Defense and State aren’t the only departments with a big China challenge
The Defense Department has been dealing with Chinese planes and ships harassing U.S. planes and ships. The State Department has dealt with Chinese aggression on the...
The Defense Department has been dealing with Chinese planes and ships harassing U.S. planes and ships. The State Department has dealt with Chinese aggression on the diplomatic front. China has also emerged as a central challenge for the Commerce Department, by design, according to Federal Drive with Tom Temin : Wire China staff writer Katrina Northrop.
Interview Transcript:
Katrina Northrop Thanks for having me. Great to be here.
Tom Temin And what did you find about the Commerce Department that Secretary Raimondo has really made China and commercial rivalry something that should matter more? Tell us what you found.
Katrina Northrop Yes. So in terms of China policy, which is what my piece centered on, the Commerce Department has played a much, much more active role in recent years. So the Commerce Department is seen as pretty sleepy, traditionally. It’s been far from the action, it’s usually run by an older business executive at the end of their career. It’s also a hodgepodge of responsibilities. So there are 13 bureaus with everything from patents to the weather to the census. But starting in the Obama administration, that started to change. So the Commerce Department has something called the Bureau of Industry and Security underneath it, and that enacts export controls on companies or individuals through what they call the entity list. And before the entity list was focused on proliferation of nuclear weapons, it was populated by companies from India and Pakistan, mostly small companies, tiny companies. But in the Obama administration, right before the 2016 election, they added a huge Chinese telecommunications giant called ZTE. And that was a huge moment for the Commerce Department because it showed that it could kind of take on this big company. And then in the Trump administration, that only vastly expanded. So it added Huawei, which was one of the biggest telecommunications firms in the world, to the entity list. And that was a huge deal. They ended up tweaking a bunch of export controls and eventually showed that the Commerce Department could crush a multinational company.
Tom Temin And now ByteDance is part of that list, correct?
Katrina Northrop No, ByteDance is not a part of the entity list. It hasn’t been added to the entity list.
Tom Temin There’s a procurement rule about ByteDance, but that’s not the same as adding it to the entity list.
Katrina Northrop Yeah, it’s different. The Trump administration put on a lot of companies. 250, which is way more than any other administration.
Tom Temin And the practical effect of being listed on that entities list then, is what.
Katrina Northrop When you’re on the entity list, if I’m a U.S. company and I want to do business with that Chinese company that’s on the list, I need a very special license to do business. Essentially, it makes it very hard for U.S. businesses to do business, give them software, give them anything, give them tools or even like tiny parts. People call it a sanction, but it’s really an export control. So the Trump administration really used this list a lot. And when Raimondo came in, she continued to use it. She’s used it a lot, in addition to this list that I’ve just been talking about a lot. Raimondo also has done a lot of other things on China, particularly about ships.
Tom Temin There is a large apparatus in the federal government, including the trade representative, that has to do with trade. I think even the State Department has elements of trade policy. There’s the trade representative and several others. [Department of Defense (DoD] has an apparatus. It sounds like in the Obama administration they discovered almost an unused muscle of trade power and decided to exercise that one just because it was convenient. And I guess you could, no pun intended, throwing red tape around red China. Is that your sense that they found something, a new tool that had just been lying there, not all that well utilized?
Katrina Northrop Yeah, well, it hadn’t been utilized on China, so I think you’re right. I guess discovery is the wrong word because it was there, but they realized that they could use it on Chinese companies. Now it’s really the front line of defense. So your listeners will remember when the spy balloon came over the U.S. that the Chinese spy balloon. The first line of defense, was putting six companies on the entity list. So this is kind of, it’s the first step.
Tom Temin Got it. We’re speaking with Katrina Northrop. She’s a staff writer for Wire China. And you were about to talk about the way that Raimondo’s Commerce Department is using this power in the semiconductor realm.
Katrina Northrop Yeah. So in the semiconductor realm, which is very different than export controls, it’s all about promoting U.S. competitiveness in comparison to China. They have $52 billion to dole out on chips and they are building up this huge team within the Commerce Department. They’re giving money to companies like Intel or TSMC to build manufacturing bases here in the U.S. to make sure that the U.S. has access to semiconductors. And that’s all within the Commerce Department. No one else has control. So it’s a big task.
Tom Temin It’s almost sounds as if, and I don’t say this with a judgment right or wrong, but that they have discovered a great way to establish industrial policy, something which the United States has been ginger about, let’s say, for the last 250 years.
Katrina Northrop Yeah, I mean, this is the biggest industrial policy program in decades. China has really been the impetus behind that program. No one was more involved in making it happen then Secretary Raimondo. She was on Capitol Hill lobbying people, speaking with semiconductor executives to make sure that the CHIPS Act, which gives her this power, was passed and that that was a huge win for her. But it was also a huge win for the Biden administration. And yeah, it’s all about industrial policy, as you say.
Tom Temin What about Raimondo motivates her, do you think? Is there something in her background or something that, aside from zealousness toward the policy of the administration that appointed her, what makes her the commerce secretary to do all this?
Katrina Northrop Yeah, that’s a good question. She has next to no China experience. She was the governor of Rhode Island, a tiny state, and she often talks about how her father was actually laid off when his job in Rhode Island was outsourced to China. But that’s pretty much the extent to her experience dealing with China. But she is this up and coming kind of star in the Democratic Party. A lot of people told me that this won’t be her last job in Washington, D.C. And so having her there, really ambitious, really smart. She’s Harvard, Yale, Oxford educated. She has everything on her resume. So I think that makes a real difference, in terms of the power she has in Washington.
Tom Temin And we won’t hold Harvard against her, but good for her for doing all those things. And what about the reaction from China? Have they been able to countermeasure this in any way?
Katrina Northrop They’re actually cracking down a lot on U.S. businesses in China right now. And that’s a part of what Raimondo is having to deal with. Raimondo met with the commerce minister, the Chinese commerce minister in D.C. in May. That was top of the agenda, according to her read out. She is trying to figure out what the balance is between taking action against Chinese companies, but also making sure that the response on U.S. companies in China does not kind of outweigh that and make it too risky. So that’s a tough balance to strike.
Tom Temin And just a quick question about why are China your publication? Who are those readers and what kinds of things do you also cover?
Katrina Northrop Yeah, we cover China’s global impact on business, tech and trade. Most of our audience is kind of China specialist people in policy and academia and business. So most of our readers have a China focus. We’re based in New York, actually, but we have people all over the world.
Tom Temin And you’ve spent significant time in China personally.
Katrina Northrop Yeah, I was in China before the pandemic had to leave at the very beginning of the pandemic, unfortunately, and hope to get back. But it’s very hard to get a journalist visa to go to China right now. There are very few American reporters on the ground in China. So it’s a it’s a tough time to be reporting, but also a very important time.
Tom Temin But the reporters that are there, they don’t throw in jail like in Russia.
Katrina Northrop There have been reporters in China who have been to jail. There are a few examples of that. And I think it’s more the case that they are kicked out. So at the beginning of the pandemic, a huge group of American reporters were kicked out of China. That’s a big problem for Americans understanding of China, because if you don’t have reporters on the ground, how are you going to know what’s going on?
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Tom Temin
Tom Temin is host of the Federal Drive and has been providing insight on federal technology and management issues for more than 30 years.
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