US ‘hemorrhaging sensitive technology’ to China, congressional report finds
Joel Gehrke
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Chinese officials have access to a vast range of sensitive American technology due to lax federal implementation of export restrictions, according to a new congressional review.
“We need to get back into a state of mind where we are actively trying to keep technology from the PRC because we don’t trust where they will put it,” a Republican aide with the House Foreign Affairs Committee told the Washington Examiner.
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The acrimony and anxiety that characterizes China’s relationship with the United States and its allies would seem to imply that such a posture would have been established years ago. And yet, federal officials who oversee commercial exports largely have given Beijing a free hand in acquiring microchips and other high-value technology, according to congressional investigators, with the result that Western allies continue to enable China’s growing military power, long after national security leaders have identified the communist regime as a dangerous threat.
“The bureau needs major reforming to ensure the national security mission is not undermined by countervailing goals — such as export promotion,” House Foreign Affairs Chairman Michael McCaul’s team wrote in a report on the Bureau of Industry and Security’s export policies. “Second, the export control regime needs immediate modernizations to limit, and ideally stop, the hemorrhaging of sensitive U.S. technology to China.”
The necessity for such restrictions represents one of the more significant points of continuity between President Joe Biden’s administration and his predecessor, Donald Trump. White House national security adviser Jake Sullivan’s team has spearheaded a series of measures designed to curtail China’s access to the advanced semiconductor microchips that are essential to the development and manufacturing of cutting-edge technology, including hypersonic missiles and artificial intelligence.
“Our competitors are using increasingly sophisticated means to illicitly acquire sensitive technologies, information, and know-how, and we must adapt accordingly,” Sullivan said last year. “Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”
Those efforts dovetail with Trump-era initiatives to prevent China’s flagship telecommunications company, Huawei, from building next-generation wireless technology infrastructure across NATO and other partner countries. And yet, their posture has not been adopted inside the BIS, according to McCaul’s team. Their report estimates that the “BIS approved $60 billion worth of licenses for Huawei” between November 2020 and April 2021, even though Trump administration officials, convinced that the company is a platform for Chinese spy agencies, placed the company on the Entity List, a move intended to raise barriers for the company’s acquisition of American technology.
“Putting Huawei on the list was also sort of a monumental move,” the GOP aide recalled, surmising that Trump’s team overestimated the effectiveness of that addition. “The Trump administration did it and said, ‘Great, we’ve done it. We can move forward,’ not knowing that there is this discretionary licensing regime built in and that the people that were approving or denying these licenses would overwhelmingly approve them.”
In other words, the key node of the Commerce Department for the regulation of American technology exports and a bureau that has not restored the “very rigid” export control practices that the U.S. government and its allies allowed to soften after the collapse of the Soviet Union.
“Post-Cold War, there was a push for economic liberalism and expanding trade and investment,” the Republican aide said. “The export control regime went from one that was trying to add more technologies [to restricted lists], trying to increase restrictions because it was the cold war … largely an effort to remove controls, to take control off of items to facilitate the export to other countries.”
Even with technology subject to the Commerce Control List, a roster of systems in categories spanning “nuclear materials” to “aerospace and propulsion,” among others, the report suggests that a Chinese purchaser has little difficulty finalizing the transaction with an American supplier.
“All items on the CCL could have a military use, and generally require a BIS license before being exported from the United States,” McCaul’s report states. “Nonetheless, many items on the CCL are exported under a license exception or a ‘No License Required’ designation. In 2020, nearly 98 percent of CCL items exported to China went without a license.”
The recipients of that technology ostensibly do not hail from China’s military sector, but the export licensing bureau “takes a narrow definition of a ‘military end-user,’” one out of step with Western intelligence assessments about how China’s national security agencies make use of the putative civilian companies.
“Here’s a controlled item that could have a national security use in the PRC, but because it’s going to a civilian company, you don’t have to get a license,” the GOP aide said, contrasting the BIS approach with the way national security officials view such transactions. “Our understanding of the Chinese political economy has evolved and is much closer to what it actually is where these distinctions between a private Chinese company and the state or private Chinese company and the PLA are incredibly blurred.”
McCaul will convene the Foreign Affairs Committee next week to discuss the themes of the report. That hearing will allow the lawmakers to air out their policy complaints and solicit explanations and feedback from a pair of senior Commerce Department officials scheduled to testify. The report makes several recommendations to tighten export policies, including “a policy of denial for all exports of national security-controlled items to China” to a curtailing of the BIS’s authority to overrule objections that national security-minded officials in the Defense Department and elsewhere might raise to a given export license application.
“The United States has a narrowing window in which export controls can redirect the development of ecosystems and production of emerging technologies away from China,” the report says. “Export controls must be used more asa preemptive tool to safeguard against technology transfers that may appear benign today, but have the potential to threaten national and economic security in the future.”
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However effective the recommendations might be, those measures can’t change the history of China’s emergence as a military power with the potential to win a war against the United States.
“If we had maintained a very national security-focused position on the PRC after the Cold War, I think we really would have been able to calibrate the development of their military,” the Republican committee aide said. “And, certainly, their surveillance state.”