As U.S.-China technology competition grows, Congress may consider mandating stronger export controls over U.S. research and semiconductor equipment, the Congressional Research Service said in a report this month. Congress might consider “assessing” whether Chinese efforts to target U.S. research and development capabilities “merits additional government oversight and controls over U.S. basic and applied research,” the report said. Congress might also consider more restrictions over “technical expertise that U.S. industry shares with China over open source technology platforms” and more controls over exports of semiconductor equipment, tools and software. The Commerce Department is reviewing candidate controls for its emerging and foundational technology process (see 2103190037) and has received pushback from universities that are concerned those controls could restrict fundamental research (see 2012020044).
Exports to China
The Justice Department hasn’t yet begun prosecuting cases involving violations of the Commerce’s Department's newly issued end-user restrictions but expects that to soon become a significant part of the agency’s focus, a senior Department of Justice official said.
U.S. universities are opposing the Senate’s Strategic Competition Act of 2021 over a provision that would expand foreign investment screening to include foreign gifts over $1 million given to U.S. universities. In a letter to the Senate Foreign Relations Committee this month, four academic groups said the expanded jurisdiction awarded to the Committee on Foreign Investment in the U.S. would subject “many gifts” received by colleges to a CFIUS review and would make it “harder” for colleges to conduct research.
Clete Willems, a former Donald Trump administration trade staffer, told the Senate Finance Committee that technology sales to China help pay for research and development here, so as Congress considers how to bolster the semiconductor industry, it should also be sure not to put export controls on goods that are not sensitive.
The Senate Foreign Relations Committee passed its comprehensive China bill with several amendments, sending a bill to the Senate floor that could update China-related sanctions, export controls and foreign investment reviews. Senators said they expect the Strategic Competition Act of 2021 -- which would authorize a host of measures to address trade and technology competition issues with China and expand the jurisdiction of the Committee on Foreign Investment in the U.S. (see 2104080066) -- to garner broad bipartisan support before the full Senate.
Despite more scrutiny from the U.S., Chinese foreign direct investment in North America grew by almost half in 2020 compared to 2019, according to an April 19 Baker McKenzie report. But trade and investment experts cautioned industry about placing too much stock in those numbers, saying two-way U.S.-China investment remains “very low” and Chinese firms are still wary about gaining approval from the Committee on Foreign Investment in the U.S.
The U.S. will likely continue to update the regulations for the Committee on Foreign Investment in the U.S., which has created some complications for industry, trade lawyers told the American Bar Association April 15. The recently revised regulations have also severely reduced incoming Chinese investments, which could have long-term implications, one lawyer said.
Two Senate Republicans this week suggested they will support the Foreign Relations Committee’s recently introduced China legislation (see 2104080066) that would authorize more export controls and investment restrictions to counter Chinese trade and technology practices.
The U.S. should quickly pass a bipartisan bill that would increase U.S. investment in technology research and high-tech manufacturing, technology experts and academic leaders told the Senate April 14. Some lawmakers argued that the bill, which is partly aimed at boosting U.S. technology competition with China, should also include measures to better protect U.S. critical technologies from being stolen by the Chinese government.
U.S.-China Business Council President Craig Allen, former deputy assistant secretary for China in the State Department, said that the Chinese were taken by surprise by how little has changed in the new administration. “There was an expectation between [Donald] Trump and [Joe] Biden, there would be a loosening of technology regulations,” he said, but Commerce Secretary Gina Raimondo has taken steps to tighten export restrictions that affect Huawei, and there have been actions under the new Information, Communications and Telecommunications Services (ICTS) regulations.