US China hawks wage battle over commerce department post

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A once low-profile post in the commerce department has emerged as a key battleground for China hawks in Washington who want to push Joe Biden to take a hard line on technology exports to Beijing.

Biden has yet to name his choice to head the department’s Bureau of Industry and Security but some critics are already targeting Kevin Wolf, an Obama administration export control lawyer now at Akin Gump, a law firm, who is seen as the frontrunner.

“Commerce matters a lot, especially because Treasury is unlikely to take serious anti-China action. That’s why so many China hawks are focused on this,” said Derek Scissors, a China expert at the American Enterprise Institute. “If we want to take serious action against China, BIS is arguably the single most important bureau in government.”

BIS controls the export of dual-use technologies that can be employed for commercial and military purposes. Since the end of the cold war, and as China has emerged as a huge commercial market, companies have increasingly lobbied for the ability to export technology to China.

Hawks, however, worry about China’s “military-civil fusion” programme, which forces Chinese companies to share technology with the People’s Liberation Army. They say the US must be more vigilant about exports because of Chinese threats, and also because of how some technology enables human rights abuses, including the persecution of Muslim Uighurs in the north-west region of Xinjiang and the repression of pro-democracy activists in Hong Kong.

During the Trump administration BIS put dozens of Chinese companies, including Huawei, on the “entity list”, which bars US businesses from exporting to them without a licence. It also placed Semiconductor Manufacturing International Corporation and DJI, the drone maker, on the list.

In a sign of the concerns about the Biden’s administration approach to such issues, Republican senator Ted Cruz this week put a hold on the confirmation of Gina Raimondo for commerce secretary after she initially refused to commit to keeping Huawei on an export blacklist during her confirmation hearing.

Leslie Shedd, spokesperson for the House of Representatives foreign affairs committee Republicans, led by the Texas congressman Michael McCaul, said BIS should be run by someone with national security credentials and a “clear-eyed view” of the China threat. “If a nominee does not possess those . . . the congressman would have serious concerns,” she said.

Some critics also argue the bureau should no longer be run by lawyers who have worked with industry, which can be more focused on capturing market share in China than on US national security.

“The revolving door between BIS and industry must close,” said a former official. “The Biden team must act in the best interests of security, not corporate profits.”

Critics have compiled a dossier on Wolf, part of which was seen by the Financial Times, that raises questions about his work advising companies that are seeking licences to sell to Huawei, as well as his firm’s representation of some Chinese companies, including SMIC, on the entity list.

Wolf told the FT he had simply explained to clients what was permitted under law. He said he had not worked for any Chinese companies and was not responsible for work done by other lawyers at his firm.

Wolf said the China security threat was “significant and had evolved considerably” but that the existing multilateral export control system had not been built to address the current challenge.

“This is why someone who understands the threats, the technologies, the supply chains, the rules and how to create a new approach with a smaller group of close allies is needed,” said Wolf, who added that he did not know who would be nominated for the job.

One former Trump official, who believes Wolf would be a smart choice for the job, said that while the Trump administration had been good at identifying the China threat, it had been bad at addressing the challenge partly because of the chaotic application of export controls.

“We didn’t do a good enough job with the tools in our toolbox,” the former official said. “You need someone at BIS who really understands how the tools work to more effectively tackle Huawei and other Chinese companies.”

Wolf’s supporters contend that the lobbying campaign is a Republican effort to paint Biden as weak on China. Some say Wolf is a technocrat who would not make China policy, but would implement decisions taken by the National Security Council, which lacks his expertise.

But China hawks respond that while top-level decisions on things such as the “entity list” are not driven by BIS, the bureau has leeway in terms of how export control rules are crafted and implemented.

Scissors said BIS had been plagued historically by “industry capture”. Yet he said he would rather see an export-control expert run BIS than a China hawk without that background. He stressed that the Senate should grill any BIS nominee about how they view the threat from Beijing.

Robert Blair, head of policy planning at the commerce department until January, said it was crucial to have the right person in the job to “ensure US policy tools are working to protect our economic and national security, while ensuring our economic prosperity at home remains a priority”.

One executive said BIS had been a “regulatory backwater” that tended to view the balance between promoting US business and protecting American security in a way that accommodated industry, but had to change.

“BIS now finds itself on the front lines of the US-China technology conflict, an arguably even more important role than USTR (US trade representative) or the Treasury,” he said. “The question is, can BIS and its future leadership adapt to this new world?”

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