Obama Plan on Export Reform—Win-Win for China and Silicon Valley?

Obama Plan on Export Reform—Win-Win for China and Silicon Valley?

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The White House recently announced its intention to fundamentally reform the U.S. export-control process. While the reform is not specifically addressing exports to China, it will have the greatest impact on China. This overhaul has been long overdue. Its effect will be felt throughout the American economy, particularly in Silicon Valley. It will strengthen U.S.-China bilateral relations and simplify the lives of ethnic Chinese professionals working in high-tech industries.

As the announcement said, “The current export-control system is overly complicated, contains too many redundancies, and, in trying to protect too much, diminishes our ability to focus our efforts on the most critical national security priorities.” Amen. Those working in high-tech companies have been saying that, probably in more pungent terms, for decades.

The White House release cited the brake pads for the M1A1 tank as one example of what ails the current export-control practice. The same degree of control is applied to the export of the brake pads as it is for the entire tank. Yet the same brake pad is used in fire trucks, which can be exported without similar controls. This is the kind of bureaucratic nightmare the reform hopes to remove.

Why will this reform have the greatest impact on trade with China? Heretofore, China has been placed in not outright foe and not exactly friend category—which means even the export of heavy-duty brake pads is subject to intense scrutiny as regulators examine the likely “dual use” nature of the sale. Dual-use is bureaucratic speak for items for civilian use that could have a military application as well, which means a lot of red tape gets tied around the transaction.

The reform, if implemented as announced, will greatly simplify the licensing procedure. By strictly defining those items that are subject to control and eliminating multiple and often conflicting agencies, the new policy should render the export license application process transparent and take away the pain of exporting.

China is potentially America’s biggest customer for high-tech export. Because of the ambiguity of prevailing export-control policy, much of the potential has not been realized. Instead, China buys from Western European countries and Japan.

Obama’s intention is good news for Silicon Valley—and other high-tech regions—as these companies can now focus more on exporting and less energy on walking through the labyrinth of government approval.

This development should also be good news for Chinese Americans working in the high-tech industry. Since China has become a major buyer, many Silicon Valley companies have wisely employed ethnic Chinese to engage in marketing and sales to China. This occupation carried unexpected hazards.

Silicon Valley has witnessed cases in which the export manager to China landed in jail for alleged sale of dual-use items to China. In one case, it involved the sale of shaker tables. The government accused the ethnic Chinese export manager of selling to a missile-making facility in China rather than the locomotive factory stated in the application. By the time the government dropped the charges for lack of substantiation, the former export manager had been out of a job for months and confronted with the reality of a ruined career.

With the new regulations, such ambiguity should not happen again and exporting to China will no longer be cause for racial profiling.

The export-control reform, long overdue, will be an all-around win. We can only hope that politics do not interfere.

Dr. George Koo is a retired international business consultant and a contributor to New America Media.