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I have done two columns recently on export controls
and thought that would be sufficient for a while, but I was wrong. It
turns out nobody was paying attention. That is no surprise, but it is
annoying nonetheless. So, when the Wall Street
Journal published an article
last week that repeated old canards and reignited an old debate, I felt
I had no choice but to weigh in once again to set the record straight.
The
essence of the article is that the Commerce Department’s Bureau of
Industry and Security (BIS) is too lax in its licensing policy and
allows too many exports to China. However:
- The
cranky quotes were largely from former Trump administration officials
and the data cited is from 2020, which means the things they are
complaining about happened on their watch.
- The
Trumpers usually blame career civil servants for these “mistakes,” but
it was Trump personally who ordered that ZTE be removed from the Denied
Persons List (in a tweet, no less), and it was Trump who ordered that
licenses be granted to Huawei. If this was a problem, it began at the
top, not on the fourth floor of the Commerce Department.
- Licensing
data from 2021 shows a 197 percent increase in rejections from 2020, a
sign that the Biden administration is taking its responsibility
seriously. My previous columns discussed the expansion of export
controls taking place under Biden. I have raised questions about that,
but it is certainly evidence from the critics’ standpoint that the
situation is getting better rather than worse.
- While that data shows a change from the last administration, it also misses the point. The Wall Street Journal
article says that BIS’s license approval rate was 94 percent
(acknowledging that it is now down to 88 percent) but fails to note that
the rate has hovered at plus or minus 90 percent for at least 30 years.
The reason is simple: companies don’t apply for licenses when they know
they are going to be rejected. The result is that the data consistently
has skewed in the direction of approvals.
- The
article contains little information about what is actually being
shipped via the licenses granted, and also does not note that a license
is permission to export, but no guarantee the export actually occurs.
This is significant in a case like Huawei. That company’s placement on
the Entity List means that a license is required for any export
to Huawei, whether it is a coffee mug or a semiconductor chip. That
licenses have been approved for Huawei should be neither surprising nor
disturbing.
- The
comment about the small number of items controlled to China also misses
the point. In the 1990s, I was an “early adapter” in giving the “higher
fences around a smaller number of items” speech, subsequently given by
officials in every administration since then. Over time, we have
realized that if you try to control everything, you end up controlling
nothing because enforcement becomes impossible. Better to focus the
limited resources on what actually matters rather than stuff where the
technology horse has long since left the barn. That is precisely what
BIS has been doing.
What
we are seeing once again is the demagoguery of ignorance. People don’t
know how the export control system works or its limitations, and thus
feel free to blame it for every technological advance China makes. So,
one more time, let me explain what is really going on.
Starting
more than 30 years ago as weapons became “smart” and information and
communications technology (ICT) was integrated into warfighting, the
government realized that an effective military would be dependent on the
most advanced ICT, and obtaining it depended on cooperation from the
private companies that invented and produced it. As a result, the key
question became how to keep those companies profitable and growing so
they could meet our defense needs.
That
turned the export control issue on its head, because keeping our
companies profitable means letting them export. Overcontrolling their
exports starves them of the revenue they need to develop and produce the
new products that keep us ahead of China. That doesn’t mean letting
them do whatever they want; it means walking the fine line I have
discussed previously between over- and under-controlling. The critics
fundamentally don’t understand that and would prefer to embargo
China—trying to starve them even if it means starving us as well—and
misinterpret data to argue that BIS is
somehow undermining our security.
In
reality, BIS is taking the only approach that makes any sense—a
case-by-case judgment of what can be safely exported and what cannot,
coupled with an effort to multilateralize our controls so all high-tech
producing countries are on the same page. We are damming the entire
river, and not just half of it. Contrary to what the critics think, the
United States is not the sole producer of advanced ICT, and it is not
the leader in all categories. Acting unilaterally not only fails to
achieve our strategic goals; it is an economic and technological gift to
our
competitors.
Sadly,
this debate has been going on for more than 40 years, and this column
is not going to end it because demagoguery is easier than debating
actual facts. The Wall Street Journal article was a
disappointment—its editors should know better. All I can promise in
response is to continue to rant and hope eventually someone pays
attention.
William
Reinsch holds the Scholl Chair in International Business at the Center
for Strategic and International Studies in Washington, D.C. |