US-China: Huawei shows money trumps law

By: David Scissors, American Enterprise institute

Friday was fun. Taiwan Semiconductor Manufacturing Corp. (TSMC) said it will build a large plant in the US starting in 2021. Yet another extension allowed American firms to sell more to Chinese telecom Huawei. They’re linked by April rules mandating licenses for exports that may benefit certain foreign militaries. Behind it all is the US still putting money ahead of our laws.

There was breathless reporting of new license requirements for supplying Huawei, specifically. No restrictions have actually been applied. Eventually there will be reviews for some products using already “controlled” American technology and materials. But it will turn out to be a trivial step:

1) The Department of Commerce described its action as cutting “off Huawei’s efforts to undermine US export controls.” Did those efforts just start a month ago? (Hint: no) It’s hard to take seriously closing a loophole that should have been recognized immediately.

2)  Full enforcement will not occur until 120 days from the finalized rule, which we don’t yet have. Unless there’s a completely unsurprising modification of what’s being advertised.

3) To illustrate, Huawei has been on the Entity List of bad foreign actors for a year. Inclusion on the Entity List was supposed to limit business with Huawei in May 2019, similar to how the new rule is supposed to 120 days from now.

The Entity List hasn’t mattered because Huawei has received five consecutive exemptions from its restrictions. Five. Either Commerce didn’t at all understand what their original order entailed or they’re stalling (see below).

4) Reviews will not result in license rejections. It’s no accident TSMC opted for a multi-billion dollar announcement just as licensing became an issue. The company thinks investing in the US can make its relationship with Huawei magically less harmful. 

TSMC is right — the Trump administration has consistently put gains from various kinds of China business ahead of rule of law and national security. In 2019, the Department of Justice indicted Huawei, subsidiaries, and one of its officers on 23 counts involving breaking Iran sanctions and intellectual property theft. All five postponements of action against Huawei have occurred since those charges were filed.

In February of this year, Justice added racketeering. Two of the delays have been granted since. This isn’t broad asset seizure and global sanctions. Who does Huawei have to kill for the US to merely stop supplying them with new products?

The primacy of profit was also on display last week in an entirely different way. President Trump mentioned the long-standing problem of Chinese firms selling stock in the US without meeting disclosure standards. Like President Obama, President Trump sees the (small) amount of money made from firms listing here as overriding balanced treatment and transparency.

The most important example is from 2018. That year, Congress overwhelmingly passed changes to investment review and export controls. In September 2019, the Department of the Treasury issued draft investment rules, now finalized. The Department of Commerce isn’t anywhere close to draft export rules. They’re stalling.

How can Commerce ignore Congress? Ultimately, it’s not companies influencing bureaucrats, though that certainly happens. It’s President Trump. In mid-2018, he reduced legal action against Huawei peer ZTE for breaking American law because “too many jobs in China lost.” In early 2020, he dismissed national security and declared the US open for business with China.

The Trump administration is hardly the first to sacrifice security and law in relations with China. The Obama administration focused on climate change — the carbon emissions gap between the PRC and US expanded 90 percent during Obama’s terms — and barely pretended to take disclosure and export controls seriously.

Prior to COVID, prominent Senate Republicans introduced bill after bill after bill to enforce laws and protect security. All blocked by Senate Republican leadership. The reason is the same as with previous presidents. Talk as much as you want about COVID, human rights, national security, economic theft, and rule of law — the money from business with China talks louder than all of them.

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