Agency at the center of U.S.-China tech fight
Bureau has the power to stop exporting products to countries
WASIINHTON >> As tensions between the United States and China escalate, a little-known federal agency is at the center of a debate in the Biden administration about how tough an approach to take when it comes to protecting U.S. technology.
The Bureau of Industry and Security, a division of the U.S. Commerce Department, wields significant power given its role in determining the types of technology that companies can export and that foreign businesses can have access to.
In recent months, Washington lawmakers, lobbyists and other interested parties have been vying to influence how the agency, under the Biden administration, will approach a technology relationship with China that is both crucial for U.S. industry and national security.
China hawks, including a collection of national security experts, congressional Republicans and progressive Democrats, say that in the past, U.S. industry has held too much sway over the bureau. They have been pressing the administration to select a leader for the agency who will take a more aggressive approach to regulating the technology that the United States exports, according to people familiar with the discussions.
Their opponents, including some current and former Commerce Department employees, and many in industry and Washington think tanks, caution that putting a hard-liner at the helm could backfire and harm U.S. national security by starving U.S. industry of revenue it needs to stay on the cutting edge of research and encouraging it to relocate offshore.
“It’s a very complicated relationship between the economic and national security interest,” said Lindsay Gorman, a fellow for emerging technologies at the German Marshall Fund. “The fine line the Commerce Department has to walk is protecting against national security risks that may not be top of mind for the industry in the short run, without killing the golden goose.”
The bureau’s powers became clear during the Trump administration, which wielded its authority aggressively, though somewhat erratically, using the agency to curb exports of advanced technology goods such as semiconductors to telecommunications company Huawei and other Chinese businesses. It weaponized the bureau’s so-called entity list, adding hundreds of Chinese companies to a list that blocks exports of U.S. products to companies or organizations that pose a national security threat.
But many of these regulations were enacted haphazardly and often did less to restrict Chinese access to U.S. technology than the Trump administration intended. And at times, former President Donald Trump offered Chinese companies concessions from these punishments to try to advance a trade deal with China, including offering a reprieve for Chinese telecom company ZTE and licenses so companies could continue supplying goods to Huawei and Semiconductor Manufacturing Interna
tional Corp., or SMIC.
The Biden administration is still carrying out a review of its China policies and has not indicated how it plans to use the bureau’s powers. Its initial engagement with China got off to an acrimonious start last week at a meeting in Anchorage, Alaska, and President Joe Biden, in his first news conference, held Thursday, emphasized investing heavily in new technologies to compete with Beijing.
“The future lies in who can, in fact, own the future as it relates to technology, quantum computing, a whole range of things, including
in medical fields,” Biden said.
“I see stiff competition with China,” he added. “They have an overall goal to become the leading country in the world, the wealthiest country in the world and the most powerful country in the world. That’s not going to happen on my watch because the United States are going to continue to grow and expand.”
The Commerce Department is responsible for promoting the interests of U.S. business and has always had a close relationship with industry. But as the China tech competition has intensified, the department has taken on a larger role in regulating company activity as well. In 2018, Congress updated its laws governing
export controls, giving the Bureau of Industry and Security more power to determine what kind of emerging technologies cannot be shared with China and other geopolitical rivals.
But critics say the bureau has given companies and industry groups too much influence over its regulatory process and failed to adapt to the new realities of global competition.
“The industry viewpoint has been the commerce viewpoint since the fall of the Soviet Union, and they’re not able to make the adjustment that the world has changed,” said Derek Scissors, a resident scholar at the American Enterprise Institute who advocates stronger export restrictions.
The Biden administration
has already run into the political minefield surrounding the bureau. In her confirmation hearing in January, Gina Raimondo, the new secretary of commerce, drew criticism from Republicans when she declined to commit to keeping Huawei on the bureau’s entity list. Raimondo later said that she would use the entity list “to its full effect” and that Huawei and ZTE should be on the list.
With Raimondo sworn in to her post this month, the Biden administration is considering candidates to lead the Bureau of Industry and Security. It has become a contentious process, a kind of proxy battle among trade advisers, industry groups and lawmakers of both parties for the future of the U.S.’
tech strategy.
An early contender, Kevin Wolf, a partner in the international trade group at the law firm Akin Gump, has run into resistance from some China hawks in Washington over his industry ties. Wolf, who was previously assistant secretary at the bureau, issued the sanctions against ZTE. He has consistently argued that restrictions that are unclear and unpredictable can backfire, “harming the very interests they were designed to protect.”
But critics have found fault with his work on behalf of industry since leaving the government, including counseling clients on what is permitted under Trump’s regulations and trying to obtain licenses for his clients to supply products
to Huawei and SMIC.
Wolf said that he had merely helped companies understand the new rules, as other export control lawyers do, and that it was the Trump administration that was responsible for creating a new process to grant companies licenses to supply products to listed entities.
Some who believe the Bureau of Industry and Security requires a more fundamental transformation have instead pushed for James Mulvenon, an expert on the Chinese military at research firm Defense Group who has publicly called for refocusing the bureau’s mandate to place national security interests before those “of Silicon Valley, Wall Street and other multinationals.”