Semiconductor export curbs hitting China to be followed by biotech and AI restrictions: US official
- American national security, rather than ‘economic destruction of China’, drives ‘targeted shutdown’ of industry, senior official contends
- Effectiveness of unilateral controls said to depend on unified stance from key allies, including advanced chip tool maker Japan
“Will we end up doing something in those areas? If I was a betting person, I would put money on that,” said Estevez, who oversees the Bureau of Industry and Security charged with crafting and enforcing the new rules.
“That is not, despite some of the views out there, about the economic destruction of China,” he added. “This is about national security.”
Estevez, who joined the Commerce Department after a 36-year career with the Defence Department, said the fact that US National Security Adviser Jake Sullivan cited export restrictions weeks before the Commerce Department announcement underscored the priority given across various US agencies.
“When I see an action that needs to be taken for national security, I have top-down coverage to take care of that regardless of the impact,” he said, adding that Washington would be realistic about what it limits.
“We do look to see what’s available in the world and whether it makes sense.”
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It also extended its reach well beyond US shores, limiting to China foreign countries’ exports that rely on these US technology or software. And it prevented US citizens from consulting or otherwise assisting China in sensitive areas even as it tightened oversight of Chinese companies seen as potential or actual violators.
Beijing has slammed the hugely consequential new rules as a malicious attempt to block Chinese companies in violation of global trade rules. But it has yet to roll out expected countermeasures.
The US official said he hoped China would recognise that the measures were targeted and carefully designed.
“I don’t want to conjecture what they’re going to do,” said Estevez. “It’s not a massive shutdown of Chinese industry. It’s a targeted shutdown of using our capability against us, and we hope that they’re going to respond, take that into account.”
The Chinese embassy in Washington did not immediately respond to a request for comment.
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Estevez, speaking at the Centre for a New American Security, likened Washington’s expanded use of hi-tech export restrictions to “an anaconda slowly squeezing and squeezing and squeezing”.
Estevez said the Commerce Department’s so-called unverified list of Chinese companies was not a blacklist per se. However, companies that fail to explain how they use high-end chips and equipment could find themselves on what amounts to a blacklist.
Chinese companies on the unverified list are given 60 days to show they are not misusing or diverting technologies. Those that do not comply are transferred to a so-called entity list, leading to an outright ban.
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Working their way off the entity list involves a careful review by the US Defence, State, Commerce and related agencies.
“For Western firms, it’s case by case. For Chinese firms, it’s a presumption of denial,” Estevez said. “My job is not to change their behaviour. I’m not here as a diplomat … My job is to protect national security.”
As the US relies more on trade and financial sanctions – potentially spreading itself thin – it remains unclear how effective these will be as a geopolitical tool.
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“Should something start taking place in the [Taiwan] Strait, I would expect … to see us start taking additional action,” said Estevez. “So I would look at export controls as part of the integrated deterrents.”
While the new chip rules are far-reaching, analysts say much will depend on implementation and enforcement.
“This is going to hit US industry pretty hard, and many elements of the Chinese [semiconductor] sector, cloud services,” said Paul Triolo, senior vice-president of the Albright Stonebridge Group consultancy.
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The Commerce Department has an officer at the US embassy in Beijing responsible for this effort. The agency has also been criticised by Washington hawks for clearing some 95 per cent of the applications for export licences.
But this is somewhat deceptive, the US National Defence University graduate said. Scores of intelligence experts from Washington and allied nations feed information to that US embassy official. While the Commerce bureau would welcome more manpower and resources, Estevez said, its tools were effective.
Furthermore, the 95 per cent US license-approval figure was misleading, he added, since a number of US and Chinese-affiliated companies did not bother to apply for licences, knowing they would be turned down.
China, in criticising stiffer US export restrictions, has pointed out the potential damage to US companies.
But Chinese firms are also feeling the crunch. Tech shares fell sharply after the US export curbs were announced. A flurry of emergency meetings between trade officials and Chinese tech firms has followed.
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Estevez said his bureau had conferred extensively with US companies, whom he said were most interested in clarity, fairness and some assurance that allies would face similar export restrictions so they would not have a competitive advantage. He claimed their response had been largely supportive and patriotic.
Once allies are brought on board, Estevez said he expected a favourable response in foreign capitals.
“The threat of Chinese developments and Chinese advancement and Chinese military-civil fusion, Chinese human rights transgressions don’t just impact the United States,” said Estevez. “They impact the United States and its allies. I’m very bullish. I have zero confidence that we’re not going to have a deal.”
Centre for a New American Security technology and national security director Martijn Rasser has called the powerful Commerce bureau the most important agency no one has ever heard of.
“We’re trying to work at that so people have heard of us,” Estevez told reporters.