US: Security concerns prompt new China trade rules
Updated
National security concerns about China's militarisation are behind America's decision to tighten regulations on military technology sales. The US has set up a list of 20 product groups that now require end-use validation which means any American company selling technology directly to China, or through a third country, must prove that the technology will not be used to boost China's military power.
Presenter: Bo Hill
Speakers: William Reinsch, president, National Foreign Trade Council; Mario Mancuso, under-secretary for Industry & Security, US Department of Commerce; Rory Medcalfe, international security analyst, Lowy Institute of International Policy in Australia
HILL: The recent thawing of relations between China and the US could be about to reverse. A new list has highlighted national security concerns, prompting stricter rules which control military hardware and technology that may aid China's military. The new policies will mean a lot more red tape, and a burden of proof on American companies. Bill Reinsch, president of the US's National Foreign Trade Council, explains.
REINSCH: They will impose a significant compliance and liability burden on American companies that will be expensive on the big ones and a real disincentive for the small ones to do business with China at all. It applies to re-exports so that means, in your case, if an American company wants to export components to Australia he has to ask his Australian customer, where are you going to send your finished product - is it going to military end-use in China? And so his Australian customer is going to have to cooperate with the US rule and the Australian customer may not be very interested in doing that and he may end up deciding that well he'll just save himself the trouble and do business with somebody else.
HILL: Total US exports to China in 2006 were worth $US55.2 billion, and US high-tech exports were worth $17.7b. Chinese imports to the US, in contrast, totalled $287.8b. It's a trade deficit that has caused friction between the Beijing and Washington. So why would President Bush's administration want to restrict further American trade interests in China? Mario Mancuso is under-secretary for industry & security at the US Department of Commerce. He says the US government is mindful of industry concerns and the updated policy partly facilitates trade because it eliminates the need for licences for approved buyers. But, he says, it should not be about security versus economic interests.
MANCUSO: In a strict sense, we don't balance national security, there isn't something that we say if there are economic impacts that we weigh that against national security. We have to do what's appropriate for our country.
HILL: Bill Reinsch, from the National Foreign Trade Council, says he understands.
REINSCH: This is a national security issue for the US government and normally companies don't second-guess the government when the government says it's a national security issue. At the end of the day the US government has to make the decision as to whether it wants to go ahead anyway if it thinks security needs outweigh economic. I think where we get a little frustrated is when government tries to pretend there aren't any economic consequences.
HILL: American security concerns involve China's growing military strength and the potential risks to US interests. Rory Medcalfe, an international security analyst from the Lowy Institute for International Policy in Australia, says the recent Chinese anti-satellite test earlier this year was, at least for the US, a disturbing sign of China's defence capabilities.
MEDCALFE: The US administration is worried in the long term about China's military modernisation and what impact that could have on US power in the Asia-Pacific especially in any situation which might arise over the future of Taiwan.
HILL: While some of the products could be found in European or other markets there are a number of items that China would not be able to access anywhere else but the US. The US Commerce Department says it has targeted specific items, including aviation electronics and aircraft, that are not widely available on the world markets. It would appear the US decision is a backward step in recent warming relations between Beijing and Washington. But, Mr Medcalfe says, the new rules shouldn't hurt.
MEDCALFE: They're significant but I don't think that the US-China relationship will rise or fall on this decision. The trade relationship and investment relationship between the US and China is vast and I think the judgement by the administration is that that enormous relationship can weather the relatively small amount of restriction and damage that this decision will cause. We have to see this in the context of the overall relationship between the US and China which is still generally pretty positive.
