President Biden is planning to move ahead with a rule passed by the Trump administration last November to combat Chinese technology-related threats. The rule, which comes into effect next month, will empower the U.S. Commerce Department to ban all technology-related business transactions that are determined to be a threat to the nation.
The department is currently accepting public comments on the rule until March 22, when it will come into effect. Business Roundtable, a group that comprises major American companies’ chiefs, had earlier said that the rule is “unworkable” in the current form.
Companies had complained that if the rule is implemented, it could hurt American firms’ competitiveness and innovativeness. Businesses would be forced to bear new compliance costs and risk unwinding deals involving foreign partners.
Some companies are worried that they would be required to replace existing Chinese tech equipment, thereby taking on additional costs amidst the pandemic. This is especially true of companies operating in the telecommunications sector.
The Commerce Department has estimated that almost 4.5 million American businesses will be affected by the rule, with compliance costs in the first year of implementation reaching up to $52 billion. The annual compliance cost is estimated to be around $20 billion.
You are now signed up for our newsletter
Check your email to complete sign up
Given such widespread impact, many experts expected the Biden administration to delay implementing the rule until it conducts a broad review of U.S. policy on Chinese tech. However, Washington decided to move ahead, as it does not wish to be too soft on China. But taking into account the business community’s concerns, officials have indicated that they might not enforce the rule too strictly.
Members of the Biden administration have repeatedly stressed that they would take an aggressive stance against China. During her confirmation hearing, Commerce Secretary nominee Gina Raimondo promised to be strict in tackling China’s unfair practices, naming companies like ZTE and Huawei specifically. In late January, White House Press Secretary Jen Psaki affirmed that the administration would hold China accountable for its actions.
“Technology … is of course at the center of U.S.-China competition… China has been willing to do whatever it takes to gain a technological advantage — stealing intellectual property, engaging in industrial espionage, and forcing technology transfer… The president’s view is we need to play a better defense, which must include holding China accountable for its unfair and illegal practices and making sure that American technologies aren’t facilitating China’s military build-up,” Psaki said in a statement.
President Biden has signed an executive order to carry out a 100-day tech supply chain review to address concerns over a semiconductor shortage. Chip shortages have come about as a result of pandemic-related production slow down and the trade war between the U.S. and China; this has made it difficult for American firms to work with Chinese chip manufacturers.
“I’m directing senior officials in my administration to work with industrial leaders to identify solutions to the semiconductor shortfall… Congress has authorized a bill, but they need … $37 billion to make sure that we have this capacity. I’ll push for that as well,” Biden said in a statement.
Senate Majority Leader Chuck Schumer revealed that Chinese tech would soon pass a package to enable the U.S. to outcompete China and create more jobs. He admitted that the semiconductor industry is a weak spot in the American economy and that China cannot get ahead in this sector.