U.S. Eyes Eased Export Rules

Though some export controls may be eased, security concerns regarding China remain.
By Michael Lelyveld
2009-10-12
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BOSTON—The U.S. Commerce Department has proposed long-awaited steps to ease the country's export rules, but it is uncertain that they will allow China to buy the high-tech goods that it wants, experts say.

On Oct. 1, Commerce Secretary Gary Locke outlined plans for lowering some of the barriers to trade in items that the government controls for security reasons. U.S. exporters and foreign customers have been urging an overhaul of the export control system for years.

"Our current system was designed in the 1950s, and its Cold War-era framework is ill-suited to manage the highly complex 21st century threats currently faced by the United States," Secretary Locke told an annual Commerce conference in Washington.

Locke proposed changes that could speed sales of "dual-use" products, those with both civilian and military uses, like semiconductors. The question is whether they will also allow more sales to China, which are subject to strict U.S. curbs.

Adam Segal, senior fellow for China studies at the Council on Foreign Relations in New York, said the overhaul is unlikely to make a big difference in the dual-use exports that the United States will permit to Beijing.

"I think the direction is to rationalize export control laws, but I think the Chinese won't actually be included in that rationalization," Segal said in a Radio Free Asia interview.

Sales lost

With the spread of technology, many sensitive items that were once made only in the United States have become available from foreign manufacturers. Yet, U.S. exporters must continue to obtain license approvals for individual sales.

Locke cited a case in which a U.S. maker lost a sale of sophisticated imaging cameras to Italy because of the time delay for approvals. A Japanese competitor filled the order instead.

Commerce is proposing changes that would eliminate the license requirements for dual-use sales to "allies and partner nations," while fast-tracking reviews for sales to "other key allies."

The announcement follows President Barack Obama's decision in August to conduct a broad-based review of all U.S. export controls.

But the question of controls for China remains difficult.

Since China's 1989 crackdown on dissidents at Tiananmen Square, Washington has maintained tight limits on sales of high-tech and crime control items that might aid that country's military. Chinese officials frequently argue that those rules are outdated and harmful to the trade balance with the United States.

"Every time the United States brings up the trade deficit, the Chinese like to say that if you ease the export control laws, then we can make a dent in that," said Segal. But he added that "the numbers don't bear that out."

Last year, U.S. high-tech exports to China totaled $18.7 billion, a small fraction of China's $268-billion trade surplus with the United States, according to a Congressional Research Service report.

Changes sought

But efforts are underway to see where more nonmilitary exports may be possible. During a July meeting of the U.S.-China Strategic and Economic Dialogue in Washington, U.S. officials reportedly pledged to "facilitate" high-tech sales to Beijing.

On Sept. 29, U.S. and Chinese firms took part in a Washington meeting of the U.S.-China High Technology Working Group, co-sponsored by the Commerce Department, China's Ministry of Commerce (MOFCOM) and the National Association of Manufacturers (NAM).

Participating companies included aircraft, aerospace, and computer manufacturers from China and the United States.

Patricia Mears, NAM director of international commercial affairs, believes changes are coming for U.S. trade with China, but may come slowly.

"When you look at export controls, it rarely occurs that there is a huge change overnight," Mears told RFA.

"But I think that in the Obama administration there is real stepped-up interest in overhauling the system, and certainly that includes China in a very major way."

Concerns remain


Despite the push for changes in export rules, Mears said there is unlikely to be an end to U.S. security controls on China sales.

"Certainly, security is a concern, and it's a legitimate concern. But on the other hand we have to look realistically at what we are controlling, and many in industry feel we have gone way over on what we need to control in terms of providing security," she said.

Mears said that incidents like Chinese police actions against ethnic minorities and displays of missiles during the 60th anniversary of Communist China may set back efforts to liberalize U.S. exports to Chinese companies.

"There's no doubt that is going to strengthen the hand of anyone who says we should do nothing to relax our controls with China," she said.

Another problem for easing U.S. restrictions is the need to verify that dual-use exports for civilian purposes are not diverted to the military. U.S. exporters have also raised those concerns with Chinese companies, said Mears.

"Depending on the industries, many of these companies are still state-owned enterprises, partially or wholly. They have co-mingled production for military and commercial uses," she said.

One suggestion from U.S. manufacturers is that Chinese companies should separate their civilian production to facilitate export approvals.

Even with such a reorganization, exports of high-tech products would still have to be subject to verification that transfers to the military are not taking place, Mears said.

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