With the pandemic leading headlines for more than a year now, international trade that stopped for a quarter in 2020 has since recovered. A number of significant political changes happened within this year and it is time to look at the impact they have for international trade (see figure). Jennifer Douris O’Bryan, Government Affairs Director at SPIE, gave an update on the state of governmental trade regulations in the U.S., China, and the European Union, plus Great Britain.
Most notably, the U.S. presidency has changed. That had surprisingly little effect on the international relations—for instance,with China: “I don't see there being a major shift in U.S.-China relations,” said O’Bryan. “However, I do see a change of tone and rhetoric coming from this administration, as opposed to the last administration.”
A new rule came into effect in the U.S. last year, adding a license requirement for exports going to military end-users in China. It expanded the definition of military end-use to include items that support or contribute to the operation, installation, maintenance, repair, overhaul, refurbishing, development, or production of military items. The Bureau of Industry and Security (BIS) published a military end-user list on December 23, 2020, that was subsequently updated on January 14, 2021.
A big issue in political discussions of recent years was immigration, and so everyone is tracking changes in the policies for high-skilled immigration as needed in universities and high-tech sectors such as photonics. On his first day in office, Biden transmitted a draft immigration bill to Congress that included, among its provisions, an exemption from visa caps for PhD students graduating from U.S. universities in STEM fields. At the time of this writing, the bill has not passed the Senate yet.
While the Biden administration issued an executive order to rescind a ban on new green cards from being processed, it has allowed the ban on new H1B visas to remain in place if the applicant is not currently within the U.S. After all, positions on high-skilled immigration issues do not fall neatly on party lines. There are some very vocal opponents of the H1B visa program among the Democratic Party that are not far off from Trump’s position on high-skilled immigration. It remains to be seen at this point how the new administration will navigate the competing voices within his own party on these issues.
China tightens export and investment regulations
China made changes to their export control laws. On August 28, 2020, China revised their ‘Catalog of Technologies Prohibited or Restricted from Export’ for the first time since 2008. Laser technology is among the new additions, as is metal 3D printing, aero remote sensors, unmanned aerial vehicles (UAVs), major power and petrochemical facilities, etc. In October 2020, China passed its first Export Control Law. This law obliges exporters to assess independently whether an export might sufficiently implicate national security or national interests to require a license.
On December 19, 2020, the Chinese government released their own expansion of scope of foreign direct investment (FDI) reviews. These changes include the establishment of a working mechanism, which is a multi-department body similar to CFIUS in the U.S. It is charged with reviewing foreign direct investment into China. Under the new review process, any amount of foreign investment in the military industry or other areas relating to China’s national defense and security, or investments in areas in the vicinity of a military facility or military industry, would trigger a security review.
European Union and the UK
In the U.K., the National Security and Investment Bill is expected to soon be finalized. Under the draft, wording indicates that most lasers or any other processes used in advanced materials in semiconductors and manufacturer test and measurement will be covered, plus some lasers will be additionally covered under dual-use or key components in the communication supply chain.
In the EU, FDI screening regulations were adopted in March 2019. It put in place for the first time an EU-level mechanism to coordinate the screening of foreign investments likely to affect the security and public order of the union and its member states. This framework is based on an obligation to exchange information between member states and the commission, as well as on the possibility for the commission and member states to issue opinions and comments on specific transactions.
Though the regulations laid down a common framework for review by member states and seek to coordinate national enforcement actions, the regulations and additional guidance in March do not grant the EU the ability to veto foreign investment. That power is retained by the member states under national legislation. Largely speaking, you can expect to see a focus on dual-use technologies as a critical technology sector, consistent with EU guidance and now similar to U.S. regulation.
