Senate bill targets Chinese tech companies

Two senators want to make it the official policy of the United States to curb Chinese influence of the U.S. technology supply chain.

Legislation filed Aug. 21 by Sens. Marco Rubio (R-Fla.) and Tammy Baldwin (D-Wis.) would implement a range of trade restrictions for Chinese companies seeking to invest in or partner with American firms across a range of commercial sectors, including emerging technologies like artificial intelligence and quantum computing. The bill also seeks to limit Chinese access to U.S. markets in the future.

The bill would direct the U.S. Trade Representative to make an annual list of products manufactured, produced in or exported from China that align with the Made in China 2025 plan, a strategic document issued by Beijing in 2015 to increase domestically produced goods in the technology and other sectors. It would direct the secretary of Commerce to prohibit the export of "any national security sensitive technology or intellectual property" to China or Chinese-owned businesses, including scare materials used to manufacture technological goods.

It would also impose a shareholder cap preventing Chinese investors from gaining majority shareholder status of American companies and prohibit federal agencies from doing business with telecommunications companies that rely on Chinese products for "essential" or "critical" components of their systems.

The legislation would represent the most far-reaching attempt by lawmakers to unwind a U.S. tech supply chain that has always emphasized low-cost but often failed to account for national security considerations. In particular, Congress and federal agencies have taken aim at two Chinese telecommunications companies -- Huawei and ZTE -- that they accuse of working with Beijing to facilitate economic and international espionage around the globe. Huawei and ZTE both deny this is the case, and much of the core evidence cited by the federal government to justify national security concerns has remained non-public.

It's not entirely clear how successful a push to purge U.S. tech from Chinese influence by targeting Chinese companies would be, given the interconnected nature of the global supply chain. A report earlier this year by the U.S.-China Economic Security Review Commission found that seven of the largest American tech companies – Hewlett Packard, Microsoft, IBM, Dell, Intel, Cisco and Unisys – relied on China for an average of 51 percent of their shipments between 2012 and 2017.

Some U.S. security analysts believe that focusing on country of origin is an impractical way of boosting security in the modern economy.

"It's a global economy and everybody wants to sell everywhere in the world, so you can't simply say 'I'm not going to buy things from a certain country,'" John Pescatore, director of emerging security trends at SANS, told FCW in April.

In comments submitted to the Federal Communications Commission in support of Huawei's bid to retain eligibility for the Universal Service Fund grant program, Jaques DeLisle, a University of Pennsylvania professor and director of the Center for the Study of Contemporary China, noted that many of the national security concerns cited by U.S. government officials around Chinese-owned companies would also apply to American and other foreign firms who use the same supply chain.

"To the extent that equipment that is 'made' by a non-Chinese company contains the same relevant components as equipment made by Huawei or another Chinese company," wrote DeLisle, "the risk would not be addressed by a rule banning Huawei and other Chinese suppliers."