US approves almost all technology exports to China, data shows

For 2021, that approval rate drops to 88%, the analysis shows, but changes in data collection methods between the two years make comparisons difficult. The figures show applications were “returned with no action”, meaning their results were uncertain.

The result: The US continues to export large quantities of semiconductors, aerospace components, artificial intelligence technology and other goods to China. Critics say such sales have been carried out by successive US administrations to protect Beijing’s military interests.

He said the Commerce Department is focused on long-term strategic competition with China and will make export control decisions with its partners at the Defense, State and Energy departments.

Already a technological powerhouse, China is developing increasingly sophisticated chips and other advanced technologies. Washington has responded with export controls and bans, and the Biden administration signed bipartisan legislation earlier this month to spend more than $50 billion to expand American semiconductor manufacturing facilities in the US.

Critics say trade officials are improperly prioritizing U.S. business interests over national security by allowing exports of sensitive technology and that urgent regulatory reform is necessary to respond to threats from Beijing.

For Steve Kuhn, the Pentagon’s former top China export control analyst, the high rate of approval to sell technology for military use is a sign of a major policy failure.

“I have no problem trading or eating with China,” Mr Koon told colleagues after resigning in September 2021 in frustration over the policy. I have a big problem arming China. A Pentagon spokesman declined to comment on Mr. Cohen’s resignation.

The U.S. export control process, a long topic, is now at the center of a debate over how much the U.S. should continue to trade with its arch-rival, dozens of current and former U.S. officials said in interviews with The Wall Street Journal. .

“I believe China is the biggest threat we face,” said Mira Ricardo, a former Trump administration trade official who served as head of export controls.

“What we don’t have is a consensus in the US government about what the relationship should be economically,” she said. “There are people who say, ‘No, no, no, we can’t export anything to China,’ but that’s not the policy,” she said, referring to technology exports.

Some warn that tighter restrictions on US technology sales will backfire as allies such as Germany, Japan and South Korea step in to fill the gap. To make export bans effective, we want our partners to have the same controls, said Kevin Wolff, a top trade official during the Obama administration who now advises companies on export regulations at the law firm Ekin Gump Strauss Hauer & Feld LLP. Testifying on Capitol Hill last year. “This is simple and logical.”

However, such coordination may take years, and others require an immediate response to China’s official military-civilian integration policy, which seeks to eliminate the gap between the military and the private sector, as it has made it impossible for the United States. Security technology transferred to China will not be in military hands.

Some question the role of the Commerce Department, America’s lead agency, in the matter. Matt Pottinger, a former national security adviser to President Donald Trump, said the agency’s export control division, known as the Bureau of Industry and Security, “struggled to reconcile its mission of protecting America’s national security with the Commerce Department’s goal of promoting American exports.” . “The problem with China is very serious.”

In the year In late 2019, Mr. Pottinger called BIS officials together for a special meeting in the White House’s status room and accused them of helping American businesses oppose the administration’s policy on China, people familiar with the matter said. Mr. Pottinger acknowledged this incident, which ultimately failed to change attitudes in the room, the people said.

Export Administration Commerce Assistant Secretary Tia D. Roseman Kendler declined to comment. “We’re promoting America’s technological leadership. And to do this, we need to understand America’s technological leadership,” she said. “The best place to get this information is from industry.”

Advocates of stronger US export controls have consistently criticized White House administrations and other members of the interagency process, saying they often provide ineffective input.

Ms. Kendler said her Internet counterparts at the Defense, State and Energy departments are welcome to appeal cases to higher officials if they are unhappy. She said that out of more than 41,000 license applications registered with BIS in the 2021 fiscal year, only 57 have been repeatedly escalated.

A spokesman for the National Security Council said the Pentagon and the Department of Energy support the export control process, saying it is critical to protecting national security. The State Department did not respond to requests for comment.

In the year In 2018, Congress passed an export control reform bill that would require the Commerce Department to strengthen controls on new and fundamental technologies such as artificial intelligence and quantum computing, but critics say progress has been slow.

Trade also does not control more established technologies, such as some semiconductor-device manufacturing equipment, which are critical to making chips for military and civilian use. According to Chinese trade data compiled by the United Nations, imports of this type of equipment from the United States will reach $6.9 billion in 2021, up from $2.6 billion in 2017.

Following an industry lobbying campaign, “we sit here today and we don’t need any license to sell anything in China,” the chief financial officer of US chip maker Lam Research told an investor conference in September 2020.

Ms. Kendler, the trade official, declined to discuss criticism of the way it handles certain companies, but said the agency is “very focused on changing” its policies on China and Russia.

Some worry about what they describe as the porous nature of the Commerce Department’s ability to restrict Chinese companies. Caron, a Washington, D.C.-based research and data analysis firm, says it has identified tens of thousands of Chinese components that could potentially meet U.S. military end-user export restrictions, although only about 70 are in the Commerce Department. Current list.

And the agency’s restricted list — often called the export blacklist — doesn’t prevent U.S. companies from selling to its members. It only asks them to apply for permits, which they usually give.

Rep. Michael McCaul (R., Texas), Republican of the House Foreign Affairs Committee, which is pushing for tighter controls, said the Commerce Department spent more than $100,000 between Nov. 9, 2020, and April 20, 2021. Billions worth of export licenses to blacklisted Chinese companies Huawei Technologies Co and Semiconductor Manufacturing International Corp. The Commerce Department added SMIC to its list after defense contractor James Mulvaney listed the chipmaker’s military customers.

How much each company should limit exports has been hotly debated within the administration, with some arguing that selling less sophisticated technology to China’s tech giants makes economic sense and poses less of a threat to national security.

SMIC recently acquired the capacity to make 7-nanometer chips, according to researchers at Canadian firm Tech Insights Inc. “This is a major breakthrough because the US Commerce Department has had to restrict export licenses,” a semiconductor analyst wrote. Dylan Patel.

SMIC did not return requests for comment. Huawei declined to comment.

Another problem, former senior trade official Nazak Nikaktar said, is that once a license is granted, the Chinese government won’t allow proper inspections, so the U.S. has little ability to prevent the technology from being diverted.

In some cases, US companies can sell technology to Chinese customers without even asking for a license under the rules.

Chinese artificial intelligence giant SenseTime told Hong Kong regulators last year that the scale would not have any negative impact as the US body’s listing identified only one of its components. Intelligence research firm IPVM highlighted the issue in a September 2021 post, but the BIS did not narrow the limit. SenseTime did not respond to requests for comment.

The law also says that US companies can freely sell technology to companies in China that manufacture the goods in foreign factories.

Anthony DeBarros and Gordon Lubold contributed to this article.

Write to Kate O’Keeffe at kathryn.okeeffe@wsj.com