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Trump’s effort to keep US technology out of China worries American companies

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.”

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.

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