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Technology camps dubious on US-China export

Posted: 27 Feb 2007     Print Version  Bookmark and Share

Keywords:U.S.-China export  military export  Mike Clendenin 

Tightening U.S. export controls over technology shipped to China has reached the bureaucratic endgame, igniting fears that U.S. high-tech gear bound for one of the world's fastest-growing economies will become mired in a tangle of red tape that encourages buyers to shop elsewhere.

The changes, championed by the Bush administration, may fall into place as early as April and are intended to cast a wider net over commercial technology products that might make a "material contribution" to the advancement of China's military. The proposal, known as the "military catchall," is pitting hawks in the administration against U.S. tech interests that fear a crippling impact on their business with China.

At its core, the rule seeks to expand the category of items that are "dual use"?products that have both commercial and military applications. The proposal unnerves many companies because it sets the bar low enough to expose a much wider variety of products to the export-licensing process, including goods that are readily available from foreign competitors. It also puts a higher burden of liability on companies to determine whether the item will be used for military purposes.

"It is a major escalation," said Larry Disenhof, EDA Consortium export committee chairman. No one wants to be providing advanced technology to a foreign military that we are unsure of. The question becomes, how do you do it so that you are not grinding everything to a halt?"

The 47 broad categories of goods under scrutiny cover such items as machine tools, chemicals, musical equipment and microprocessors. Areas once largely unscathed, such as EDA tools, are now in regulators' crosshairs. That has companies cringing at the prospect of months-long delays in getting export licenses approved.

Because U.S. trading partners aren't laying out the same ground rules for their companies, Chinese buyers will be able to turn to U.S. companies' foreign competitors, said William Reinsch, former head of the export control office at the U.S. Department of Commerce. Reinsch said U.S. companies would be willing to take a "hit" on sales to China if there was a demonstrable national security benefit. But that benefit has not been proved, Reinsch said.

That has led critics to brand the proposal a lose-lose proposition. "I've read the drought regulations, and they make little sense to me," said Kathleen Walsh, a specialist on China export controls. "I don't see how the new catchall rules would improve our security, nor is it clear how the proposed dual-use technology to come under licensing would make a 'direct and significant' contribution to the Chinese military. It's just not going to work."

Export controls are nothing new. Tech companies continually chafe under the regime and complain about lost competitiveness, particularly in the semiconductor-manufacturing equipment sector, which views China as its hottest market.

This time around, however, the list of protesters ranges from makers of high-end networking gear and servers to individual inventors, from designers of business software and EDA tools to distributors of commodity PC products.

There's irony in the U.S. attempt to retard the modernisation of China's army by limiting its access to widely available commercial technologies. Two decades ago, the U.S. military, in its own bid to modernise, stepped up procurement of commercial-off-the-shelf goods.

China's rising military power is an understandable cause of concern for the U.S. administration. During the last decade, the People's Liberation Army has used annual double-digit increases in its military budget to accomplish rapid modernisation. In January, the Chinese highlighted their advanced tech know-how by using a missile to annihilate a weather satellite, the Feng Yun 1C, at an altitude of 530 miles. Earlier, China held an uncharacteristically public coming-out party for its first domestically built high-tech fighter jet, the J-10, targeted at rivaling America's popular F-16.

Shortly after those events, Beijing tried to calm regional and U.S. fears by trotting out a senior military official in the state media, another unusual move. "We do not conceal our intention to build a strong and modern national defence," Lt. Gen. Zhang Qinsheng said, "but we also tell the world candidly that the Chinese policy is always defensive in nature."

The general's assurances had little effect at the Pentagon; indeed, China's high-tech saber rattling appears to be a subtext to the tightening of the technology export regime. In comments this month, Beth McCormick, acting deputy undersecretary for technology security policy at the DOD, referred to the Chinese military's recent milestones as further justification for the stricter export policy. "Export controls are the first line of defence," she said.

McCormick also argued that "the vast majority of licences are getting approved," and that when the waiting period for all 19,000 applications in 2006 is averaged out, the time to approval has been reduced to roughly 15 days.

American companies exported about Rs.185.81 crore ($41 billion) worth of goods to China in 2005, according to U.S. government figures. About Rs.10,876.80 crore ($2.4 billion) in planned shipments required export licences, and of those planned exports only Rs.56.65 crore ($12.5 million) worth were denied. Using those figures, McCormick argued that the government has been able to "strike a balance between openness and export controls."

- Mike Clendenin
EE Times

Mark LaPedus in San Jose and George Leopold in Washington contributed to this story.

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