By Steve Coonen
Quoting an old Russian proverb, President Ronald Reagan once remarked, “Trust, but verify.” Reagan’s words may have been appropriate as the U.S. negotiated an arms control agreement with the USSR. But when it comes to inspecting how China is using American technologies, the U.S. government should adapt his words to go a step further: “Distrust and verify.”
At their root, the Bureau of Industry and Security’s (BIS) end-use checks in China are practically useless. Under the terms of the U.S.-China end-use check agreement, it is impossible for U.S. export control officers (ECOs) to verify the ultimate destinations or end-uses of U.S. technology. With other countries, U.S. export control officers can conduct post-shipment verifications (PSV) with few restrictions for up to five years. But, unique to China, U.S. officials have only 180 days after an item is shipped to submit a request to conduct a PSV check. Effectively, China can do whatever it pleases with American technologies after a mere 180 days.
Making the ineffective agreement worse is the Chinese government’s antics in making the checks themselves as onerous as possible. The Ministry of Commerce, through which ECOs must coordinate, makes visits difficult to schedule and limits the scope of an inspection visit as much as possible. Chinese “companies” themselves might not even have the wherewithal to offer inspectors a complete picture of where U.S. technology is actually going. As a result of this stonewalling, U.S. officials were only able to conduct, on average, 55 end-user checks per year in mainland China from 2016 to 2021. This is out of thousands of exports of technology to China per year.
If the asymmetrical terms of the U.S.-China end-use check agreement come as a surprise, it’s because BIS has managed to keep the disastrous U.S.-China bilateral end-user control agreement quiet. That agency and others within the federal government remain willfully blind to the fact that China is the only trading partner for which the U.S. has no effective mechanism to verify the actual end-use of any U.S. technology transferred to the People’s Republic of China (PRC). In fact, the U.S.-China End-Use Check (EUC) agreement serves more to facilitate the diversion of technology for military use rather than deter it. It’s not just the People’s Liberation Army (PLA) that can make use of American tech—China also illegally diverts American controlled technologies to its friends in Russia, Iran, and North Korea.
The policy of Military-Civil Fusion (MCF) is a state-led program overseen by Xi Jinping himself, and is designed to build up Chinese science and technology knowledge across military and civilian sectors. Hence, absent a meaningful end-use verification mechanism, where prohibiting American technologies from getting into the PLA’s hands is concerned, the PRC’s MCF strategy renders the current U.S. export control regime completely impotent. Under MCF, any technology transferred to China’s civilian sector, to include intellectual property derived from business deals with U.S. companies, can be co-opted by the Chinese military. No matter what a Chinese entity declares the stated end-use of an American technology to be, it is impossible to know the actual end-use purpose or end-user.
Calls to allocate greater resources to BIS and the U.S. export control community to address the CCP’s diversionary practices are welcome. BIS only has two ECOs to cover all of China, and only one to cover the rest of Southeast Asia. As the U.S. imposes an increasing number of controls targeting China, China will become more creative by setting up entities in other countries not subject to American restrictions, such as Singapore. Ultimately, however, the problem of meaningless end-use checks cannot be solved by the standard suggestion of throwing more money at it. Until the U.S. has an agreement with the Chinese government that permits the meaningful verification of the actual end-uses of U.S. technologies, just as it has with every other trading partner, no amount of additional resources will stop the diversion of U.S. technology from further modernizing and expanding the PLA’s military capabilities. That the U.S. government permits the export of any militarily useful technology is irresponsible, defies logic, and is most certainly not in the national security interests of the United States. Its neglect is even more mind-boggling in light of China’s MCF policy. Until the U.S.-China end-use check agreement can be renegotiated to allow for meaningful inspections, the only responsible course of action is to deny virtually all exports of dual-use technologies to the PRC.