Commerce Needs Cash to Curb China’s Chips – DNyuz

Commerce Needs Cash to Curb China’s Chips

The most important U.S. government agency in the brewing cold war with China may not be the State Department or the Pentagon, but rather the Commerce Department, an agency little more than a century old, with funding and resources almost that far behind.

The most important U.S. government agency in the brewing cold war with China may not be the State Department or the Pentagon, but rather the Commerce Department, an agency little more than a century old, with funding and resources almost that far behind.

Commerce has been tasked with overseeing everything from massive new supply chain security and export control initiatives to crafting U.S. policies on artificial intelligence with an eye toward outcompeting Beijing. Commerce must play a larger role in national security than ever before, since this fight revolves around technology, economic competition and commerce.

And yet, Commerce’s boss is warning that she doesn’t have enough resources to carry out the fight.

In an interview with Foreign Policy, Commerce Secretary Gina Raimondo said that the department’s operations to protect U.S. supply chains and critical technology are “woefully underfunded.” One agency within Commerce that oversees globe-spanning export control measures to protect sensitive national security technology from falling into adversaries’ hands–the Bureau of Industry and Security (BIS)–has a budget relatively unchanged in a decade, with double the workload.

Republican lawmakers have an answer: Reform first, and then they’ll talk money. “Resources alone will not address the shortcomings in our export control regime,” three top Republican lawmakers, Reps. Michael McCaul, Elise Stefanik, and Mike Gallagher, said in a statement. “Any conversation about additional resources must be matched with actions that demonstrate BIS is being reformed into a true national security agency that will do what needs to be done to counter China and other adversaries.”

As such, battles over funding for its alphabet soup of wonky and technocratic agencies that are housed within Commerce–BIS, the National Institute of Standards and Technology (NIST), the National Telecommunications and Information Administration (NTIA), and the U.S. Patent and Trademark Office (USPTO)–could have a major effect on the trajectory of U.S. competition with China.

“Technology continues to be the vehicle of the economic security agenda, so it really is at the forefront of not only foreign policy but peer engagement on commercial relations, and it’s dominating the way that we interact with the world,” said Emily Benson, a senior fellow and director of the Project on Trade and Technology at the Center for Strategic and International Studies (CSIS).

“It’s less a function of Commerce taking the reins and more that the policy itself is shifting closer and closer into the portfolio that already existed at Commerce.”

Republican lawmakers have hammered the Commerce Department for greenlighting the export of “dual-use” technologies to China in recent years–technology that has both commercial and military applications. McCaul, the chairman of the House Foreign Affairs Committee, released a report this week saying the Commerce Department allowed “unimpeded transfer of U.S. technology to China” in the past two decades-plus, which he asserts is “one of the single-largest contributors to China’s emergence as one of the world’s premier scientific and technological powers.”

This criticism long predates the Biden administration and Raimondo’s tenure at Commerce, and McCaul in his report concludes that BIS as it stands is “understaffed and lacks resources to conduct oversight.”

The Commerce Department shoots back that it needs more money and fewer headaches, but it may be getting neither. The latest big executive order from U.S. President Joe Biden on artificial intelligence, released in late October, ordered the Commerce Department to craft a significant portion of U.S. government policy and oversight on AI, a daunting task given the far-reaching implications of AI technology. It’s especially difficult to do so on a tight budget.

“Protecting our most advanced AI from our adversaries is vital,” Raimondo said. “The Commerce Department is committed to the work, but you can’t do everything the president’s directed us to do unless Congress also appropriates AI resources,” she said.

BIS was thrust into the limelight last October when it announced far-reaching export controls on semiconductor sales to China, sending shockwaves through the half-trillion-dollar global chip industry and laying the marker for a new chapter in heated U.S.-China competition on critical technologies. BIS further ratcheted up the pressure on Beijing this October, expanding those export controls to include a wider range of chips and to close additional loopholes.

With great power, comes great responsibility. But resources are not abundant. BIS’s budget is less than $200 million, roughly similar to a decade ago. Raimondo stated that “our licensing requests are literally twice as high.” “So I think it’s like an emergency situation, in my judgment, and, if not an emergency, an urgent priority.”

At any rate, the export controls, especially on the specialized gear that could allow China to move into the very premier league of chip production, have hit home. Raimondo said bilateral conversations with her Chinese counterparts and other high-level officials in recent months–including Biden’s meeting with Chinese President Xi Jinping in San Francisco last month–show the degree to which the export controls have rattled Beijing. “In every discussion with President Xi, in all of my meetings in China, they brought up the export controls–particularly on semiconductors and semiconductor equipment–and asked me to reconsider them, to which I said we can’t,” she said.

One thing leaders from both U.S. political parties can at least agree on: There’s only so much Washington can do without cooperation from industry and allies around the world. Many global chipmakers are eager to keep selling in China while remaining within U.S. laws. Nvidia, the California-based company whose cutting-edge chips are critical components of AI applications, said this week it would still look to sell in China but work with the U.S. government to ensure its products are in compliance with export rules.

Raimondo herself, at a defense forum in California recently, laid into U.S. firms that might seek to put profit before all else. “Newsflash: Democracy is good for your business,” she said. “Rule of law, here and around the world, is good for your businesses.”

Export controls are also just a starting point, with the original ones in October last year kicking off a monthslong diplomatic negotiation process for Japan and the Netherlands–two other countries that dominate semiconductor equipment manufacturing–to sign on to the U.S. curbs.

“It was, in a way, kind of a cart-before-the-horse situation, where the U.S. implemented these export controls but could only really control itself, then had to lean on allies to actually be willing to implement,” Sarah Kreps, a professor at Cornell University’s Brooks School of Public Policy and the director of its tech policy institute, said Wednesday at an event hosted by CSIS.

Raimondo said the U.S. semiconductor industry is getting the message and is largely on board. She said that American companies don’t wish to break our export control laws. “What they want from us is clarity, and so we’re trying to do that.”

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