4 Export Control Fallacies and Their Rebuttals

By Steve Coonen

Writing in the Wall Street Journal last week, professors Henry Farrell and Abraham Newman criticize American export control policies as having the potential to create more problems then they solve. Pointing the finger at America as a force for destabilization is divorced from the reality of the global export control landscape. China’s commitment to using American technologies to build up its military has necessitated export controls targeting the country’s chip sector.

Here are four fallacies promoted in the article (in italics) and my rebuttals:

Fallacy #1: The U.S. is to blame for export control-related global disruptions

“A new tit-for-tat is emerging, and as China responds to the turn in American policy, there is a risk that the situation could escalate in a way that hurts both U.S. security and the global economy.”

The Chinese government caused “the turn” in American export control policy. U.S. export controls targeting China exist for a reason. China has leveraged American semiconductor technologies to build up the Chinese military. Moreover, under its military civil-fusion strategy, the PRC is the only country that has made the diversion of technology from civil end-use to military end-use a publicly stated strategy, by its head of state no less. 

Additionally, the authors give too much credit to how strict the U.S. export control system is. BIS approved a full 88% of exports of controlled technology in 2021 and over 91% in 2022. Moreover, most emerging technologies with potential military application (e.g. hypersonics, advance materials, additive manufacturing, biotech, etc.) do not have any meaningful restrictions or controls, allowing them and others go to China uncontrolled.

In recent years, Huawei and SMIC were justifiably added to the entity list for national security reasons. In principle, this should preclude those companies from obtaining U.S. technology. Yet in practice U.S. export controls made sure these companies could still get nearly everything they needed to advance their industries. Even after being placed on the entity list, the USG still approved 69% of transfers for Huawei from November 9th, 2020 to April 20th, 2021, and during the same period, the USG approved or returned without action 99.5% of all applications for SMIC. Since being placed on the entity list, Huawei has introduced a 5G mobile device and SMIC has broken into the 7nm semiconductor arena.  

To suggest that U.S. export controls are overly stringent is facile.

Fallacy #2: American pressure has caused China’s quest for technological independence

“In response to this American pressure, China is also now doubling down on a strategy of achieving technological independence.”

China’s quest for technological independence began well before the Trump-Biden era of export controls. In 2014, China’s State Council set the goal of becoming a global leader in all segments of the semiconductor industry by 2030. In 2019, Xi Jinping said, “the fact that core technology is controlled by others is our greatest hidden danger.” We can read this as a statement to the Chinese party-state to build self-sufficiency.

We already see China gaining independence in the legacy chip sector: According to the Rhodium Group, a research firm, “In the next 3-5 years China is due to add nearly as much new

50-180nm wafer capacity as the entire rest of the world.” The U.S.’s October 2022 controls, says Rhodium, “should not obscure the fact that China is building significant capacity in semiconductor markets that rely on mature process nodes. The U.S. government must institute a presumption of denial technology for all controlled technologies bound for China.

Fallacy #3: The U.S. might target allies for export controls in the way it does China

“Other countries might band together with China, or strike out themselves toward greater technological self-sufficiency, fearing that they might be next on the export-control hit list. Even close partners like Germany, which has a big economic stake in China, might find their loyalties fraying if they don’t know where America’s ‘small yard’ begins and ends.”

U.S. allies have little reason to fear that the U.S. will impose draconian export controls targeting their countries. Tough export controls targeting China specifically are there for good reason. The PRC is the only country with a public strategy of diverting technology, and the only country with which the U.S. lacks a viable end-use verification mechanism. With every other country, the U.S. can conduct post-shipment verification checks to see where U.S. technology actually goes. Having real accountability mechanisms for how technology is used gives the U.S. confidence in where it is going and what it is used for.

This is not so with China, per a poorly negotiated bilateral agreement. And in what must be the best kept secret in Washington D.C., U.S. officials can only perform checks in China on a minority of transfers and only for up to six months after shipment. This arrangement is an open invitation for diversion. 

So much for Ronald Reagan’s “trust but verify” paradigm.

Fallacy #4: Clarity on U.S. export control standards will stop Chinese malfeasance

“Adversaries and fence-sitters alike need to see continued value in interdependence. Achieving this will require the U.S. to use one of its crucial advantages over China—the rule of law—to set specific standards and appeals procedures to limit uncertainty over its future actions.”

A refined set of standards will do nothing to deter China from stealing or illegally appropriating American technology. The CCP has a long-standing record of deceitfulness, cheating, stealing, bullying, and trickery, regardless of the promises it has made to the world. As former White House Chief of Staff and current Ambassador Rahm Emanuel said recently, the CCP uses “lying and cheating as a modus operandi of the state.” The American people cannot even get the latest basic trade statistics with the PRC from 2022.  The United States sends more dual use-controlled technologies to China than to any other country. How much cutting-edge uncontrolled technology does the U.S. send to China? Who knows! One thing is clear: the Chinese Communist Party, Ministry of State Security, and People’s Liberation Army probably do, and are putting it to good use to fulfill Chinese ambitions. Congress must act now to clean up the U.S. export control regime and stop our greatest adversary from weaponizing American know-how against us.