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Export controls have always been controversial—having run the dual-use export control program in the Clinton administration, I can testify to that. But it seems that lately, thanks largely to Russia’s invasion of Ukraine, they have moved to an even more intense level of public and professional scrutiny.
Rallying our friends and allies around a common approach to sanctions and export controls on Russia has been one of the most significant accomplishments of the Biden administration, but the big unknown is whether this success will turn out to be Russia-specific or whether it indicates a sea change in the way countries use these controls and the way they work together to implement them. In other words, will the same cooperation ultimately extend to China?
China presents a larger and more complex challenge than Russia, both because it hasn’t invaded anybody (yet) and is thus not in the same international pariah category, and because it is more fully integrated into global markets. The economic cost of not selling to China (or buying from it) is much higher than for Russia.
At the same time, nervousness about China’s intentions has been growing in Europe—it is already white hot in the United States—and if China actually did invade Taiwan, allied cooperation would be likely, as it has been with Russia. But is that also true absent that kind of triggering event? We may be about to find out, or at least get a few clues.
Since at least my time in the Clinton administration, our export control policy has been to keep the adversary one or two generations behind us technologically. Holding them back increases the distance between us as we attempt to run faster. That has, over time, become more difficult with China because of its success in obtaining technology, legally or illegally, from the West and because of its substantial government commitment to improve its own capabilities and develop its own technologies. That has led to concerns that our policy may be running out of gas, and it might be time to try something different.
Demands to do that have produced some panic and pushback in the business community, because policy change implies far broader controls and possibly an end to the end-user-based approach of the last 25 years. Companies have pointed out, as I have in past columns, that it is essential to our national security that the government does not impose controls so far-reaching that they deprive U.S. high-tech companies of the revenue they depend on to develop next-generation products. Kneecapping our high-tech sector is not the way to strengthen our national security.
Now we are beginning to see hints of a new policy emerging from the Biden administration based not simply on keeping China behind, but rather on degrading its capabilities. The clearest hint is reports of recent U.S. efforts to persuade ASML, a Dutch company that produces some of the most sophisticated semiconductor manufacturing equipment in the world (i.e., not chips, but the tools needed to make chips), to stop selling some of its older equipment to Chinese chipmakers. (Its topline latest generation equipment is already blocked to China.)
That is significant. By going after older equipment that in the past has been authorized for export, the United States would expand the scope of multilateral controls and make it more difficult for China to produce the less sophisticated chips it has been making. The administration deserves credit for focusing on tools for manufacturing chips rather than the chips themselves and for taking a multilateral approach. In this case, we are not the only producer of advanced semiconductor manufacturing equipment, and we are not the leader. Acting alone would not get us very far. As another former under secretary Eric Hirschhorn has said, unilateral controls are like damming half the river. Whether this effort will bear fruit remains to be seen, and it is not clear, at least to me, that denying China tools it already has is the right policy, particularly when the world is in the midst of a chip shortage. A recent report that China is manufacturing seven-nanometer chips suggests this train may already have left the station anyway.
It also appears the administration is expanding the basis for export controls. While U.S. law has long given the president the authority to control exports for a variety of purposes, historically, most of the emphasis has been on technologies that would facilitate proliferation of nuclear weapons or their means of delivery, chemical weapons, and items that would enhance an adversary’s military capabilities. Now we are also seeing controls imposed for human rights and forced labor reasons. That may not be a bad thing, but it turns export controls into a sanction regime rather than a technology transfer regime and raises questions about commerce’s capabilities and budget for broader-based enforcement and compliance programs.
Next week’s column will continue this topic and discuss Bureau of Industry and Security (BIS) under secretary Alan Estevez’s support for a “fifth regime” to supplement the existing four, along with some related issues that illustrate the complexity of export control policy.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
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