The U.S. technology industry is asking for more time to review a new export control process before delivering feedback to the Trump administration, which is aiming to expand the ambit of the Committee on Foreign Investment in the United States due to concerns about predatory foreign investments.
U.S. export controls are a bugbear for China, and their relaxation is seen as a likely Chinese demand in trade negotiations with the U.S.
Spurred in part by concerns over Chinese investment, the administration has sought to widen the scope of CFIUS. The Export Control Reform Act and the Foreign Investment Risk Review Modernization Act were included in the National Defense Authorization Act, which President Trump signed into law in August. A pilot program under the new law went into effect on Nov. 10. That program, however, did not expand the list of technologies subject to export controls.
“This doesn’t address any export controls, but once the pilot program is established, if critical technologies are added through the new export controls process, then those critical technologies could trigger jurisdiction under the pilot program,” a senior Treasury official told reporters in October.
But how the administration defines emerging technologies, and later foundational technologies, is key, sources say.
“They’re treating the two separately,” Kevin Wolf, a partner with the law firm Akin Gump, said in an interview. He previously served as the assistant secretary of Commerce for Export Administration.
“Emerging being the non-mature technologies like quantum computing, artificial intelligence and the foundational technologies they will address in a similar process beginning next year, and those are technologies that are mature, that already exist,” he added. “Think of emerging as non-mature, foundational as mature, two separate parallel processes to implement the policy objective.”
The tech industry wants more time to submit comments to the administration to inform the rule-making process as it seeks to add emerging technologies to the export control list.
“Passing the Export Control Reform Act of 2018 was a critical step to protecting our national security. However, it is of utmost importance that we get its implementation right,” Jennifer McCloskey, vice president of global policy, market access at the Information Technology Industry Council, said in a statement to Inside U.S. Trade. “To that end, we want to ensure companies have the appropriate time to respond to the questions set forth. The information requested is critical to the proper evaluation of the future control of certain emerging technologies. We appreciate the administration’s engagement with industry on this issue and urge them to work with us on our request.”
ITI joined several other industry groups in a Wednesday letter to Richard Ashooh, assistant secretary of Commerce for export administration in the Bureau of Industry and Security, urging BIS to extend the notice and comment period.
“As made clear in the notice, ‘updating the export control lists without impairing national security or hampering the ability of the U.S. commercial sector to keep pace with international advances in emerging fields’ is essential and complex,” the groups wrote. “As such, we request that the Bureau of Industry and Security (BIS) extend the notice’s comment period to 90 days to ensure our associations and our members have adequate time to review the notice and provide comprehensive feedback to address the policy concerns and technological complexities at issue.”
Though the administration has avoided mentioning China directly, the export control process is aimed in part at Beijing.
“Although unstated in the notice, as a policy driver, if you trace this back through the history of the legislative debate on FIRRMA, clearly the motive and concern is Chinese efforts to acquire technologies in these areas and use them in ways contrary to our national security interest,” Wolf said.
This has infuriated China. “In practice, the U.S. ‘national security review’ is often based on flimsy evidence and is becoming increasingly stringent,” China’s State Council Information Office said in a September white paper.
A highly anticipated dinner meeting between President Trump and Xi Jinping is slated to take place G20 summit in Buenos Aires on Saturday amid hopes for a “framework” agreement.
“This weekend seems to be a key turning point: Either there will be some kind of deal that settles things down for at least a little while -- and perhaps until 2021 -- or there will be no deal and the chances for one will shrink even further,” Scott Kennedy, a China analyst with the Center for Strategic and International Studies said in an email Thursday.
“I’m hopeful that we’ll see an announcement of some kind of temporary cease-fire on future tariff increases coupled with an agreement to get back to the table with an indication of which issues will be the priority issues,” former acting Deputy U.S. Trade Representative Wendy Cutler added in a recent interview.
Kennedy told Inside U.S. Trade in August that as part of a “big package deal,” China “likely would want substantial concessions, including an ability to purchase more U.S. high-tech items that are currently export-controlled, a genuine commitment to negotiate a bilateral investment treaty, and recognition of China as a market economy.”
China’s ambassador to the U.S., Cui Tiankai, recently told Reuters the “key to have a negotiated solution to the current trade issue is a balanced approach to the concerns of both sides. We can not accept that one side would put forward a number of demands, and the other side just has to satisfy all these things.”
“I am not sure if the Chinese have continued to press for any specific concessions since the summer or if the conversation has only centered around the American demands,” Kennedy added Thursday. “And so Amb. Cui’s comments may be positioning China to blame the US if there is no agreement in Argentina.”
William Zarit, the chairman of the American Chamber of Commerce in China, told Inside U.S. Trade that the resumption of bilateral investment treaty negotiations, which Treasury Secretary Steven Mnuchin has not ruled out, “could certainly be helpful as part of a solution if it came with enforceability.” But he called BIT talks a “can of worms” because many of the barriers U.S. businesses face come in the form of unwritten regulations which would make it difficult for the U.S. to accept Chinese guarantees.
Myron Brilliant, executive vice president and head of international affairs at the U.S. Chamber of Commerce, told Inside U.S. Trade in October that he had seen little movement in the U.S.-China spat over whether China is a market economy.
“I can assure you that ain’t moving anytime soon,” he said, adding, “They’re more likely to get it from the Europeans before they get it from us.” -- Anshu Siripurapu (anshus@iwpnews.com)
