Economic decline, trade imbalance, offshoring, trade wars. These are buzzwords constantly used in the schools of public policy, business and economics. Many discussions on such fields, however, often ignore the role of existing export controls in causing such adverse consequences.
Export control lists are federal regulations on American businesses to prevent the illicit sale of sensitive high tech, dual-use equipment and software code to foreign countries. The government pinpoints national security as justification to enact such laws. Dual use technology refers to goods having both military and civilian applications. According to Bin and Xiao, two leading professors of International Relations at Chinese universities, “China is level to a subject of export regulations almost as strict as Cuba, Iran, and North Korea”. This form of treatment extends to countries on the rest of the list including Canada, Germany, India, Israel, Pakistan, South Korea and the UK. Economic tensions have continued to rise since the renewal of the export control lists in 2013. Countries on the list point to America’s inability to update its decades old export control policies as a stark reminder of its decline in global economy. China’s opening up of export controls permits it to court fresh economic partners in Africa and Latin America through enormous exports in various industries. China is able to push out American investments as seen in Ethiopia, Kenya, Democratic Republic of the Congo, and more emerging economies. In order to rejuvenate growth, it is imperative for the United States to reform its export control lists.
Export control laws have especially hit the American manufacturing base. Over-regulating the export of dual-use goods singularly contributes to the destruction of US economic competitiveness and a high trade deficit with China. Homegrown businesses fail to rake in profits as their products are locked out of massive markets such as China. Goods as naïve as brake pads, carbon fiber and computer chips are characterized as dual use tech and thus require a special license to export. The application process itself ranges 150 -175 days, causing many businesses to concede. A high trade deficit is linked to massive job losses and outsourcing in the manufacturing sector. The trade deficit with China in the years between 2001-2013 lost two-thirds of all American manufacturing jobs. Due to especially harsh restrictions on the computer and high tech industry, outsourcing to China has become the norm. The years of importing cheap tech goods from China are responsible for more than a million jobs lost and the loss of America’s status as a global leader in computer and electronic production. The global recession in 2009 resonated throughout the world and produced the most cost competitive workers in developing countries such as China. This in turn resulted in reduced wages for existing jobs in the United States, further slowing the economy.
The main case of opposition for reforming the export controls list comes from legislators who reason that the sale of goods with potential military uses could deliver an edge to rival countries such as China or enemy groups in Pakistan. The notion behind this logic can be eliminated for several reasons. The first is that it is inevitable for China to pursue a stronger defense industrial base where technology such as carbon fiber that’s used for body armor and snowboards to be created. Furthermore, these countries gain are able to import similar technology from European countries such as France and Germany with looser export controls. Lastly, illicit trafficking of such goods are already occurring in the status quo. Keeping on these controls only hurt businesses since the groups who wish to acquire military applications do so in the status quo.
After years of outsourcing, recession, and decreased competitiveness due to export controls, is protectionist measures still the way to go? Data from leading economists suggests that the United States should loosen existing export controls to envision the flow of higher quality goods into China while maintaining the current level of imports. According to Capri, “US exports to China would increase by $46-76 billion, at a growth rate of 83–138%, thereby narrowing the US–Sino trade deficit by at least 20%”. This is based on China’s unquenchable thirst for American products and deep reserves for imports. An alternative would be predicated on trade wars and a history of bad policy which would destroy the economy. Only loosening an outdated export control policy towards our biggest trading parties can alleviate traSde deficits and create a robust, resilient, competitive US economy suitable for the 21st market place.
