The Department of Commerce ignores Congress

Export controls may be the single most important aspect of American policy toward China. The original Section 301 investigation in 2017 that launched US tariffs was intended to deter China’s predatory behavior in technology. Export controls are vital to that task. The same is true for limiting the capabilities of the People’s Liberation Army. Export controls can reduce the scope and intensity of Xi Jinping’s surveillance state.

For these and other reasons, Congress in summer 2018 voted on an overwhelming, bipartisan basis to tighten export controls. This turns out to have been a waste of time. The Trump administration, in particular the Department of Commerce, has disregarded Congress in favor of implementing its own actions. These actions are narrow and often laughably inadequate.  

The independent Intellectual Property (IP) Commission identified China as by far the biggest perpetrator of IP violations. Even if their estimate of hundreds of billions in annual costs is far too high, costs in the tens of billions are more important than the bilateral trade deficit. With the trade deficit, the US exchanges money for goods. With IP theft, the US only loses.

Chinese Premier Li Keqiang meets with the World Intellectual Property Organization (WIPO) Director General Francis Gurry at the Zhongnanhai leadership compound in Beijing, China, August 28, 2018. Roman Pilipey/Pool via REUTERS

In 2018, lawmakers were not just worried about future problems, they worried about existing technology. Commerce’s inaction has enabled this technology to continue to reach China. COVID-19 is a dishonest excuse for this. It’s been a serious obstacle to crafting regulations only since March 2020. For 18 months before that, the Commerce did almost nothing to implement the new law.

This week, Commerce finally remarked on an important element of export control implementation. There’s no action. It’s a notice for future action and solicitation of public comment in 60 days, when industry has already lobbied Commerce for two years. Then Commerce will take more time to formulate a rule and to implement it, finally reaching its ultimate goal: a new administration and Congress in 2021 and possible export control reset.

When this endless process started, I was a naïve, fresh-faced China analyst expecting actual regulations. The scope of export control coverage would be given, allowing calculation of how much money would be affected (versus industry hysterics). Would there be obvious flaws, as with other Commerce actions? China’s likely response could be evaluated. But Commerce has still published almost nothing to assess, not even definitions of the technology involved.  

Not coincidentally, this makes recommendations difficult. A very mild requirement is a report from Commerce on which American technologies and companies are at most risk from China’s acknowledged, sustained program of civil-military fusion, and how Commerce has responded and intends to respond. This information should already be readily available, as required in Section 1759 of the 2019 National Defense Authorization Act.

Parts of the report may need to be confidential. Transparency can be enhanced through public hearings involving firms cooperating most with China on sensitive technology, such as semiconductors. Firms can explain how China is so important as to be indispensable to sales, yet there is no threat of Beijing coercing them to transfer advanced technology.

Proposals to implement export controls in a business-friendly way should be heard. But if the idea is just to sell freely to China because that’s what’s profitable, then advocates are merely pretending to consider the national interest. Congress correctly tightened export controls. The Department of Commerce has supported exports over national security, undermining the claims of the Trump administration (and campaign) of being tough on China.

The record to date points to a
stronger response than just a report: Congress should take export control
authority away from Commerce. It’s the most logical agency for it, but it’s
been captured. The Department of Defense is a more reliable protector of technology
that could strengthen the Chinese military. For that matter, so is the
Department of State. It would hard for anyone to do worse on respecting congressional
authority than Commerce has.

Finally, it should be emphasized that the ongoing obsession with Huawei is far less important than implementing export controls. Huawei is just one firm, whose assets can be seized and reallocated at will by the Communist Party. Telecom is an important sector but hardly the only one, and broad export controls would in any case include telecom.

Not to mention the executive branch’s flouting of a law passed by a huge margin in the legislature. Was Congress not serious about getting tough on China in 2018? Starting to look like it.

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