This story is published in a content partnership with POLITICO. It was originally reported by Adam Behsudi on politico.com on May 23, 2019.
The Trump administration is taking steps towards issuing even more restrictions on exports of hi-tech goods to China as the US ratchets up its trade war with Beijing, according to two people familiar with the plans.
The Commerce Department will soon recommend rolling back regulations making it easier for US companies to export certain goods that have both civilian and military purposes, the people said.
Commerce will also recommend ending a general policy of approving export licences for that group of goods if they go to civilian use and instead require reviews on a case-by-case basis.
The expected moves would make it harder for China to acquire US technology. They come on top of actions President Donald Trump has taken since US-China trade talks ground to a halt earlier this month, such as raising tariffs on US$200 billion in Chinese goods.
His administration also put Chinese telecommunications giant Huawei on a trade blacklist and is considering similar actions against other Chinese tech companies.
How Trump is willing to use these actions as leverage could become clearer next month when he may meet Chinese President Xi Jinping in late June on the sidelines of the G20 summit in Japan, though no formal plans have been set.
Trump-Xi trade war summit at G20 in Japan still up in the air as ‘conditions not right’, China adviser says
“It seems to me we’re still turning up the pressure to try to get a deal,” said Scott Kennedy, a senior adviser and China expert at the Centre for Strategic and International Studies.
The Commerce Department is drafting the recommendations as part of a review required by an export-control law recently passed by Congress. A Commerce spokesperson said the department is finalising the review, which has a May 10 deadline, but declined to confirm specific actions the administration is weighing.
Commerce is considering at least four regulatory actions targeting China under the Export Control Reform Act, said the two people, who declined to be identified because of the sensitive nature of the deliberations.
Two of those options would involve revoking two licence exceptions that US companies can get for shipping restricted technology to China. US firms can avoid an export licence requirement to China if they can prove the goods are bound for civilian end-use or if a US-origin goods are approved for re-export to China from an allied third country.
Another option would be expanding a prohibition on any US goods bound for military use in China on par with restrictions now applied to Russia and Venezuela.
Finally, Commerce could look at changing its general policy of approving export licences for goods bound for civilian uses.
One of the people close to the deliberations said the actions appear to be “a direct response to the civilian-military fusion that is happening in China”.
The US already maintains relatively tight restrictions on exports to China of technology and goods that have both civilian and military uses. Tough US export controls aimed at China have long riled Beijing, and Chinese officials have raised objection to mounting restrictions with previous administrations.
The additional restrictions would add to the recent Commerce Department decision to blacklist Huawei, forcing most of the company’s US suppliers to obtain a special licence for export transactions. Commerce has a general policy of denying licence applications for blacklisted companies.
There is broad disagreement over both timing and which tools to use here. In any case, this will really piss off Beijing
The Commerce Department is also considering similar action against a number of other Chinese companies, including Hikvision and Dahua Technology, which manufacture sophisticated video surveillance technology, according to the two people familiar with the plans.
Those companies have been implicated in alleged human rights abuses as a result of the monitoring and mass detention of members of the Muslim Uygur group in China’s Xinjiang province.
Any final actions related to the surveillance companies are complicated by the scope of a broader proposed package of sanctions the administration is considering.
Officials are looking at using a law that would allow the US to ban Chinese government and business officials accused of human rights abuses in the region from entering the US or holding assets in America, said a lobbyist familiar with the matter.
“There is broad disagreement over both timing and which tools to use here,” the lobbyist said. “In any case, this will really piss off Beijing.”
The Trump administration had held back on several actions – including punishing China for its activities in Xinjiang as well as Huawei’s blacklisting – in the hopes that a deal could be reached with Xi to draw down trade tension.
But talks fell apart earlier this month amid accusations from US officials that Beijing had backtracked on commitments to codify under domestic law obligations to address intellectual property theft and forced technology transfers.
“China’s backtracking in a massive way at the eleventh hour from four months of shuttle diplomacy has fed a view in the administration that there is no reason to hold back from these types of actions,” said one person close to the internal deliberations.
Eric Geller contributed to this report.