US Needs Better Framework to Leverage Export Controls Against China, Researchers Say

The recommendations, outlined in an 82-page report released last week by the Center for Strategic and International Studies, come as the Biden administration implements export controls on advanced semiconductors (see 2310170055) and continues to search for more technologies that should be subject to restrictions. The report, written by the CSIS Defense-Industrial Initiatives Group, argues for a more “targeted” approach to export controls and sanctions against China, saying the U.S. and its trading partners can be better at going after “key goods” in China’s supply chain where Western nations have a manufacturing advantage.

The authors said this will help the U.S. better combat Chinese economic coercion, such as the country's market access restrictions and calls for boycotts. The U.S. “and its allies currently employ limited nonmilitary tools to deter or respond to China’s coercive acts,” the report said. “Given the malign impact of Chinese economic coercion, the United States will be at an increasing disadvantage unless it invests in developing tools to leverage its economic strength to combat China’s growing use of economic forces as weapons of the state.”

The U.S. can do this by collecting better intelligence on Chinese import dependencies and by choosing items for possible export controls by prioritizing goods where the U.S. and its allies “have market dominance, where China’s domestic capability lags by several generations, where import substitutability is low, and where the U.S. economic impact is low.” The report said items that meet these conditions will have a “greater chance of impacting China’s economy” and force Beijing into making “uncomfortable economic trade-offs -- potentially including incurring opportunity costs to high-priority initiatives that run counter to U.S. interests.”

The authors call on the Office of the Director of National Intelligence to help lead this effort, saying the DNI should work with the Commerce, Treasury and Defense departments, along with the National Science Foundation and the National Laboratories, to “share information on areas of growing scientific investment by” China. They said the Committee on Foreign Investment in the U.S. “identification and review process may offer a useful model.”

A new entity or government official to coordinate these export controls also would help the U.S. impose new measures quickly and efficiently, the report said. It suggested the U.S. either: create a new agency tasked with managing “global economic competition”; appoint an “ambassador-at-large” to oversee this work; or create a new office within an existing agency, such as the State or Commerce department.

The authors said all three options have benefits and drawbacks, and creating new agencies or positions could risk “antagonizing offices or agencies who may lose authorities to such an office.” But they also said the U.S. should consider changing its current approach if it wants its export controls to have a stronger impact.

“Rapid action across the U.S. executive branch against a creative and fast-moving adversary will require a lean, focused interagency team able to rapidly evaluate options, gain buy-in across the relevant agencies, and implement a given course of action,” the report said.

The authors also stressed that any new export controls or sanctions should have a “built-in sanction removal function” with bipartisan congressional support, which would give China and other countries “credible incentives for compliance.” They said China “must believe” that the restrictions will be removed “as soon as they come into compliance,” but the U.S. can also reapply or increase the measures “should China’s actions backslide.”