The pressure the Trump administration has made to prevent China from taking control of the high-tech market has set a collision course with the same American companies it wants to protect.
Companies that specialize in microchip, artificial intelligence, biotechnology, and other industries have grown increasingly concerned by management efforts to restrict the flow of technology to China, saying they may pull expertise, research and revenue away from the United States, ultimately eroding America’s advantage.
Fears, which had been burning for months, took urgency, as the Commerce Department was considering adopting a comprehensive proposal that would allow the United States to ban transactions between US companies and Chinese counterparts. These rules, in addition to new restrictions on Chinese investment in the United States and proposed measures that would prevent US companies from exporting certain products and exchanging technology with foreign nationals, have the technology industry scrambling to respond.
The Trump administration’s campaign has already prompted foreign companies to avoid US components and technology due to concerns that access to the parts they need may suddenly stop. American companies are watched with caution as the United States considers export licenses restricted to companies selling products or sharing intellectual property with China, including General Electric, which sells aircraft parts to China as part of a joint venture with Safran, a French company.
Senior management officials plan to meet on February 28 to discuss more restrictions on China, including Whether the license to sell jet engines to G.EE will be banned and whether the Chinese telecom giant Huawei’s access to American technology will be curtailed.
There is a growing bipartisan consensus in Washington that China poses a security threat and that the United States must protect domestic industries to maintain a technological advantage. But the technology industry has warned that restricting access to China, both in terms of buying and selling products, could cripple US companies and end up undermining the United States as the world’s largest global research and development center.
Companies, along with lawyers and counselors who advise them, say companies are increasingly having no choice but to seek more research and development outside the United States, to ensure uninterrupted access to China, a rapidly growing consumer market, and the center of the global electronics supply chain. They say new investment dollars are being transferred to research centers near the University of Waterloo in Canada, as well as Israel, Britain and other places out of reach of the US government.
“Anyone who thinks that our concerns are exaggerated should speak to semiconductor industry workers in the United States who are already losing their jobs due to the closure of our largest market,” said John Nofer, president and CEO of the semiconductor industry association, which represents chipmakers. . “The revenue from this large market is fueling our substantial research investment, which allows us to innovate and drive economic growth and national security for America.”
RISC-V Foundation, a nonprofit that created an open source software standard for chips that operate smartphones and other electronic devices, has acknowledged in recent months that it has chosen to move its foundation from Delaware to Switzerland due to concerns from its members about stricter regulations in the United States.
Scott Jones, a non-resident fellow at the Stimson Center, said: “If this administration continues on the current path, we will see more corporate and schism splits.” “They will take their games and go somewhere else, and other economies will benefit from this.”
The latest source of concern stems from a Commerce Department proposal last November to examine and prevent technology transactions that might pose a threat to the United States. The rule would allow the Secretary of Commerce to prohibit transactions involving technology linked to a “foreign discount” that pose a major threat to the United States.
The rule arose from the executive order signed by President Trump last year to try to shut down Huawei by letting the commerce minister block it Any technical purchase designed by “foreign adversary” jeopardizes America. American companies say the regulations are so broadly written that they can give the United States the authority to block transactions or relaxation located far from telecom equipment.
While tech companies say they support efforts to protect the national security of the United States, dozens of companies and pressure groups in the industry have expressed concerns about the proposal.
In a January comment message, IBM asked the Commerce Department “to return to the drawing board” and said the rules “would lead to a broad disengagement of American business from global markets and suppliers.”
“Its reach, breadth and mystery are unprecedented,” said IBM.
The Internet Society, which counts Google and Facebook among its members, said the proposal lacked “objective guarantees”. The Motion Pictures Association has warned that it could affect Hollywood’s ability to track transactions about special effects or animations.
The Ministry of Commerce said in a statement that the process will ensure that “all points of view have been considered and that US national security considerations are balanced with the commercial interests of companies.”
More stringent measures have come in response to what management and even the technology industry consider an increasing economic and security threat. China is gaining ground through a set of technologies that experts say could give the country an economic and military advantage, including artificial intelligence, facial recognition, microchips and quantum computing.
In an effort to control these advanced industries, China has published subsidies and acquisitions directed at US companies, and has drawn up industrial plans Like made in China 2025 to jump forward. The administration has repeatedly accused China and its companies of being involved in corporate espionage and theft of intellectual property.
Last week, the US government Huawei and two of its subsidiaries were charged with extortion and federal conspiracy to steal trade secrets from six US companies. It also accused four Chinese military personnel of infiltrating Equifax, one of the nation’s largest credit reporting agencies, and stealing trade secrets and personal data of about 145 million Americans in 2017.
Beijing’s actions created a great fear in Washington that China would dominate advanced industries and stop American competitors from operating, as it did in steelmaking, furniture, and solar panels. But the risks are greater this time, given that many of these new technologies are important to the military.
Prosecutor William B. said. He justified in a speech this month: “The Chinese have long been a trading people, but for China, pure economic success is not an end in itself.” “It is a way to achieve broader political and strategic goals.”
The Trump administration’s response has been to introduce a new definition of national security, including economic threats. This discrimination allowed the United States to enact strong rules restricting trade exchanges with China.
Mr. Trump mentioned national security in his decision to impose a tax on foreign metals, proposing new restrictions on technology that could be transferred outside the United States and preventing Chinese companies such as Huawei from purchasing American components.
While tech companies have found a way to overcome Huawei’s initial ban, management is another Consider stricter restrictions. A new proposal would extend the U.S. government’s scope to regulate manufactured products worldwide, and prevent companies from using American components and technologies in foreign-made products that are then provided to Huawei.
The proposals have caused panic in the technology industry, which fears that the new restrictions will hamper its ability to benefit from the Chinese market. Industrial lawyers and business groups have begun to warn that unless management can persuade its allies to adopt similar restrictions, companies will decide that the safest path is to try to limit their use of American technology.
Critics point to past incidents in which strict controls pushed American industries abroad – including machine tool makers in the 1990s, and commercial satellites in the 2000s. While it is illegal for companies to transfer existing operations abroad to try to circumvent export control rules, there are no such restrictions on new investments.
Jim McGregor, President of Greater China to APCO Worldwide, said of America’s largest technology company: “Their motivation is shareholder value and money.” “He does not defend what is good for America. You can say this is terrible, but this is how our system works.”
Mr. MacGregor said that the economic incentives for the Chinese market would encourage companies to “separate from America.”
Chinese companies are also working to shake off American components from their supply chains – a long-term effort toward self-sufficiency that has accelerated under the threat of tougher U.S. actions.
In recent months, some Chinese companies have started asking their suppliers to certify that their products are made with the least amount of American content possible, and therefore are not in danger from US export controls, say people familiar with the talks.
Chinese telecom operators have been asked to find an alternative to using Oracle software in their systems. CITIC Capital, a giant investment management firm with deep ties in China, has helped Chinese companies find alternatives to American technology as an investment topic for this year.
Some who support China’s stricter rules say companies are exaggerating the potential impact in an attempt to influence the new regulations. They say the United States maintains significant advantages in research and development, and companies are trying to scare the government into loosening the rules by saying they will leave.
Others say the national security threat from China is so serious that there are some revenue losses in the short term.
“You can’t avoid paying that price,” said Clyde Prestowitz, a former Reagan administration official who led trade negotiations with Japan and China. “Your only option is to push it now or later. Now, you still have a sophisticated industry that will be hugely successful, but it can survive and thrive if advanced technology does not become a Chinese stadium.”
The view of management is not homogeneous. Within the Commerce Department, some are pushing for tougher rules while others say stalled US businesses will do much to threaten national security.
The Pentagon is also divided, with some officials calling for stricter regulations, while others say the government should not jeopardize innovation, given that military technologies usually rely on commercial products.
Some Chinese experts say that American companies are deluding themselves and that avoiding the tougher rules will only ensure that China ultimately steals its technologies and gets them out of business.
“We have seen what happens to many foreign companies that” should be “in the areas of steel, telecommunications, etc.,” said Derek Scissors, resident researcher at the American Enterprise Institute, on China. “They gradually become more desperate, until they die.”