Each passing day makes 2022 China legislation, now in House-Senate conference, less likely. China policy deserves bipartisan cooperation, which only fades as Election Day nears. It’s possibly for the best this year, as the Senate and, especially, House bills are filled with empty findings and actions unrelated to China. The final product can still be worthwhile, but another obstacle has emerged: The Departments of Treasury and Commerce may ignore any parts they don’t like.

In late April, a document floated by the Department of the
Treasury became public. The document was offered as an alternative
to a bipartisan bill originated by Senators Casey and Cornyn that is now part of the House version
of the larger China bill. The bipartisan effort looks to screen investment by
American entities that may move critical supply chains and other capabilities
to unreliable partners or outright hostile countries.

There has been considerable debate over whether the US should review
outbound investment—we have long done so with inbound—and what the scope of a review should
be. Since Treasury typically regulates investment, it’s the prime candidate for
implementing agency of any such legislation.

The document Treasury drafted would start a pilot program to
gather information, expiring in a year with no status beyond that and no action
taken at all. It makes clear the department has no interest in implementing
anything of consequence, whatever Congress decides. A natural reaction to this
might be that a cabinet department can’t simply defy congressional will.

The Department of Commerce has said otherwise, for four
years and counting. In the summer of 2018, Congress voted on an overwhelming basis to tighten export controls, specifically targeting China. The vote created categories
of emerging and foundational technology.

Unlike outbound investment review, this is settled. Yet Commerce hasn’t taken a single action to restrict foundational technology. The excuses have followed one after the other: not enough resources, allies won’t cooperate, and most recently, Congress didn’t define “emerging” and “foundational,” so Commerce can ignore the terms and continue to allow any foundational technology to be shared without restriction.

The true reason Commerce is dead set against restricting
foundational technology is American companies make a good deal of money selling
products utilizing foundational technology to China. The constitutional
obligation to implement and enforce congressional laws, as well as all other
aspects of the national interest, don’t stack up to tech company profits.

Executive branch agencies usually discourage exact
definitions from Congress, saying it ties their hands. Commerce abuses congressional
acceptance of this argument, and undermines other agencies, by claiming no
definition is equivalent to terms being unimportant. These terms were
introduced exactly so new export controls would include existing technology.
Because Commerce doesn’t like that, the terms don’t matter, four years after
they became law.

Commerce and, to a lesser extent, Treasury are telling congressional conferees and anyone contemplating China legislation for 2023 something important: If what you write leaves any room at all to ignore you, we will. This makes writing good legislation more difficult since so much must be pinned down in advance. Congress is being confronted with parts of the executive branch that, on China, are more opponents than partners.

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