Our So-Called Foreign Policy: A Welcome Biden Breakthrough on China Tech Policy Coming?

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China, export controls, investment, Michael McCaul, monitoring and enforcement, national security, Our So-Called Foreign Policy, Politico, tech, The Wall Street Journal

A key Republican in Congress recently said that the Biden administration is seriously considering a major and long overdue escalation of its efforts to hamstring a Chinese drive to achieve global technology dominance that gravely threatens U.S. national security. And a recent Wall Street Journal investigation has shown exactly why it’s so overdue.

Last week, Michael McCaul, Chair of the House Foreign Affairs Committee, told Politico that (in reporter Gavin Bade’s words) “The White House is considering new action to block U.S. business with entire swaths of the Chinese tech economy — an investment blockade stricter than previously reported.

As McCaul himself put it, based on conversations he says he’s had with U.S. officials, the administration “is talking about a theory where they would stop capital flows into sectors of the economy like AI [artificial intelligence], quantum, cyber, 5G, and, of course, advanced semiconductors — all those things….They actually want to say, right, you can’t invest in any [Chinese] company that does AI. You can’t invest in any company does cyber” or other similar sectors.”

As I’ve repeatedly suggested, such broad brush measures are vital for two main and closely related reasons. First, there are no Chinese entities (even those laughably classified as “private sector”) in any industry, including tech, that aren’t ultimately under the control of the Chinese government.

So it’s been utterly and dangerously foolhardy to believe – as U.S. administrations long have – that not just capital but knowhow and high tech products that Washington permits to be sent to specific Chinese entities aren’t likely to be made available to or used to benefit any other organization in China. And that includes the government and of course the military.

It’s true that Washington’s national security export control system isn’t totally unaware that such leakage may occur. Therefore, for instance, tech and product transfer requests with clear national security implications are typically approved only for customers that supposedly can be trusted to comply. Efforts to verify their trustworthiness are made as well.

But here we come to the second main reason that much more sweeping bans on doing tech business with China are needed: enforcement is excrutiatingly difficult at best. After all, the Chinese tech sector is enormous, which means that the financial and human resources needed for adequate monitoring would be equally enormous. Even worse, the highly secretive Chinese system boasts an impressive arsenal of tactics aimed evading the controls, and the aforementioned Wall Street Journal article indicates how spectacularly they can succeed.

A Journal investigation has found that “China’s top nuclear-weapons research institute has bought sophisticated U.S. computer chips at least a dozen times in the past two and a half years, circumventing decades-old American export restrictions meant to curb such sales.”

Indeed, because of its nuclear weapons-related work, this institute was one of the first such organizations put on U.S. export control blacklists – and that was back in 1997. So it’s clearly long been the subject of great ostensible American concern. Moreover, in 2020, in order to shrink the opportunities for cheating by the lab, the Trump administration  added “10 entities owned or operated by the academy as well as 17 aliases it uses to the entity list for procuring U.S.-origin items in support of Chinese nuclear-weapon activities.”

How, then, did it manage to obtain these semiconductors? Because in a system like China’s, which is not only highly secretive but totally lacking in independent regulatory systems and even apolitical rule of law, nothing is easier than concocting endless numbers of “aliases” and shell companies and fake arrangements of all kinds. Good luck to any American inspectors trying to keep up. Which is why total U.S. bans on investing in entire Chinese tech sectors would be so welcome.

At the same time, why stop at investment? Similar bans on broad classes of products and tech licensing deals are essential, too – and for exactly the same reasons. China operates nothing less than a vast, government wide mechanism for obtaining advanced tech capabilities from abroad by hook or by crook. Concentrating U.S. countermeasures on specific institutes or entities that can quickly change their identities is simply a fool’s quest. With the widest possible bans, Washington could reap the gains of an approach that’s the secret of success in much of life both inside and outside policymaking: keeping it simple.

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Im-Politic: Chat GPT’s No Threat to My Job. Yet

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AI, artificial intelligence, Chat GPT, Im-Politic, innovation, tech

Credit for the idea behind this post goes to my good friend Leon Hadar, a foreign policy analyst always worth reading. He recently decided that he’d heard so much about Chat GPT – the new artificial intelligence software that enables users to produce everything from research papers to works of art and music simply by making a request with some key search terms – that he decided to try it for himself.  (To date, it’s free.)

For reasons that should be obvious, this program has educators and anyone who earns income from creating content scared witless. Even someone like me, who writes as a hobby, has reasons for concern. After all, if actual and potential readers can access the information and analysis I try to provide without visiting RealityChek, then who needs RealityChek?

So Leon recently asked Chatp GPT to write “a column in the style of Leon Hadar.” He found the results, which came in seconds “unbelievable” (evidently in a good way).

Leon’s experiment inspired me to try one of my own, but I was not so blown away by the results, or even close. In fact, I was surprised at how many major mistakes the program made.

Here’s the response I got (in seconds) to my request to “Write an essay in the style of Alan Tonelson”:

“It is time for America to wake up and realize the threat that China poses not only to our economy, but to our very way of life. For too long, we have allowed China to take advantage of our open markets and weak trade policies, resulting in the loss of millions of American jobs and the erosion of our manufacturing base.

“China’s rise as a global economic power has been nothing short of spectacular. In just a few decades, it has transformed itself from a poor, agrarian society into the world’s second largest economy. But this rapid growth has come at a steep price for the United States and other nations.

“China’s economic success has been built on a foundation of unfair trade practices, currency manipulation, and a blatant disregard for intellectual property rights. The Chinese government has used state-owned enterprises and subsidies to dominate key industries, such as steel and solar panels, and has used its control of its domestic market to shut out foreign competitors.

“The result has been a massive trade deficit with China, which has cost the United States millions of jobs in manufacturing and other industries. In addition, China’s disregard for intellectual property rights has allowed it to steal American technology and know-how, giving it an unfair advantage in the global marketplace.

“But the threat from China is not just economic. It is also strategic and military. China is rapidly building up its military capabilities, particularly in the areas of naval and air power, in order to challenge American dominance in the Asia-Pacific region. It is also using its economic leverage to gain influence and control over other nations, particularly in the developing world.

“The United States must take strong and decisive action to counter the threat from China. We must use all available tools, including trade tariffs and other penalties, to level the playing field and protect American workers and businesses. We must also work with our allies and partners to counter China’s strategic and military ambitions.

“But most importantly, we must invest in our own economy and our own people. We must invest in education, infrastructure, and research and development in order to ensure that we remain competitive in the global economy. We must also reform our immigration policies to attract and retain the best and brightest talent from around the world.

“In short, we must be willing to take bold action to defend our economic and strategic interests and to ensure that America remains the leader of the free world. We cannot afford to continue to ignore the threat from China and the consequences will be dire for our nation.”

Certainly, the software captured my major overall worries about China’s rise (though in very generalized form), and the urgency with which I view the threats it poses.

But as RealityChek regulars know, I don’t view “investing in our own economy etc” as being more important for countering China than using tariffs. As I see it, both domestic and international responses are essential. Moreover, I’m completely unconcerned with “leveling the playing field” as opposed to doing whatever is needed to restore cutting edge U.S. industrial and technological competitiveness – whether this approach conforms to some abstract notion of fairness or not.

I’m fine with tweaking U.S. immigation policies to attract more of the world’s genuine geniuses, but believe that the real key to winning the so-called global talent war is developing the almost criminally neglected potential talent available right here at home among our 330 million people.

Regarding China’s use of “its economic leverage to gain influence and control.over other nations, particularly in the developing world,” my views are much more nuanced. If Beijing could call major shots by big developed economies in Western Europe and East Asia, that would clearly undermine American security and prosperity. Remaining kingpin of the Western Hemisphere is essential, too, for Monroe Doctrine-type reasons. And some third world countries are sources of key minerals.

But lots of developing countries in particular are little more than failed states to varying degrees, Therefore, they’re simply not worth trying to control. Much more important, even when it comes to competing with China for influence in places where it does currently count, I’d put much more emphasis than at present on America trying to maximize its own already considerable economic and strategic independence than on trying to win popularity contests around the world.

Similarly, I see no intrinsic value in the United States ensuring that it “remains the leader of the free world.” I simply want it to retain the power and wealth to promote and defend whatever international interests that it deems vital, and that can’t be secured with the kinds of domestic measures over which it will always have more control.

Finally, although I asked Chat GPT to write an essay in my “style,” I don’t see any resemblance here to my own particular voice. The prose is competent at best – nothing more.

At the same time, it is competent – demonstrating an ability that’s beyond that of most humans I’ve encountered. And it got lots right.

As a result, I can easily imagine a day in which Chat GPT or another piece of artificial intelligence software will be able to generate a piece of writing indistinguishable from the Real McCoy. I can even foresee it producing posts and articles on subjects with which I haven’t dealt, in the process using exactly the kind of reasoning and evidence I’d use.

Judging from what I just got from Chat GPT, that day is still a ways off. Still, I can’t help but wonder how far.

Our So-Called Foreign Policy: Totally Unhinged Establishment Thinking on Taiwan

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Asia-Pacific, China, East Asia, foreign policy establishment, Indo-Pacific, investment, Our So-Called Foreign Policy, semiconductors, Seth Cropsey, Taiwan, tech, The Wall Street Journal, Trade

Because semiconductors are already central to America’s security and prosperity and will only become more important with each passing day, wouldn’t it be great if the United States wasn’t so dependent on Taiwan for supplies – especially of cutting-edge chips – given that the island is located just 100 miles from China?

According to Seth Cropsey, one of America’s most respected military experts and a former national security official, the answer is “No” – because if the United States became much more self-sufficient in semiconductor manufacturing, it wouldn’t have to care so much about…Taiwan.

His January 26 Wall Street Journal article is a wonderful example of a syndrome I’ve long written about (most recently here in the Taiwan context) – the tendency of the U.S. foreign policy establishment, and too many U.S. leaders who have listened to its members’ advice, to use foreign policy measures to solve problems much better dealt with through domestic policy moves whenever possible.

The advantages of using domestic policy should be screamingly obvious. As I’ve also previously pointed out (most recently at length here), American policymakers will almost always have much more control over developments within our borders than without. And when it comes to Taiwan-like situations, rebuilding the nation’s capacity to manufacture semiconductors per se carries absolutely no risk of war with a nuclear-armed China.

What’s particularly bizarre about this Cropsey op-ed is that he completely overlooks two eminently reasonable arguments for concentrating tightly on Taiwan’s security, at least for the time being. The first is one I strongly agree with – regaining the semiconductor prowess the United States needs will take many years. So until then, it’s imperative – and in fact in my opinion vital – that America take whatever steps are needed to prevent China from taking over Taiwan, which it regards as a renegade province that it’s vowed to reabsorb by force if necessary. After all, it should be easy to see how Beijing either could win access to Taiwan’s crucial, world-leading production technology, or deny the United States (and the rest of the world) access to the huge volumes of chips that Taiwan’s factories turn out.

The second argument absent from his column – and which I don’t agree with – is that irrespective of the semiconductors, if China gained control over Taiwan, it would take a huge step toward becoming the kingpin of East Asia, perhaps the world’s most economically dynamic regions, and limit or cut off U.S. access to crucial markets and sea lanes.

I disagree for two reasons. First, leaving the semiconductors out of the picture, the chronic and huge trade deficits run up by the United States with the region show that doing business with East Asia has been a longtime major net loser for America’s domestic economy. Second, and also putting semiconductors aside, East Asia has relied for so long on amassing trade surpluses, especially with the United States, to achieve adequate growth that its countries (including China) simply can’t afford such decoupling.

As I just made clear, opponents of my position can cite valid concerns. But Cropsey never mentions them. Instead, he’s simply worried that the Biden administration’s focus on rebuilding America’s own semiconductor manufacturing mean that Washington “looks to be playing for time—not time to rearm and prepare for a fight, but to reduce Taiwan’s importance to the U.S.” and that this would harm U.S. interests because “An America that no longer needs Taiwanese semiconductors [would be able to]abandon its old friend.”

I admire Taiwan’s economic, technological, and political achievements as much as anyone. But even overlooking the enormous extent to which Taiwan’s massive investments in China’s technology industries (just like America’s) have shortsightedly helped create and magnify the very threat the island faces, the idea that honoring a friendship only for its own sake is remotely as important as minimizing the odds of a nuclear war is just loony. And nothing exempifies the nature of too much American foreign policy discussion for decades as well as a major newspaper’s belief that such arguments deserve to be taken seriously.

Making News: Back on National Radio on Banning TikTok & Other Decoupling from China

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Byte Dance, CBS Eye on the World with John Batchelor, China, decoupling, export controls, Gordon G. Chang, Making News, national security, privacy, semiconductor manufacturing equipment, semiconductors, social media, tech, TikTok

I’m pleased to announce that I’m scheduled to be back tonight to the nationally syndicated “CBS Eye on the World with John Batchelor.” Our subject – a raft of recent and proposed U.S. government moves to decouple the nation’s economy from China’s, including legislation to ban the Chinese-owned social media app TikTok.

The segment, which also features co-host Gordon G. Chang, is slated to be broadcast at 10 PM EST. But the entire program is always compelling, and you can listen live at links like this. As always, moreover, I’ll post a link to the podcast as soon as one’s available.

And keep on checking in with RealityChek for news of upcoming media appearances and other developments.

Following Up: Podcast Now On-Line of National Radio Interview on U.S.-China Economic & Tech Relations

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Biden administration, CBS Eye on the World with John Batchelor, China, export controls, Following Up, Gordon G. Chang, microchips, nationalsecurity, Party Congress, tech, Trade, Xi JInPing

I’m pleased to announce that the podcast of my interview last night on the nationally syndicated “CBS Eye on the World” with John Batchelor is now on-line.

Click here for a timely discussion, with co-host Gordon G. Chang, of how the results of the just-concluded Chinese Communist Party’s annual congress will impact U.S. trade with the People’s Republic, and whether the Biden administration’s major new measures will adequately slow China’s drive to achieve global technology leadership..

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Our So-Called Foreign Policy: For Banning All U.S. High Tech Sales to China

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Biden administration, China, Chips Act, Defense Department, export controls, national security, Our So-Called Foreign Policy, semiconductor manufacturing equipment, semiconductors, tech

Just as my good buddy Ace recently gave me a great idea for a post on U.S. Ukraine policy, my equally good buddy Swifty (a finance guy) yesterday gave me an equally great idea – about how to ensure that U.S. curbs on sales of high tech equipment to China really put the hammer on the semiconductor industry being built in the People’s Republic. And interestingly, it mirrors an idea that I proposed many years ago for America’s human rights policy – government compensation for American-owned firms that lose business due to such limits.

In recent months, Washington has made major – albeit incredibly belated – progress in cutting off such American aid to Chinese tech manufacturers, whose burgeoning capabilities of course will boost China’s military power and potential. Important restrictions on what U.S.- and foreign-owned businesses can supply to China’s microchip entities are contained both in the bill signed by President Biden to boost semiconductor manufacturing in the United States, and in a sweeping set of restrictions on what both U.S.- and foreign-owned firms can supply to China’s microchip entities.

But even if these new policies are adequately enforced – always a big question surrounding American efforts slow China’s tech progress – they suffer two related weaknesses stemming from their tight focus on the highest end semiconductors and the equipment needed to make them. First, the vast majority of chips in use today – including in military systems – are lower-tech, so-called “legacy” chips, and China’s growing presence in the global market for these devices can create dangerous vulnerabilities itself.

Second, any sales of the machinery and software needed to make these legacy chips is bound to wind up helping teach Chinese scientists and engineers how to make their more advanced counterparts.

And this is where Swifty’s idea comes in. As he noted, it needs to be America’s goal to cripple China’s ability to make any type of semiconductor, and to completely shut down its learning opportunities. The big obstacle to imposing the broader controls needed to achieve this goal? The fact that this step would drive U.S.-owned companies that make semiconductor manufacturing equipment out of one of their biggest markets.

Swifty’s recommendation? Compensate them for these losses – at least until they can recoup them by selling to friendly countries to which chip production that’s under pressure from U.S. restrictions moves from China. He adds that such payments would be eminently affordable.

After all, even though the China market is enormously important to these firms, the China revenues they say they’ll lose are drops in the bucket compared with the mammoth scale of overall U.S. government spending, and even of the U.S. defense budget. (For some company-specific figures, see, e.g., here and here.)

That last point is particularly critical. For knee-capping China’s tech prowess is vital to U.S. national security. So think of these payments as defense spending – since it’s at least as important to prevent China from deploying lots of high tech weapons on the battlefield in the first place as to develop ways to fight them on the battlefield.

This national security perspective also matters greatly for dealing with another possible outcome of this greatly escalated U.S. strategy of denial – sabotage by American allies whose tech companies try to take advantage of U.S.-owned firms’ exit from China. Although the Biden administration has given some of them temporary exemptions, so far, the rest seem to be abiding by the new Biden administration rules – even in one case in which a loophole may well exist. But if they balk at wider restrictions, they should be told that their actions could wind up enabling Chinese forces to kill Americans in combat, and that they can’t expect continued U.S. protection if they persist. 

Way back in the early 1980s, I wrote that if the United States was serious about human rights policy, compensation should be paid to American-owned companies that lose foreign business in dictator-ruled countries subjected to U.S. economic sanctions. If Swifty’s similar approach isn’t used for China tech policy, it’ll be difficult to claim that the nation is serious about its national security.        

Making News: Back on National Radio Talking Conservatism’s Future & Batchelor China Manufacturing Podcast Now On-Line

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automation, CBS Eye on the World with John Batchelor, China, conservatism, Gordon G. Chang, innovation, Making News, manufacturing, National Conservatism Conference, politics, robots, tech, The Hrjove Moric Show, TNT Radio

I’m pleased to announce that I’m scheduled to return tonight to “The Hrvoje Moric Show” on the internet network TNT Radio. The segment is slated to be broadcast at 9-10 PM EST, and will focus on my impressions of the National Conservatism conference at which I spoke last week, and what this new movement will mean for the future of right-of-center politics in America. But I’m sure that the state of the economy will come up, too!

Click here to listen live, and of course if you can’t tune in, I’ll post a link to the podcast as soon as one’s available.

Speaking of podcasts, here’s a link to the recording of my interview last night on “CBS Eye on the World” with John Batchelor. The segment, with co-host Gordon G. Chang, featured a timely discussion of how China’s manufacturing is rapidly automating, and the implications for U.S. domestic industry.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Our So-Called Foreign Policy: No U.S. Learning Curve on Denying China Vital Tech

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China, Commerce Department, export controls, innovation, Kate O'Keefe, national security, Our So-Called Foreign Policy, sanctions, tech, The Wall Street Journal

The biggest reason to be appalled by The Wall Street Journal‘s excellent report yesterday on America’s efforts to control exports of high tech goods and knowhow to China wasn’t the raw data it contained – which showed that the U.S. government almost never rejects requests by business to sell high tech goods and knowhow to China.

No – as disturbing and scary as these findings are, the biggest reason to be appalled by the article is how clearly it reveals that, after decades of dealing with China, and despite the recent U.S. decision to spend huge amounts of money to try to stay ahead of China technologically, Washington has learned absolutely nothing about the threat to America’s national security, independence, and prosperity posed by this increasingly hostile and dangerous adversary, or how to counter it effectively. And maybe it hasn’t wanted to learn?

In fact, the article, by Journal reporter Kate O’Keefe, adds to the evidence that U.S. officials don’t even view China as especially hostile – let alone dangerous – at all. The People’s Republic is evidently assumed to be a country and an economy that in key respects closely resembles most other major powers with which U.S. companies do business.

Sure, U.S. export controls policies put China in a special category, and subject it to special restrictions for goods like weapons and satellite and space equipment, whose transfer to China is banned outright. But when it comes to “dual use” products and tech – which have both civilian and military applications, and which comprise an enormous group of goods and services – the American approach in practice treats China

>as if it’s got an independent private sector that can be sharply distinguished from its government agencies;

>as if China’s civilian government agencies can be easily distinguished from its national security apparatus;

>as if virtually all these entities operate in reasonably transparent ways and can be “trusted” to act safely in their role as “end-users” of these purchases;

>as if America’s main export control or sanctions challenge is making sure that cutting edge products and tech aren’t provided either directly to the Chinese military or other branches of the Chinese bureaucracy that jeopardize U.S. interests (like the secret police), or indirectly – via a small handful of other actors that, for whatever reason (Corruption? Tragically misguided patriotism?), will pass them along to the Bad Guys; and

>as if the U.S. government has the ability to make sure that prohibited items are kept out of the wrong hands.

Just two examples from O’Keefe’s article of how patently inane this approach has been:

>”Kharon, a Washington, D.C.-based research and data-analytics firm, said it has identified tens of thousands of Chinese entities that may meet the U.S. criteria for military end-user export restrictions, even though there are only roughly 70 on the Commerce Department’s current list.” (Commerce is the lead export control agency.)

>The Commerce Department has added to its list of entities for which Americans need a license to do business the officially state-owned flagship Chinese semiconductor manufacturer SMIC – but only after a U.S. defense contractor “documented the chip maker’s military customers.”

Back in 2012, I wrote that China represents a systemic challenge requiring a completely different export control (and sanctions) approach. Nowadays, when China has grown so much stronger in large part because of this La-La-Land (to be charitable) U.S. strategy, a course change is more important than ever.

What this means is that, no matter how they’re classified by the Chinese regime or structured on paper, every single entity in the People’s Republic that’s in the tech or broader manufacturing sector must be recognized as being under Beijing’s actual or potential control. Therefore, they can be counted on to (a) make available to the authorities anything they acquire that can undermine U.S. interests and/or keep the leadership in power; and (b) do everything possible, including with the regime’s active help, to cover its tracks.

This doesn’t mean that difficult China export control and sanctions policy issues don’t lie ahead for Washington. For that, we can thank all the U.S. leaders before Donald Trump’s presidency who so recklessly turned the People’s Republic into such a powerhouse tech manufacturer and major tech market. (At the same time, the fundamentally moronic export control system remained largely intact during the Trump years.) But one critical reform can be put in place immediately – new regulations realizing that if a product or technology is deemed too dangerous to sell or transfer to any one China entity, it’s by definition too dangerous to sell or transfer to all Chinese entities. Because the China challenge is systemic.

Making News: Podcast Now On-Line of National Radio Interview on Reviving U.S. Semiconductor Making…& More!

Tags

antitrust, Biden, CBS Eye on the World with John Batchelor, China, Chips Act, competition, conservatism, Gordon G. Chang, infotech, innovation, Jobs, manufacturing, microchips, near-shoring, reshoring, semiconductors, tech, Trade, {What's Left of) Our Economy

I’m pleased to announce that the podcast is now on-line of my appearance on last night’s nationally syndicated “CBS Eye on the World with John Batchelor.”

Click here for a timely discussion with John and co-host Gordon G. Chang, about whether a massive new array of subsidies and incentives just signed into law by President Biden will indeed revive American microship production, and prevent U.S.- and foreign-owned semiconductor companies from setting up state-of-the-art operations in China.

In addition, it was great to see IndustryToday.com reprint (with permission, as required!) my recent post on some of Mr. Biden’s factually challenged claims about the economy’s performance during his presidency. Here’s the link.

Finally, I’m honored to have been invited to speak at a big conference to be held in Miami, Florida on the future of American conservatism – including what it should be. My talk, on “An America First Approach to Trade and Competition,” is so far scheduled for Sunday, September 11. But sometimes these plans get reshuffled, so I’ll post any updates as soon as they become available. In the meantime, click this link for the rest of the agenda, and the all-star cast of speakers that’s been lined up, at this link. 

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Following Up: Podcast Now On-Line of National Radio Interview on Pelosi Taiwan Visit and U.S. Stagflation Prospects

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Asia-Pacific, China, decoupling, Following Up, geopolitics, Indo-Pacific, inflation, manufacturing, Market Wrap with Moe Ansari, Nancy Pelosi, national security, Pelosi, recession, sanctions, semiconductors, stagflation, Taiwan, tech, Trade, trade deficit

I’m pleased to announce that the podcast is now on-line of my interview last night on the nationally syndicated “Market Wrap with Moe Ansari.” Click here for a timely conversation on two headline issues:  how U.S. House Speaker Nancy Pelosi’s controversial visit to Taiwan could hit U.S.-China economic relations and America’s access to Taiwan’s world-class semiconductor manufacturing prowess; and why what’s in store for the U.S. economy could be even worse than the recession that’s now widely forecast.

And keep on checking in with RealityChek for news of upcoming media appearances and other developments.