Sat, Jul 30, 2005 - Page 11 News List

US balks at transfers to China

DEBATE Security officials are growing alarmed by Beijing's industrial espionage, but US business interests are increasingly dependent on open trade with China

BLOOMBERG

US President George W. Bush's plan to toughen restrictions on technology exports to China has set off a struggle between US national security officials concerned about China's military threat and US companies increasingly dependent on overseas markets.

The US Commerce Department plans to issue new rules by year's end imposing stricter limits on the export of civilian technology that can be exploited for military use, such as aircraft parts, computer chips and machine tools, said Peter Lichtenbaum, the department's acting undersecretary for industry and security. The rules would expand the number of items that must be licensed by the government before being sold to China.

The planned changes come at a time when US companies such as Intel Corp and Boeing Co increasingly rely on Asia as a growth engine for sales, and have billions of dollars invested in assembly, research and testing operations in China.

"US industry is integrating with China, but the Bush administration is taking steps that are taking US policy in a virtually opposite direction," said Edmund Rice, president of the Coalition for Employment Through Exports, which represents companies such as Boeing. "They're heading for a clash."

Administration officials say that isn't their intention.

"We want to be sure that we find that balance between national security concerns and commercial opportunity," Commerce Secretary Carlos Gutierrez said in an interview.

The move to toughen export controls comes as US-Chinese economic relations are especially complex. China agreed under US pressure to a partial revaluation of its currency last week.

A US$18.5 billion bid by the Chinese government-controlled China National Offshore Oil Corp (CNOOC, 中國海洋石油) Ltd to buy El Segundo, California-based Unocal Corp has encountered strong opposition in the US Congress. Lawmakers this week ordered a review that may delay by 141 days a government decision on whether to allow the acquisition.

The House approved legislation Wednesday that allows companies to seek a broader array of duties on imports from China and force the Treasury to monitor China's currency policies.

The new export rules would expand restrictions on so-called sensitive items, Lichtenbaum said. Items include semiconductors made by Intel; chipmaking equipment sold by Advanced Micro Devices Inc; airplanes made by Boeing; aircraft parts from Honeywell International Inc; and machine tools made by companies such as Gleason Corp, according to Commerce Department documents.

Intel, the world's largest maker of computer chips, has reported that its Asia operations consistently lead global sales growth. China alone accounted for about US$5 billion of its US$34 billion in revenue last year, the Santa Clara, California-based company said. Intel has 5,000 employees in China and has invested US$1.3 billion in design centers, labs and factories there.

"We're living in a world where technology has become a commodity," Intel spokeswoman Jennifer Greeson said. "Restricting access to markets would have a pretty significant impact on the US technology sector."

Chicago-based Boeing, which earlier this year won orders from China's airlines for 60 of its new 787 jets, said last month it will use about US$600 million in parts from Chinese companies.

Some of those companies have ties to the Chinese military, which may prevent Boeing from sharing sensitive designs or materials.

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