Will Merger Lead to Curbs?

A U.S. plan to merge export control agencies may lead to debate over China curbs.
By Michael Lelyveld
china-curreny-305.jpg A Chinese bank worker counts stacks of U.S. and Chinese currency in Hefei, Anhui province, March 9, 2010.

BOSTON—A sweeping new plan to overhaul U.S. export controls is unlikely to give China greater access to technology and could lead to even tougher limits on sales, experts say.

On June 30, the U.S. national security adviser, Gen. James L. Jones, outlined the most extensive changes in the country's export licensing system since the Cold War.

"We should be striving for a system that prevents harmful exports while facilitating new ones," Jones told an industry meeting in Washington.

"Our current system is not meeting that objective."

China has been hoping that the update of export rules, first announced by President Barack Obama last August, would lower the barriers for sales of sensitive high-tech goods.

Beijing has repeatedly argued that eased restrictions would reduce the imbalance of bilateral trade. But experts see nothing in the latest plans that would ease curbs on China sales.

"This has never been about China. It's about national security," said William Reinsch, president of the National Foreign Trade Council (NFTC) and a member of the U.S.-China Economic and Security Review Commission.

"If there's any impact on China, it's going to be coincidental," said Reinsch, a former Commerce Department undersecretary for export administration.

Dual-use goods

A major feature of the new U.S. plan is to end the decades-old division of authority for export licensing among at least three separate agencies.

Under current rules, exports of "dual-use" goods with potential military applications are licensed by Commerce, while purely military items are controlled by the State Department.

The Treasury Department also regulates exports to embargoed countries and sanctioned destinations like Iran.

But the patchwork of authority has been a source of frequent complaints.

The agencies "use different procedures, [and] have different regulations and different definitions for the same terms," Jones said.

Under the new plan, the separate licensing authorities would be merged into a single agency, using a single set of procedures and a single control list.

The agency would be governed by a board of directors consisting of cabinet members from the current departments, reporting to the president, Jones said.

The plan has been hailed by exporter groups, including the Aerospace Industries Association (AIA), the National Association of Manufacturers (NAM), and NFTC.

"We think it's the right way to go," Reinsch said.

In a statement, NAM said the merger will "better equip the United States to protect national security, strengthen the defense industrial base and double exports over the next five years."

Aim to boost efficiency

While the process will simplify rules for exporters, it is unlikely to affect sales to China.

The United States placed strict limits on high-tech goods, military items, and crime control products for China in 1989 following Beijing’s deadly crackdown on pro-democracy protesters at Tiananmen Square.

China frequently cites the restrictions as a cause of trade frictions with the United States.

Most recently on June 24, Foreign Ministry spokesman Qin Gang blamed industry specialization and U.S. export controls for the trade imbalance with China, arguing that undervaluation of the yuan is not the cause.

Reinsch said that even with the reorganization, sensitive items would still be subject to administrative decisions on exports to China.

"These things require licenses. They're always going to require licenses," he said. "The question is do they say yes or no when there's a license application."

Catherine Robinson, NAM's director of high technology trade policy, agrees that the overhaul is aimed at boosting efficiency of U.S. exports rather than changing China policy.

"This reform is not about any one country," said Robinson.

"It's about creating a system that allows the United States to control what it needs to control while facilitating legitimate trade."

"In terms of specific reforms for China, again that's not what this is about," she said.

"The reform is about the United States and doing what's best for us."

New curbs on China?

The plan would take place in three phases, which are already under way.

In the first phase, separate control lists are already being reviewed in preparation for the merger. In the second, Commerce and State would move to a single electronic system that would share licensing information and help harmonize practices.

While those two steps can be taken administratively, the merger and creation of the new USXport (U.S. Export) agency will require congressional approval. At that stage, exports to China could become an issue.

The danger of new restrictions on China has been a perennial worry for exporters. Congress has repeatedly shied away from votes to reauthorize the nation's basic export control law because of concerns that members may attach China sanctions as amendments.

Congressional debate about the USXport agency could similarly trigger new curbs on China.

"That is always a concern, obviously, with China," said Robinson, although she is hopeful that the president's personal involvement in promoting the new agency will make a difference.

But experts say that if China issues come up in the course of debate over the export plan, Congress would not favor any easing of restrictions.

"I don't think there would be a lot of enthusiasm for making significant changes in the export control policy for China," Reinsch said.


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