U.S to implement tough rule in response to China technology threats

The Biden administration plans to permit a sweeping a Trump-era geared toward combating Chinese technology threats, a move that gives the Department of Commerce broad authority to prohibit transactions involving “foreign adversaries.”
February 28, 2021 | 15:11
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The Trump administration issued bans on doing business with several Chinese tech giants, including Huawei Technologies. PHOTO: QILAI SHEN/BLOOMBERG NEWS

According to Bloomberg, the interim rule, which will allow Commerce to monitor transactions of governments including China’s, was first proposed by the previous administration in January — days before Joe Biden’s inauguration — and follows an executive order former President Donald Trump signed in 2019. The department said Friday it’s accepting public comments on the plan through March 22, the same day it becomes effective. A final rule that would implement the measure may be issued at some future date that’s not yet been determined, a Commerce spokesperson said.

In the interim rule, former Commerce Secretary Wilbur Ross listed the governments of China, Russia, Iran, North Korea and Cuba as adversaries.

The rule is “intended to prevent foreign adversaries from exploiting vulnerabilities” in the information and communications technology-services supply chain, Commerce said in an emailed statement Friday. “Trustworthy information and communications technology and services are essential to our national and economic security and remains a top priority for the Biden-Harris administration.”

Technology companies, including IBM Corp. say the rule, if implemented in its current form, would damage the economy.

“By the Commerce Department’s own estimate, this rule would impose many billions of dollars in new compliance costs on millions of U.S. firms, including countless small businesses,” IBM Regulatory Affairs Vice President Christopher Padilla said. “Such a massive, overbroad, and economically damaging Trump-administration rule should not be on autopilot.”

There is widespread concern in the business community about the breadth of the rule and the precedent it would set in giving the agency blanket authority to interfere in transactions.

Earlier this month, the biggest trade associations, including the U.S. Chamber of Commerce, warned the Biden administration of the negative impact the rule could have on the economy and asked it to halt its implementation.

“The net impact of these negative consequences could undermine the much-needed economic recovery from the pandemic that is a priority of the administration and a central feature of the Biden-Harris American rescue plan,” the groups wrote in a Feb. 4 letter.

The affection of the rule on American companies

Photo: The Reuters

The rule may have an effect on as many as 4.5 million American companies of all sizes, in accordance with a Commerce Division estimate, doubtlessly requiring them to get authorities clearance for purchases and offers involving subtle know-how with what the regulation calls a “international adversary,” or face potential unwinding of the offers or different enforcement.

The brand new authorities oversight would apply to know-how transactions involving important U.S. infrastructure, networks and satellite tv for pc operations, giant knowledge internet hosting operations, broadly used web connectivity software program, and know-how utilized in superior computing, drones, autonomous programs or superior robotics, in accordance with a draft rule. It may have an effect on gross sales or, in some circumstances, use of a know-how.

The telecommunications and financial-services industries are considered as significantly affected by the rule as a result of they’re heavy customers of information-technology companies and deal with delicate shopper knowledge, however many different consumer-facing companies even have so much at stake.

Beijing has beforehand accused Washington of unfairly discriminating in opposition to Chinese language corporations and has tried to leverage entry to the big Chinese language market to strain international companies to disregard and foyer in opposition to U.S. restrictions.

Permitting the rule to go forward may sign additional bother for U.S. companies, which discover themselves more and more caught in the midst of Washington’s effort to confront China over its financial insurance policies and Beijing’s retaliation for the U.S. strikes.

The Trump administration issued bans on doing enterprise with a number of Chinese language tech giants starting from telecommunications maker Huawei Applied sciences Co. to platforms akin to WeChat, though a few of these measures have been blocked by courts. It additionally sought to compel the Chinese language proprietor of the short-video app TikTok to promote its U.S. operations to American corporations, although that effort stalled and has been shelved for now.

The approaching Commerce Division rule was in some respects essentially the most far-reaching of the Trump administration actions in opposition to Chinese language tech. It will give the division sweeping powers to require licenses for the big selection of know-how transactions or to ban them outright.

In current weeks, enterprise leaders have anticipated the rule to be postponed not less than quickly, because the Biden administration conducts a assessment of the Trump administration’s focusing on of Chinese language tech corporations, in accordance with a number of enterprise representatives who’re following the problem.

Many enterprise leaders acknowledge the dangers posed by know-how from China and different adversary nations, and the necessity to tackle them. These embody stealing mental property, well being knowledge and private monetary info, in addition to monitoring People’ areas and conducting company espionage from contained in the U.S., in accordance with a draft of the rule.

“We view the proposed rule as imprecise and extremely problematic as a result of as written, it could present the division with practically limitless authority to intervene in nearly any industrial transaction between U.S. corporations and their international counterparts that entails know-how, with little to no due course of, accountability, transparency, or coordination with different authorities applications which might be additionally designed to guard nationwide safety,” one group of greater than 30 enterprise associations wrote in a letter in mid-January, simply earlier than President Biden took workplace. That group included main tech and foreign-trade associations in addition to the U.S. Chamber of Commerce, retailers, eating places and electrical utilities.

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