China hawks in Washington are cheering the Trump administration’s decision to place Chinese telecommunications giant Huawei on an export blacklist, a move they say will thwart to company’s rise.
But expanding the use of export controls in the high-tech sector has the potential to inflict substantial harm to US companies, a new report found.
US firms are at risk of losing as much as $56 billion worth of export sales over a five-year period, the Information Technology and Innovation Foundation (ITIF) said in a report released on Monday. In the worst-case scenario, such restrictions could directly put nearly 75,000 jobs in danger.
The report looked at policies that could affect the broad technology sector, specifically the Export Control Reform Act, which was signed into law by President Donald Trump in August of last year.
The legislation requires the Commerce Department to impose export controls on “emerging and foundational technologies” (EFT) that are “essential to the national security of the United States.”
While the law does not specifically mention China, Beijing’s ambition to become a global leader in emerging technologies is the clear target.
Quantifying the specific harm that the policy will inflict on US firms that supply products to China, and related harm to the economy more broadly, is complicated by the fact that Congress did not define EFTs.
But the Commerce Department’s Bureau of Industry and Security (BIS) is considering a wide range of products including microprocessors, data analytics and robotics.
The risk, ITIF says, is that broad export controls will substantially reduce the very revenues US technology firms rely on to invest in research and development, thereby undercutting their competitiveness.
The report comes as the ripple effects of an effective export ban on products to China’s Huawei are being felt in financial markets. Shares of US semiconductor firms, which rely heavily on sales to Chinese firms including Huawei, continued to lead losses on Wall Street on Monday.
The placement of Huawei on BIS’s “Entity List” requires US companies to acquire special license to sell products to the Chinese firm. Major tech companies announced that they have suspended business with Huawei, though Reuters reported last week that the US may extend licenses for certain products.