As President Trump threatens more tariffs against Chinese goods, the Department of Commerce is taking more appropriate steps to push back against Beijing’s alleged theft of intellectual property. If the United States is serious about taking action against China’s illegal use of U.S. technology, the White House would do well to follow Commerce Secretary Wilbur Ross’s playbook instead of Donald Trump’s.
On Monday, the Department of Commerce added Chinese government-backed company Fujian Jinhua Integrated Circuit Company to the Entity List. That means that the company is subject to the Export Administration Regulations on the grounds that Jinhua poses a threat to the U.S.
For Jinhua and its government backers, that designation has serious consequences — most notably that shipping exports, including intellectual property, to the Chinese company will now require difficult if not impossible-to-get licensing.
The goal of imposing this regulation is to prevent Jinhua which, according to a Department of Commerce statement, “is nearing completion of substantial production capacity for dynamic random access memory (DRAM) integrated circuits” from further capitalizing on U.S. origin technology.
One reason is economic loss — for example, the loss of more $1 billion in assets of the U.S. company American Superconductor after Chinese company Sinovel Wind stole proprietary trade secrets. But another reason, more important, is related to national security.
Jinhua’s plan to ramp up production of stolen designs, the Commerce Department argues, “threatens the long-term economic viability of U.S. suppliers of the essential components of U.S. military systems.”
Essentially, Washington is worried that Chinese companies replacing U.S. producers will take out the domestic supply chain of key products, leaving the U.S. vulnerable to Chinese sabotage or cut off from parts necessary from military operations.
That’s a valid concern. The U.S. is right to be worried about domestic production of component parts for electronics on national security grounds.
Unlike blanket tariffs, singling out one company as a bad actor and imposing specific sanctions on that company is the right way to protect American interests.
This is not the first time that the Commerce Department has demonstrated that it is possible for the U.S. to target lawbreaking Chinese firms without engaging in a mutually-destructive trade war.
