- 25 июня 2018, 04:04
- POLITICO. Top Stories
Round two of President Donald Trump's trade assault on Beijing is expected by the end of this week, when the Treasury Department rolls out new restrictions on Chinese investment in the United States and on the technologies that can be sold to China.
After an internal debate, the administration appears to have settled on more aggressive restrictions favored by U.S. Trade Representative Robert Lighthizer and White House trade adviser Peter Navarro over a more conservative approach favored by Treasury Secretary Steven Mnuchin, two private-sector sources privy to the deliberations said.
Like the tariffs that Trump imposed on $50 billion in Chinese imports — and those he has threatened to impose on $400 billion more if Beijing retaliates — the new investment restrictions and export controls are intended to pressure China to stop unfair trade practices that threaten the United States’ technological leadership. Trump is expected to invoke his emergency powers to protect national and economic security to put the restrictions in place.
But the administration is already getting pushback from bureaucrats who think it would be a misuse of the export control system, and from businesses that fear the approach will further disadvantage U.S. firms trying to enter the Chinese market.
Lighthizer has said both the investment restrictions and the export controls will cover the same high-tech sectors that China hopes to develop under its massive Made in China 2025 subsidy program.
That’s a sweeping list of industries where the United States currently leads, including information technology, robotics, aerospace and aviation equipment, maritime engineering equipment and high-tech vessel manufacturing, advanced rail equipment, energy-saving and new-energy vehicles, electrical equipment, biomedicine and medical devices, agricultural machinery and equipment and "new materials" that create the possibility for many innovative new products.
Lighthizer, in an interview on Fox Business News earlier this month, said the administration would be using “a broader definition of national security” to justify the investment restrictions and the export controls than is currently used under U.S. law.
Many in the business and trade policy community agree that the United States needs to put more pressure on China to stop the theft of U.S. intellectual property and forced technology transfer. But they are frustrated that Trump has decided to act unilaterally and alienated allies such as the European Union, Canada and Japan, instead of seeking their help.
"Our allies would be delighted to work with us in seeking structural change of Chinese trade and investment policies that have an equally adverse effect on their companies. Regrettably that does not seem to be a clear priority of the United States," said Dan Price, a former George W. Bush administration White House official now at Rock Creek Global Advisors.
Currently, the United States has one of the most open investment environments in the world, including for China. However, deals that could potentially pose a threat to U.S. national security are reviewed by an interagency panel lead by the Treasury Department known appropriately as the Committee on Foreign Investment in the United States.
Lighthizer and Navarro essentially want to create two separate U.S. investment regimes — one for China and one for everyone else — to prevent China from taking the technological lead away from the United States, private-sector sources said. But critics worry that will only prod Beijing toward greater reliance on “indigenous innovation” policies that favor technologies developed by domestic champions and put foreign firms at disadvantage in the Chinese market.
“There's going to be a Chinese standard for their 1.4 billion people and there's going to be a U.S. standard for our 300 and whatever million people,” Bruce Andrews, a former deputy secretary of Commerce, said during a panel discussion last week. “Then we're going to compete around the world for the rest of the population to try to get them to buy into one of these two [standards] because Chinese companies and technologies won't be able to enter the U.S. and we won't be able to enter their market. That is not a good recipe … for the best outcomes.”
Meanwhile, the Senate recently passed a bill to give CFIUS more authority to stop inbound investments that could transfer sensitive technology to China or other potentially adversarial nations.
That bill, known as the Foreign Investment Investment Risk Review Modernization Act, S. 2098 (115), also would instruct U.S. export control agencies, such as the Commerce, State and Defense departments, to develop a new list of technologies that should be subject to export controls. Those can range from licensing requirements for certain technologies to an outright ban.
The Treasury Department has argued during the administration debate “that we should just use the Senate text and apply it to China,” said Derek Scissors, a China specialist at the American Enterprise Institute. But the problem with that approach, in Lighthizer and Navarro’s view, “is the Senate bill does not specify how we're going to tighten export controls,” Scissors added.
So Lighthizer and Navarro have pushed for a broader definition of national security that would allow the administration to restrict exports of “breakthrough technologies, emerging technologies, whatever you want to call them” that have not yet proven to be commercially valuable but could still give China a technological edge if it were to acquire them, Scissors said.
The White House National Security Council has been leading the effort to draw up the list of “industrially significant” technologies targeting items in the Made in China 2025 initiative for enhanced export controls, according to three private-sector sources familiar with the plans.
The export control list is expected to be released Friday. It’s unlikely there will be a specific proposal for implementing those restrictions under the current export control system because that might require new regulations to be issued, the sources said.
White House hard-liners like Navarro and national security adviser John Bolton may find it difficult to achieve their goals of punishing China through the export control system, which is geared toward restricting exports that could undermine U.S. national security.
“The Navarros, the Boltons, etc. … don’t understand the export control system, and they’re kind of grasping for things to look like they’re tough,” said one senior export control attorney. “I’m just not sure what they will be able to achieve and how they will achieve it.”
The White House already received pushback last month when it sent a request for the Commerce Department’s Bureau of Industry and Security to help craft a list of technologies on which the U.S. would apply new export restrictions. BIS oversees the export control system for goods that have both civilian and military uses.
Staff at BIS questioned how the export control system, which is in place to protect national security, could be used to justify export restrictions aimed at preventing China from gaining an economic advantage in a specific sector, said one private-sector source familiar with the exchange.
“The standard being articulated was not a national security standard,” the source said. “It was: We want this as leverage as part of our 301 [trade] action to get the Chinese to bow to our demands.”
The export control system operated by Commerce requires U.S. companies to obtain licenses to export certain types of goods to certain foreign countries, including China. The department maintains a list of those items, known as the Commerce Control List, which are subject to export restrictions. There are also rules in place that already single China out, such as denying export licenses for products that could be used to enhance China’s military.
Still, the upcoming export controls could actually be more significant than the investment restrictions. That’s because China — despite all the concern — is a relatively small investor in the United States, and CFIUS already prevents it from being able to invest in the most militarily sensitive areas of the economy, Scissors said.
The Rhodium Group, which specializes in tracking Chinese investment, estimates that Chinese businesses had total investments of about $140 billion in the United States in 2017. Official U.S. government figures are even lower. The Commerce Department put Chinese investment in the United States as of 2016 at $27.5 billion, out of total foreign investment of $3.7 trillion — two-thirds of which came from Europe.
However, some worry that the message sent by the Trump administration by singling out China for new investment restrictions and export controls could make it hard for the two countries to negotiate an end to escalating trade friction.
“If the U.S. government plans to put those in place for the long term, I think we have a very difficult time getting to a deal with the Chinese because I think they will see the need to reciprocate,” Andrews said.