Emad Mekay

CAIRO, Dec 1 2006 (IPS) — Several U.S. business groups have come out against a proposed regulation that would place further control exports on China for fear that Beijing will use U.S. technology to modernise its military. The groups say the plan is unrealistic and unworkable.

Dozens of business associations called on U.S. Secretary of Commerce Carlos M. Gutierrez to withdraw the proposed export control regulation for the People’s Republic of China.

In a letter distributed to the media, the groups which include the National Foreign Trade Council (NFTC), the Business Roundtable and the Business Software Alliance said the rule would place excessive compliance burdens on U.S. corporations, while failing to advance the country’s national security interests.

The groups argued in their letter to the Bureau of Industry and Security (BIS) that the proposed rule would be unilateral and bypass diplomatic efforts and warned of its negative impact.

“We believe that the regulations could well have a serious deleterious impact on the significant political, military and foreign policy relationships developed with China as well as the bilateral economic relationship,” said the 42-page letter.

Business leaders’ alarm was clear, with many of them calling the rule a major shift in U.S.-China business relations.

“This rule is not a small policy change, but rather a major shift in the way we approach U.S.-China economic relations. The impact on the U.S. business community will be extensive as will the strain on ties between the United States and China, which is a vital ally,” said NFTC President Bill Reinsch.

Reinsch said the plan could have an impact on other U.S. relations with China.

“The reality is that we can’t have a U.S. policy where we both seek to engage China on a broad number of issues ranging from diplomacy to the value of currency to trade, and at the same time impose unilateral, broad-based regulations on U.S. exports to China,” said Reinsch.

China is one of the U.S.’s fastest-growing export markets, representing billions of dollars in sales for U.S. companies. The U.S. Commerce Department has been peddling the rule as one that will help U.S. companies compete in the vast Chinese market for civilian technology while preventing the export of technologies that contribute to China’s military modernisation.

Among the requirements that U.S. businesses fear could hinder their operations is that it requires U.S. firms to obtain information from their customers about their intentions for purchased goods downstream.

The regulation would also impose additional certification burdens on the Chinese government.

The Commerce Department said in a release that the “Revisions and Clarification of Export and Re-export Controls for the People’s Republic of China” requires exporters to obtain an “End-User Certificate”, issued by the Chinese Ministry of Commerce, for all transactions in which the total value of items exceeds 5,000 dollars.

It also bans a list of items defined as “subject to the military end-use license requirement” with the goal of denying Chinese military access to those items.

But the groups which represent major U.S. corporations faulted the proposal on many grounds.

The proposed export controls will not involve other nations or U.S. allies. Already Britain, Germany and Italy say they are not bound by U.S. restrictions on trade to China.

This has worried the business groups, who argue that the rule will lose its effectiveness while penalising U.S. firms and rewarding their competitors.

“It remains unclear what benefits and positive outcomes are intended to result from this regulation. What is clear, however, are the costs to U.S. businesses,” said Robert Holleyman, president and CEO of the Business Software Alliance.

“If implemented as drafted, the rule would impose increased liability risks as well as stifling financial costs on American companies seeking to comply,” he said.

The business groups estimate that they will incur expenses of more than 100 million dollars a year meeting the compliance requirements.

“Requiring China to issue end-user certificates of Chinese customers for any licensed sale over 5,000 dollars goes far beyond anything being required by our allies,” said John Frisbie, president of the U.S.-China Business Council. “We need to protect our legitimate security concerns, but not unnecessarily undermine our competitiveness.”

Even depriving China of military products will not work, they argue, because those goods are already produced in China or are generally available in the international marketplace.

“The realities of the global marketplace make it highly unlikely that the new controls will have any impact on China’s access to the items in question as they are already widely available from non-U.S. sources,” said John Engler, president of the National Association of Manufacturers, in a statement.

The heavyweight business leaders said a better approach to China would be establish a special advisory group to examine all the issues relevant to advanced technology trade with China including economic, foreign policy and national security concerns.