”

The U.S. should consider reducing tech restrictions for NATO allies and other “technological superpowers” in Asia, such as Japan, he said, which the Biden administration is considering (see 2404090011).

“But then when you start getting into” other countries that “don't have the same standards of governance, like Ukraine, important though they are,” Gallagher said. “You run into all sorts of little difficulties.”

Others on the panel, which included senior officials at U.S. national security agencies, were asked about the issues that keep them up at night. Matt Axelrod, the BIS assistant secretary for export enforcement, said he’s most worried about Russia and others trying to evade export controls to buy sensitive U.S. technologies and the “finite resources I have to attack” that.

He said BIS has had to “do a bunch of things to compensate” for its lack of resources (see 2312070074 and 2312040041), including by forming its Disruptive Technology Strike Force with DOJ (see 2302160019) and by working more closely with companies and exporters. He mentioned the red flag letters BIS has recently been sending to chip firms and other American companies, which ask those businesses to stop selling goods to certain foreign customers that have been shown to resell those products to Russia (see 2403280058).

“We've been talking at very high levels to the C-suite of semiconductor manufacturers and distributors,” Axelrod said. “We understand that unless we get industry on board and educate industry to the risk and what they can do to help mitigate that risk internally, we're never going to be able to investigate and prosecute our way out of it.”

Paul Rosen, head of the Committee of Foreign Investment in the U.S., said what concerns him most is the “imperfect information” CFIUS must sometimes rely on to make decisions about whether to block a deal with national security implications.

“What keeps me up at night is: I don't know what I don't know, and I’ve still got to make those decisions and we’ve still got to march forward,” Rosen said. “And so making decisions on imperfect information has to happen.”

Rosen, asked specifically about how CFIUS approaches reviews of transactions that involve sensitive artificial intelligence technology, said those reviews can be challenging because AI is still a nascent technology.

“We've got to make decisions today about what this technology may be tomorrow, and so that, I think, presents really an acute challenge,” he said. “We want investment to happen, we want deals to happen. But when it comes to AI or these other technologies, we really have to dig in and do our best to understand what are the capabilities of that, really using our imagination.”