New (Multilateral) Export Controls on Advanced Technologies: Is the Past, the Future?

https://doi.org/10.63189/GVUD8209

1. Introduction

Much of the technology news from the past few years, and as far back as 2019, has been partly about the gradual imposition of export controls on some technologies (e.g. semiconductors, semiconductor manufacturing equipment, and related intellectual property) by the United States of America (US) against companies based in—or linked to—the People’s Republic of China (PRC or China). The story of these measures began in 2019, when the Chinese telecommunications giant Huawei was placed under export restrictions during the presidency of Donald J. Trump, and it evolved into the recent cancellation of export licences granted to major US semiconductor manufacturers.[1] The initial restriction, as well as the subsequent ones, was ostensibly triggered by Huawei’s dominance in the telecommunications market, especially the 5G sector. This was perceived as a threat to national security by the US, considering the Chinese company’s alleged links to the PRC’s state apparatus and military.[2]

In fact, the US now considers China its main strategic competitor, whose development must be slowed to maintain US economic and military supremacy. This approach goes by the term “securitisation,”[3] which involves considering problems that were thought of mostly in economic terms in the past as having a national security aspect. In such a view, political and legal measures that would be incompatible with those implemented under “business as usual” relations can be used, and hitherto competitors (such as the PRC in its economic relations with the US) may be redesignated as “adversaries” to be targeted by such measures. The PRC’s human rights record is subject to criticism, with alleged mass surveillance; abuse against minorities; and increasingly harsh policies towards Hong Kong, Taiwan, and neighbouring countries in the South China Sea all being mentioned.[4] It is also true that China remains subject to export restrictions instituted on weapons and military equipment since the suppression of the Tiananmen Square protests in June 1989.[5] Another reason quite explicitly quoted for instituting export controls involves the foreign trade deficit of the US in US-PRC trade relations,[6] demonstrating that economic securitisation is linked to not only national security and international and human rights considerations but also economic factors.

It would, therefore, make sense to control the export of so-called “dual-use” technologies (i.e. technologies with both civilian and military applications), even if such strict controls as the post-2019 export restrictions have not been used for some time against the PRC. These new controls—which apply to items and the knowledge necessary for deploying cutting-edge technologies such as artificial intelligence, quantum information technology, and broadband telecommunications (including 5G technologies)—constitute an apparently novel way to hinder not only military but also economic development. This is why such a change in US trade policy towards China has been deemed the “great decoupling.”

2. Means and Consequences of the Great Decoupling from the Perspective of Applicable Norms

From the Western perspective, this decoupling is considered justified and even necessary in preventing the PRC from menacing Western powers, specifically the US. Nevertheless, it presents some far-reaching issues when it comes to the interests of the European Union (EU) and its Member States. The most important consequence stem from the participation of Member States (except Cyprus) in the form of cooperation with the US and other Western powers, called the Wassenaar Arrangement.[7] The EU itself, as an entity under international law, is not a member of this arrangement.

The arrangement calls for harmonising export restrictions instituted for certain proscribed items, knowledge, and technologies to target countries subject to export controls in a multilateral setting, with measures decided by consensus. This multilateral export control regime was primarily instituted to restrict dual-use exports to pariah states, such as Iran and North Korea, to prevent the development of advanced weapons by such actors. Today, the most significant economy constituting such a target country is the PRC, which is not party to the Wassenaar Arrangement. (It should be mentioned that the Russian Federation is currently party to the arrangement, with all the predictable problems this presupposes.)

Besides the Wassenaar Arrangement, EU law provides for the harmonisation of export controls and common rules for such measures through the EU Dual Use Directive.[8] Accordingly, within certain limits, Members States are trusted to enforce these controls through domestic measures, including the issuing or cancellation of export licences.

Such cooperation may be beneficial in keeping certain sensitive dual-use technologies from being exported to what are perceived as bad actors on the international stage. However, it also presupposes some negative economic consequences, not the least of which is that development is hindered in both the “sender” and “target” economies, leading to less-than-optimal conditions of trade and international (technological) development.[9]

Outside the legal infrastructure of international cooperation on instituting export restrictions, another form of such restrictions is prevalent: unilateral export controls instituted by technological great powers, primarily the US. While such controls have a direct cost and may inadvertently affect other participants in technological development and trade (e.g. EU Member States that now renounce the export of certain technologies to PRC-registered entities), they may also have negative indirect effects through what is called extra-territorial applications. Let us presuppose—as has happened in practice recently[10]—that the US imposes unilateral export restrictions on the PRC. In such a situation, the problem of extraterritorial application may come into play, as such restrictions will apply to items not only manufactured in the US and destined for export to the PRC but also manufactured with US equipment outside the US, which, if exported by third-country manufacturers, may expose such manufacturers to US sanctions and criminal liability.[11] Therefore, multilateral cooperation and coordination of export controls is necessary.

Thus, the question arises regarding the ways in which this international cooperation should be achieved.

3. Historical Precedent for the Great Decoupling

The situation experienced today in relations between the US and PRC is not new. Similar circumstances once resulted in setting up a multilateral export control regime—the very one that preceded the Wassenaar Arrangement mentioned above. The Coordinating Committee for Multilateral Export Controls (CoCom) came into being as an informal, non-binding agreement between the US and its—mostly North Atlantic Treaty Organization (NATO)—allies to prevent advanced Western technologies from reaching the Eastern Bloc and later the PRC. The creation of CoCom dates to the late 1940s. In 1948, the US initiated discussions with other Western powers to institute a coordinated embargo against US strategic adversaries, and the regime, based on an informal but generally adhered-to gentlemen’s agreement, began functioning on 1 January 1950.[12] Considering such an embargo’s economic and diplomatic costs (due to its incompatibility with the policy of neutrality), especially to US allies, as well as its questionable basis in international law, some members were reluctant to join,[13] but in the end they did (including latecomers into the Western Cold War alliance system, such as Japan and Portugal).

The CoCom regime had a dual purpose—arms control and economic containment—by starving the targeted states of modern technologies to inhibit their economic capacity. Arguably, it was the latter aspect that turned out to be more important. This is because CoCom—as a means of economic warfare[14] and not a sanctions regime—contributed directly to the loss of competitiveness of the Eastern Bloc,[15] possibly even to its ultimate collapse. This historical example lends itself as a solution to what the US considers the resurgence of the PRC, something it has long thought of as a strategic threat to be dealt with using economic pressure.[16] This is especially true as disbanding of the CoCom system is considered to have contributed to the rise of China in the first place.[17] Proposals based on parallels with the Cold War, calling for re-institution of a CoCom-like regime, are already present.[18]

4. The EU-US Trade and Technology Council: Is the Past the Future?

While the current “official” successor to the CoCom is the Wassenaar Arrangement, this export control regime (potentially because of the presence of the Russian Federation among its membership) might become outdated. In fact, a new CoCom-esque cooperation is already taking shape in the form of the EU-US Trade and Technology Council (TTC). Similar to CoCom, the TTC is a setting for trans-Atlantic informal cooperation regarding, inter alia, export controls.[19] Another similarity is the apparently non-binding nature of the TTC’s decisions (which, just as in the case of CoCom, are likely backed up by coercive means that are not made public). However, unlike CoCom or the Wassenaar Arrangement, the TTC is a form of cooperation not between sovereign states but between the US and EU. Again, unlike the CoCom, which had no stated political or military goals, the TTC has the overt political goals of imposing sanctions and countering authoritarianism.[20]

Considering the particular objectives of the TTC in the field of export controls, joint statements[21] of the TTC mention a common commitment to ensuring that such controls are effective along with cooperation in aiding and promoting compliance with export restriction measures, including by EU Member States. While the statements regarding export controls mostly refer to Russia, Russia’s full-scale invasion of Ukraine, and the sanctions imposed regarding that conflict, China is also mentioned. It is also clear from the political content of the TTC’s founding declaration that export control measures directed at the PRC do not lie outside its scope.

While it is natural for the EU, as the coordinator of the bloc’s foreign trade policy, to participate in the TTC on behalf of its Member States, one, perhaps collateral, problem raised by this cooperation is its representativeness. In the case of CoCom, opposition of the participating states was actively voiced, with each participant considering its own interests.[22] Now, it shall fall to the EU to aggregate and centralise the interests of the Member States when committing to informal export control measures towards the US.

5. Conclusions

What is the answer to the question posed in the title of this short essay? Is the past of CoCom restrictions—a time of trading-blocs, long-term economic tension, and partial excision of a major power from technological advances—also the future? Is the TTC simply CoCom by another name, or is it destined to be? Is the past the future? At this stage, the question appears to elude an answer.

However, let us consider the present state of play. The US is currently committed to restricting China’s access to cutting-edge technology in ever wider terms through unilateral and multilateral export restrictions. These restrictions, in the case of the PRC and CoCom, seem less as sanctions and more as means of economic warfare, as no political goals are set for their removal. The founding declaration of the TTC also seems to refer to the resistance to autocracy (regardless of the definition of this term). Thus, the EU has committed to cooperation with the US in technology export restrictions through the TTC without defined boundaries and in parallel with the Wassenaar Arrangement, in a way that partly renders it a tributary of US policies and places the EU in one of the forming technological blocs that will define US-PRC competition. The past, then, might not be the future but seems to have close resemblance.

[1] João da Silva, ‘US Revokes Licences for Sales of Chips to Huawei’, 2024, https://bbc.com/news/articles/cgxwpql2e82o.

[2] Gregory J. Moore, ‘Huawei, Cyber-Sovereignty and Liberal Norms: China’s Challenge to the West/Democracies’, Journal of Chinese Political Science 28, no. 1 (March 2023): 151–67, https://doi.org/10.1007/s11366-022-09814-2; Øystein Soknes Christie, Jo Jakobsen, and Tor Georg Jakobsen, ‘The US Way or Huawei? An Analysis of the Positioning of Secondary States in the US-China Rivalry’, Journal of Chinese Political Science 29, no. 1 (March 2024): 77–108, https://doi.org/10.1007/s11366-023-09858-y.

[3] Olga Hrynkiv, ‘Export Controls and Securitization of Economic Policy: Comparative Analysis of the Practice of the United States, the European Union, China, and Russia’, Journal of World Trade, 2022, 633–56; Rita Taureck, ‘Securitization Theory and Securitization Studies’, Journal of International Relations and Development 9, no. 1 (March 2006): 53–61, https://doi.org/10.1057/palgrave.jird.1800072.

[4] U.S. Department of State, ‘The Chinese Communist Party: Threatening Global Peace and Security’, 2017, https://2017-2021.state.gov/the-chinese-communist-party-threatening-global-peace-and-security/.

[5] A. Cooper Drury and Yitan Li, ‘U.S. Economic Sanction Threats Against China: Failing to Leverage Better Human Rights’, Foreign Policy Analysis 2, no. 4 (2006): 307–24.

[6] Han Hu et al., ‘U.S.–China Trade Conflicts and R&D Investment: Evidence from the BIS Entity Lists’, Humanities and Social Sciences Communications 11, no. 1 (25 June 2024): 829, https://doi.org/10.1057/s41599-024-03369-8.

[7] Arms Control Association, ‘The Wassenaar Arrangement at a Glance’, 19 December 2023, https://www.armscontrol.org/factsheets/wassenaar.

[8] Karolien Vandenberghe, ‘Dual-Use Regulation 2021/821: What’s Old & What’s New in EU Export Control’, Global Trade and Customs Journal, 2021, 479–88; ‘Regulation (EU) 2021/821 of the European Parliament and of the Council of 20 May 2021 Setting up a Union Regime for the Control of Exports, Brokering, Technical Assistance, Transit and Transfer of Dual-Use Items’ (2021), https://eur-lex.europa.eu/eli/reg/2021/821/oj.

[9] Chad P. Brown, ‘The Challenge of Export Controls’, Finance & Development, 2023, 18–21.

[10] Indrabati Lahiri, ‘Why the US Is Banning Qualcomm and Intel from Exporting Some Chips to China’, Euronews, 2024, https://www.euronews.com/business/2024/05/09/why-the-us-is-banning-qualcomm-and-intel-from-exporting-some-chips-to-china.

[11] Austen Parrish and Cedric Ryngaert, Research Handbook on Extraterritoriality in International Law (Cheltenham, UK: Edward Elgar Publishing, 2023), https://doi.org/10.4337/9781800885592; Joop Voetelink, ‘The Extraterritorial Reach of US Export Control Law. The Foreign Direct Product Rules’, Journal of Strategic Trade Control 1, no. 1 (2023): 1–23, https://doi.org/10.25518/2952-7597.57; Régis Bismuth, ‘Chapter 7: The European Union Experience of Extraterritoriality: When a (Willing) Victim Has Become a (Soft) Perpetrator’ (Cheltenham, UK: Edward Elgar Publishing, 2023), 118–32, https://doi.org/10.4337/9781800885592.00015.

[12] See United States Congress House Committee on Foreign Affairs and Science, and Transportation United States Congress Senate Committee on Commerce, Technology and East-West Trade, OTA-ISC (Series); 101; ISC-101 (Washington, D.C.: Congress of the United States, Office of Technology Assessment, 1979), 153 et seq., https://www.princeton.edu/~ota/disk3/1979/7918/7918.PDF; John H. Henshaw, ‘The Origins of COCOM: Lessons for Contemporary Proliferation Control Regimes’ (Stimson Center, 1993), JSTOR, http://www.jstor.org/stable/resrep10989.5.

[13] United States Congress House Committee on Foreign Affairs and Science, and Transportation United States Congress Senate Committee on Commerce, Technology and East-West Trade, 160–65.

[14] Sanctions regimes are meant to achieve compliance with some demand, or rule of international law, whereas economic weapons are meant to degrade and destroy the economy of the opponent. Tor Egil Førland, ‘‘Economic Warfare’ and ‘Strategic Goods’: A Conceptual Framework for Analyzing COCOM’, Journal of Peace Research 28, no. 2 (1 May 1991): 191–204, https://doi.org/10.1177/0022343391028002005.

[15] Boris M. Pichugin, ‘Economic Crisis — Eastern Europe and the Former Soviet Union’, Security Dialogue 23, no. 4 (1992): 100. See also Joshua R. Itzkowitz Shifrinson, ‘U.S. Strategy and the Decline of the Soviet Union’, in Rising Titans, Falling Giants: How Great Powers Exploit Power Shifts, ed. Joshua R. Itzkowitz Shifrinson (Cornell University Press, 2018), https://doi.org/10.7591/cornell/9781501725050.003.0005.

[16] See Edward N. Luttwak, The Rise of China v. the Logic of Strategy (Cambridge, MA, London: The Belknap Press of Harward University Press, 2012).

[17] Hugo Meijer, ‘The Rise of China and the Collapse of COCOM’, in Trading with the Enemy: The Making of US Export Control Policy toward the People’s Republic of China, ed. Hugo Meijer (Oxford: Oxford University Press, 2016), https://doi.org/10.1093/acprof:oso/9780190277697.003.0004.

[18] Konark Bhandari, ‘COCOM 2.0: Could a New Multilateral Regime Help Control High-Technology Exports?’, Carnegie India, 2024, https://carnegieendowment.org/posts/2024/02/cocom-20-could-a-new-multilateral-regime-help-control-high-technology-exports?lang=en; Ramon Marks, ‘Commentary—Can Export Controls Win a New Cold War: A Historical Case Study’, The Jamestown Foundation, 2023, https://jamestown.org/program/commentary-can-export-controls-win-a-new-cold-war-a-historical-case-study/.

[19] The White House, ‘U.S.-EU Summit Statement’, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/15/u-s-eu-summit-statement/.

[20] Idem. According to the White House:

We reject authoritarianism in all its forms around the globe, resisting autocrats’ efforts to create an environment that protects their rule and serves their interests, while undermining liberal democracies. We intend to enhance cooperation on the use of sanctions to pursue shared foreign policy and security objectives, while avoiding possible unintended consequences for European and U.S. interests. In this respect, we resolve to continue to engage on issues on which we might have different approaches.

[21] The White House, ‘U.S.-EU Joint Statement of the Trade and Technology Council. 31 May 2023. Luleå, Sweden’, 2023, https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/31/u-s-eu-joint-statement-of-the-trade-and-technology-council-2/; The White House, ‘U.S.-EU Joint Statement of the Trade and Technology Council. 16 May 2022. Paris-Saclay, France’, 2022, https://www.whitehouse.gov/wp-content/uploads/2022/05/TTC-US-text-Final-May-14.pdf; The White House, ‘U.S-EU Joint Statement of the Trade and Technology Council. 5 April 2024. Leuven, Belgium’, 5 April 2024, https://www.whitehouse.gov/briefing-room/statements-releases/2024/04/05/u-s-eu-joint-statement-of-the-trade-and-technology-council-3/.

[22] United States Congress House Committee on Foreign Affairs and Science, and Transportation United States Congress Senate Committee on Commerce, Technology and East-West Trade.