Opinion | US-China trade war’s shift to export controls is music to Beijing’s ears

Two days of talks in London between the United States and China have underlined that tariffs are no longer necessarily the primary theatre of operation in the trade war. The action has now shifted to the far more difficult issue of export controls, primarily on rare earth exports from China and technology exports from the US. That’s good news for China.

Although details are lacking, the London negotiations resulted in a framework that purports to make at least some progress on the nettlesome export restrictions. The amorphous nature of export controls will provide ample room for obfuscation and backsliding.

The London meetings were precipitated by rising consternation on both sides over export restrictions that threatened the tentative trade truce agreed last month in Geneva. China failed to loosen its grip on the export of rare earth materials needed for a wide range of advanced manufacturing, breeding nervousness in the US over the prospect of factory closures and diminished defence capabilities.

The US, for its part, has continued to ratchet up restrictions on China’s access to the technologies central to China’s ambition to be a global AI leader. This intensifies China’s apprehension over what it sees as US determination to block its rise.

The trade war will rumble on in spite of the framework agreed in London, and as it does, export restrictions will be an increasingly important pressure point each side will try to leverage. Although export controls can take various forms, including outright bans, a more common approach is to institute a licensing system, which requires explicit approval for cross-border shipments of the product in question.

Licensing regimes create considerable wiggle room, which can lead to manipulation. Tremendous discretion is left in the hands of government bureaucrats taking direction from their political masters. Precise criteria and required supporting documentation can be left ambiguous, and requests for additional information – sometimes beyond what is officially required – or endless clarifications on already provided information can provide a pretext for approvals to drag on indefinitely.