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US curbs on China tech giants likely to remain

Former Vice President Joe Biden. (Gage Skidmore/Flickr)
December 13, 2020

This article was originally published by Radio Free Asia and is reprinted with permission.

Of all the issues that U.S. President-elect Joseph R. Biden Jr. will face when he takes office in January, the conflicts with China over technology and cybersecurity may be among the hardest to resolve.

Disputes over Chinese access to U.S. technology and markets have snowballed during the administration of President Donald J. Trump, despite the signing of a Phase 1 agreement on tariffs and trade less than one year ago.

The tariff cuts and Chinese commitments to increase imports from the United States by at least $200 billion (1.3 trillion yuan) over two years have been all but forgotten in the frictions over China’s advances in 5G telecom development, social networks like TikTok and suspected links to the Chinese government.

Some of the shift in focus can be traced to the Trump administration’s anger at the origin and spread of the deadly coronavirus, the effect on the U.S. economy and China’s poor performance on the Phase 1 deal.

In the first 10 months of 2020, China’s imports of U.S. products covered by the agreement were only 55 percent of year-to-date targets, according to the Peterson Institute for International Economics (PIIE) in Washington.

China’s total energy product purchases were only about 26 percent of expectations for the period, Reuters said.

In the meantime, U.S. concerns have escalated over the security risks posed by Chinese smartphone manufacturers including ZTE Corp. and Huawei Technologies Co. Ltd., as well as the growing popularity of TikTok’s video-sharing service with some 100 million U.S. users.

The companies have denied that they provide information to the Chinese government and the military.

But the security concerns first raised by a bipartisan report of the House Intelligence Committee in 2012 predate the Trump administration and are likely to continue well into Biden’s presidential term, analysts say.

While the Trump administration imposed stiff fines and bans against ZTE in 2017 for surreptitious sales to Iran and North Korea, the conflicts with Huawei over similar dealings with Iran are ongoing.

Canada has been holding Huawei’s chief financial officer, Meng Wanzhou, since December 2018 pending extradition to the United States.

On Dec. 4, The Wall Street Journal reported that the U.S. Justice Department has been in talks with Meng about a settlement that could allow her to return to China in exchange for an admission of “wrongdoing.”

Deadlines have also been extended for a plan to safeguard U.S. data collected by TikTok, owned by China’s ByteDance Ltd., through a share sale to Walmart Inc. and Oracle Corp., the Journal reported separately.

Barring last-minute resolutions by the Trump administration, Biden will have to decide how to deal with the cases next year.

Stay the course

But few experts expect major changes in the direction of U.S. policy toward the Chinese tech giants.

William Reinsch, a former Commerce Department undersecretary in the Clinton administration, sees both Trump and Biden as “tough on China.”

“As for what happens in the short term, I don’t expect dramatic change, no unraveling of actions taken so far, at least not right away, except for a stronger emphasis on human rights,” said Reinsch, who is now a senior adviser at the Center for Strategic and International Studies.

In one possible signal of policy toward China, Biden on Thursday named trade lawyer Katherine Tai as his pick to succeed Robert Lighthizer as U.S. trade representative (USTR).

Tai is the senior trade lawyer on the House Ways and Means Committee “with a history of taking on China,” CNBC reported.

From 2007 to 2014, Tai successfully litigated U.S. disputes with China at the World Trade Organization, the news agency said.

U.S. policy toward the spread of China’s technology sector is also seen as reflecting bipartisan concerns.

“There would be significant congressional pushback to any rollback of the actions that have already been taken,” Martin Chorzempa, a PIIE research fellow, told Reuters.

Despite political differences, the U.S. policies toward China’s rapidly-expanding telecom and tech enterprises have been a rare area of bipartisan agreement.

“Biden’s likely course flows from the increasingly bipartisan consensus among members of Congress that overly warm relations with China and tolerance of its unfair trade practices helped fuel a technological rival that now threatens U.S. leadership,” The Washington Post said.

In a Foreign Affairs article earlier this year, Biden took a strong stance on China.

“The United States does need to get tough with China,” Biden said. “If China has its way, it will keep robbing the United States and American companies of their technology and intellectual property.

“It will also keep using subsidies to give its state-owned enterprises an unfair advantage and a leg up on dominating the technologies and industries of the future,” he said.

Coalition building

But a major difference is expected in Biden’s approach to U.S. problems with China, calling for a multilateral response to cybersecurity risks after years of unilateral measures during Trump’s term.

Biden speaks of building a “united front” with allies that “more than doubles” the strength of U.S. policies.

“That gives us substantial leverage to shape the rules of the road on everything from the environment to labor, trade, technology and transparency, so they can continue to reflect democratic interests and values,” he says.

Last week, Biden told New York Times columnist Thomas Friedman that his plan is to gain leverage not only by getting U.S. allies “on the same page” but also by developing a bipartisan consensus for “government-led investments in American research and development, infrastructure and education to better compete with China.”

“I’m not going to make any immediate moves, and the same applies to the tariffs,” said Biden, referring to increases imposed by Trump before the Phase 1 deal in January. “I’m not going to prejudice my options,” he said.

But coalition building will take time, in part because the policies of U.S. allies toward Chinese tech firms like Huawei have been a patchwork of responses.

In July, for example, Britain reversed course and announced it would bar Huawei gear from its 5G networks, but the ban will not take effect before next September. Telecom operators will have until 2027 to replace Huawei equipment that has already been installed.

Germany is expected to allow Huawei to build part of its network, according to the daily Handelsblatt, while many other nations are reluctant to impose restrictions on Chinese equipment due to its lower cost.

The Biden approach could require months of diplomatic effort to win support for U.S. policies and security concerns, a campaign that may stretch well beyond the first 100 days of his administration.

Reinsch is doubtful that coalition building will work.

“The question for me is how long will he keep trying and what will he do when it becomes clear he’s failing,” Reinsch said in an email.

“I give the coalition policy a year, perhaps more if it picks some low-hanging fruit that encourages them to keep going,” he said.

But Biden has also focused on competition with China’s telecom suppliers.

“Keep in mind that he has also emphasized the other half of the equation … getting our companies in a better position to compete globally, knowing that as China continues its policies of subsidization and support for SOEs (states-owned enterprises), our companies are going to face them in third markets all over the world,” Reinsch said.

“That’s where the real competition will be, not in China and not here, and he has talked about that,” Reinsch said.

In his interview with The Times, Biden indicated that he plans to focus on China policy in a matter of weeks rather than months or years.

“It’s going to be a major priority for me in the opening weeks of my presidency to try to get us back on the same page with our allies,” he said.