The president’s handling of ZTE, a state-owned telecommunications firm that violated U.S. sanctions on Iran and North Korea, spurred Xi to accelerate plans for China to become self-sufficient in technology.
In awatershed moment, the Commerce Department earlier this year banned U.S. companies from selling to ZTE, a crown jewel of China’s technology industry, after it was caught violating the terms of an earlier settlement of criminal and civil charges related to illicit sales to Iran and North Korea.
The order would have put the company, which employs roughly 75,000 workers, out of business. After an extraordinary personal plea from Xi, Trump agreed to relax the “death penalty” and allow U.S. companies to resume shipments.
But the incident — and Trump’s 2017 decision to veto the sale of Lattice Semiconductor to a China-backed buyer — fueled Beijing’s desire to develop domestic sources for critical products.
Xi has personally directed a campaign to promote “self-reliance,” with public tours of China’s modern industries in the south and its traditional Rust Belt region in the northeast.
“The turn away from reliance on the U.S. for agricultural and industrial inputs will accelerate,” Charles W. Freeman Jr., a former U.S. diplomat said in an email. “U.S. companies in China will hedge by continuing to move some of their facilities to Vietnam and other lower labor cost economies.”
The Commerce Department last month also began drafting regulations to limit exports of advanced technologies, including robotics, biotechnology, artificial intelligence and quantum computing.
The measure, which echoes Cold War-era limits on dealings with the former Soviet bloc countries, aims to safeguard national security and U.S. technological leadership, according to a Federal Register notice seeking comments on the proposal.
“In previous trade talks, China has insisted on the U.S. responding to its requests, as well, including looser export controls and a more lax investment regime. The U.S. is moving in the totally opposite direction vis a vis China, and unlike tariffs, these new regulations will not be up for give and take,” said Cutler.
The new export controls are fueled by concerns that China is trying to steal or buy American technology to help it leapfrog Silicon Valley. Begun in 2015, the “made-in-China 2025” program of subsidies for domestic companies in 10 technology sectors is aimed at displacing U.S. companies as world leaders, the administration says.
The administration is struggling to balance worries about aiding a state-directed economy’s rise and U.S. corporate demands to share in the wealth generated there.
“Trump’s problem is that he has demanded the structural transformation of the Chinese economy into something that works more like the U.S. economy and his administration has defined China as our economic and military enemy,” said William Overholt, a senior fellow at the Harvard University Asia Center. “The demand is nonnegotiable and everyone in both the U.S. and China knows it.”
China could move quickly to pick up stalled negotiations for a treaty that would encourage investment by granting foreign and domestic firms equal treatment, according to Jeff Moon, a former trade negotiator in the Obama administration.
“The two sides have discussed these industrial issues for years in other contexts, and substantive discussions can ramp up quickly if we stop pretending that these are new issues that have never been addressed before,” Moon said, adding that China also could rethink its limits on foreign ownership of joint ventures.
Major business groups applauded the Trump-Xi deal for defusing the immediate threat of higher tariffs, which they said would have raised prices for consumers, narrowed profit margins and disrupted supply chains.
Matthew Shay, president of the National Retail Federation, said he hoped the deal would lead to the elimination of all U.S.-China tariffs.
Dean Garfield, president of the Information Technology Industry Council, echoed the call for a tariff rollback.
That might happen one day. But for China and the U.S., there’s no going back to the world before Trump.
https://www.washingtonpost.com/busi...60ce2a8148f_story.html?utm_term=.87847df91a0b
In awatershed moment, the Commerce Department earlier this year banned U.S. companies from selling to ZTE, a crown jewel of China’s technology industry, after it was caught violating the terms of an earlier settlement of criminal and civil charges related to illicit sales to Iran and North Korea.
The order would have put the company, which employs roughly 75,000 workers, out of business. After an extraordinary personal plea from Xi, Trump agreed to relax the “death penalty” and allow U.S. companies to resume shipments.
But the incident — and Trump’s 2017 decision to veto the sale of Lattice Semiconductor to a China-backed buyer — fueled Beijing’s desire to develop domestic sources for critical products.
Xi has personally directed a campaign to promote “self-reliance,” with public tours of China’s modern industries in the south and its traditional Rust Belt region in the northeast.
“The turn away from reliance on the U.S. for agricultural and industrial inputs will accelerate,” Charles W. Freeman Jr., a former U.S. diplomat said in an email. “U.S. companies in China will hedge by continuing to move some of their facilities to Vietnam and other lower labor cost economies.”
The Commerce Department last month also began drafting regulations to limit exports of advanced technologies, including robotics, biotechnology, artificial intelligence and quantum computing.
The measure, which echoes Cold War-era limits on dealings with the former Soviet bloc countries, aims to safeguard national security and U.S. technological leadership, according to a Federal Register notice seeking comments on the proposal.
“In previous trade talks, China has insisted on the U.S. responding to its requests, as well, including looser export controls and a more lax investment regime. The U.S. is moving in the totally opposite direction vis a vis China, and unlike tariffs, these new regulations will not be up for give and take,” said Cutler.
The new export controls are fueled by concerns that China is trying to steal or buy American technology to help it leapfrog Silicon Valley. Begun in 2015, the “made-in-China 2025” program of subsidies for domestic companies in 10 technology sectors is aimed at displacing U.S. companies as world leaders, the administration says.
The administration is struggling to balance worries about aiding a state-directed economy’s rise and U.S. corporate demands to share in the wealth generated there.
U.S. officials argue their demands for greater market access for foreign companies would benefit Chinese consumers. But administration complaints over China’s state subsidies for technology companies and limits on foreign ownership of joint ventures threaten Beijing’s economic model.
“Trump’s problem is that he has demanded the structural transformation of the Chinese economy into something that works more like the U.S. economy and his administration has defined China as our economic and military enemy,” said William Overholt, a senior fellow at the Harvard University Asia Center. “The demand is nonnegotiable and everyone in both the U.S. and China knows it.”
China could move quickly to pick up stalled negotiations for a treaty that would encourage investment by granting foreign and domestic firms equal treatment, according to Jeff Moon, a former trade negotiator in the Obama administration.
“The two sides have discussed these industrial issues for years in other contexts, and substantive discussions can ramp up quickly if we stop pretending that these are new issues that have never been addressed before,” Moon said, adding that China also could rethink its limits on foreign ownership of joint ventures.
Major business groups applauded the Trump-Xi deal for defusing the immediate threat of higher tariffs, which they said would have raised prices for consumers, narrowed profit margins and disrupted supply chains.
Matthew Shay, president of the National Retail Federation, said he hoped the deal would lead to the elimination of all U.S.-China tariffs.
Dean Garfield, president of the Information Technology Industry Council, echoed the call for a tariff rollback.
That might happen one day. But for China and the U.S., there’s no going back to the world before Trump.
said Claire Reade, a former U.S. trade negotiator now with Arnold & Porter, via email
https://www.washingtonpost.com/busi...60ce2a8148f_story.html?utm_term=.87847df91a0b
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