US, EU, Japan Should Collaborate on Export Controls, Sanctions to Counter China, Report Says
The U.S., the European Union and Japan should do more to align their export control regimes and cooperate on new export control measures to defend against Chinese mercantilist trade practices, the Information Technology & Innovation Foundation said in a Jan. 13 report. The three parties should schedule “formal meetings” to discuss export controls, saying previous discussions have been too “limited in scope. They should be broader given the changing nature of China’s pursuit of advanced technology.”
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The report is a response to China’s unfair trade practices, the ITIF said, including its threat to the “very soul of the global trading system.” The foundation said it is “impossible” for any nation, acting on its own, to effectively respond to China. “It is time for the European Union, Japan, and the United States to band together in a stronger trilateral framework to address the various ways China rigs, manipulates, and distorts markets,” the report said.
For Japan and the U.S., this includes discussions and meetings with individual EU member states on export controls screening frameworks, the report said. Officials at the meetings would report to their country’s respective ministers and senior officials on progress made in the fields of export control cooperation, information exchange and developments in creating “domestic measures” to “target and respond to Chinese firms that benefit from” unfair trade practices, the ITIF said.
All three parties should make sure their export control regimes are updated on a “regular basis” and allow other parties to freely share information about cases of concern. “While not always explicitly identified in relevant policies and debates, China is the main country of concern given the extent of its trade in high-tech goods,” the ITIF said. But efforts to control emerging technologies (see 1912160032) -- including dual-use items -- may complicate the parties’ ability to continually update and align their export control regimes, the report said.
“This is critical because, unless all three parties can come up with fairly aligned export control regimes ... China will simply [pit] companies and countries against each other, few of which can resist the lure of sales in the Chinese market,” the ITIF said.
The ITIF said all three parties are primed for cooperation because they all have recently or are currently modernizing their export control regimes. This includes Japan’s effort “in recent years” to update its export controls (see 1911190019 and 1908020023), the EU’s proposal to modernize its export controls surrounding dual-use items (see 1912240008), cybersecurity and surveillance technology, and the U.S.’s passage of the Export Control Reform Act and its effort to restrict sales of emerging and foundational technology (see 1911070014).
The U.S., the EU and Japan should collaborate on a “narrow and specific set” of emerging and foundational technology controls for items that “provide a unique, identifiable, and qualitative military advantage,” the ITIF said. This will help all three parties agree to similar definitions and terminologies for the controls, which are difficult to determine because they often change “too rapidly for export rules to reliably and readily adapt,” the report said.
The three parties should also develop a “joint regime” to sanction Chinese companies and agencies where there is clear evidence of intellectual property theft against American, European or Japanese companies, the ITIF said. In those cases, the parties should impose a “coordinated export control regime” that is applied to the Chinese company committing the theft. They should also share information to better identify actual end-users -- including introducing a mechanism that allows intercountry communication between export control agencies -- and work with other “key countries” to impose the controls.
Cooperation will make each party’s export control regime stronger, the report said, and avoid situations wherein China simply buys the technology from another foreign buyer in the face of unilateral export controls. Cooperation is “necessary to avoid firms from one party being put at a competitive disadvantage to their competitors in the EU, Japan, or the United States,” the ITIF said, “as in the case whereby one party blocks the export of a particular technology, but the others don’t.”
Although the U.S., the EU and Japan should cooperate on export controls and sanctions against China, there will likely be “force resistance and formidable countermeasures,” the foundation said. “China has repeatedly shown it treats its trade relationships in an ‘all business’ fashion, and is happy to dole out retribution when necessary, especially for nations and their firms that dare to challenge Chinese interests.” But a “stronger trilateral framework” will reduce the impact of Chinese retaliation, the ITIF said. China will not be able to pit American, European and Japanese companies against each other in a ploy “to get them to make the best offer … for access to Chinese markets that should already be open anyway.”