U.S. Government on Export Controls: “Do As I Say, Not As I Do”

Bloomberg reports that the Commerce Department’s Deputy Secretary recently flew to the Netherlands to lobby the Dutch technology company ASML from selling advanced chipmaking equipment to China. That trip raises the question – if the U.S. government is lobbying other nations to curb exports of sensitive technologies, why isn’t the Commerce Department using its power to put export controls on certain American chipmaking technologies bound for China?

ASML is one of the world’s most important companies in the chipmaking ecosystem. As China Tech Threat noted in its white paper on semiconductor export control policies, “only ASML produces extreme ultraviolet (EUV) photolithography equipment, which is necessary to manufacture state-of-the-art 5 nm chips.” Will Hunt, Saif Kahn (now at the National Security Council), and Dahlia Peterson at the Center for Security and Emerging Technology wrote in March 2021, “today just one company—ASML— leads the industry with a monopoly over the latest EUV technology.”

 The Biden Administration has continued the Trump Administration’s policy of pressuring the Netherlands not to allow exports of ASML’s EUV machines to China. That’s the right policy – and one which will not impact ASML’s business given the huge global demand for chips. “If we cannot ship to customer A or country B, we’ll ship it to customer C and country D,” said ASML CEO Peter Winnick in downplaying the effect of export controls on the company’s business in 2019.

What’s new is that Deputy Secretary of Commerce Don Graves’ recent trip to the Netherlands focused on expanding export controls governing ASML’s products. ASML is still a world leader in the production of deep ultraviolet lithography (DUV) systems, a generation behind EUV machines, but still vital to producing high-tech chips. Per Bloomberg, “These machines are a generation behind cutting-edge but still the most common method in making certain less-advanced chips required by cars, phones, computers and even robots.” Graves apparently lobbied to stop the export of these machines, too. This is another welcome policy step.

Clearly the Commerce Department’s leadership is willing to restrict the export of technologies that will enable China to build up its domestic semiconductor manufacturing capabilities. It seems to understand, as a recent paper authored by China Tech Threat and the Coalition for a Prosperous America put it, that “the Chinese government recognizes that the ability to produce advanced technologies is key to establishing China as the world’s leading economic and political power.”

So why isn’t the Commerce Department using its own authorities to stop American semiconductor manufacturing equipment companies from selling sensitive technologies to China? A few reasons:

  • Commerce may not have its policy figured out yet. Secretary Raimondo recently declared at the Department’s annual export control conference, “We also need to retain our strategic advantages by keeping our advanced technologies out of the wrong hands.” That’s the right strategic overview. With Bureau of Industry and Security Under Secretary Alan Estevez now in place, it may be that the Department is undertaking a careful policy review on export controls.
  • A new policy may be developed, but not ready for a rollout. The Information reported on May 9th that the Department of Commerce is weighing restrictions on the sale of semiconductor manufacturing equipment (SME) to YMTC, China’s national champion semiconductor manufacturer known to have close ties with the Chinese military. Ideally the decision has already been made but is being prepared for public rollout.
  • Commerce just doesn’t care. There is always the possibility that the Commerce Department is declining to levy new export controls out of pressure from SME companies. This would be a terrible outcome. To quote Michael McCaul, Chairman of the House Foreign Affairs Committee, “​​How are we going to compete against China if we don’t address this very important issue of us exporting our technology that they then use to build their military apparatus?”

At this point in time the Commerce Department is comfortable lobbying other nations to impose China-targeted export controls, while dragging its feet on levying new American restrictions. It’s a hypocritical “Do as I say, not as I do” approach to national security policy.