US Commerce Secretary Urges Allies to Unite Against China’s Export Control Evasion

U.S. Secretary Raimondo warns against China’s “threat”
Need a multilateral approach like Qualcomm
China expands production and increases reserves
Pushing for amendments to mineral resource laws

On the 15th of last month (local time), the U.S. and Chinese leaders met with smiles in San Francisco. However, just two weeks later, the conflict between the two countries is escalating again. Following the U.S.’s announcement of detailed regulations targeting Foreign Entities of Concern (FEOC) aimed at China, the Commerce Secretary stressed the need for joint export controls with allied countries. In response, China, which virtually controls the global rare earth supply chain, has strengthened its management of critical minerals.

According to major foreign media on the 2nd (local time), U.S. Commerce Secretary Gina Raimondo remarked at the Reagan National Defense Forum held in California that day that China is looking for ways to circumvent U.S. export controls daily. She emphasized the need to strengthen and continuously take joint export controls with allies seriously. Her statement implies the urgency to promptly address China’s relentless attempts to exploit loopholes in U.S. regulations. On the same day, Secretary Raimondo stated that, in her view, China is the biggest threat the U.S. has ever faced, and she asserted that China is not a friend of the United States.

In particular, Secretary Raimondo advocated for a multilateral approach, drawing parallels to the Coordinating Committee for Multilateral Export Controls (COCOM) introduced during the Cold War to restrict exports of strategic goods to the communist bloc. She questioned, “What’s the point if China can get technology from Germany, the Netherlands, Japan, and Korea, even if we prevent U.S. companies from making money?” If other countries fill the gap left by the U.S., it would not only harm U.S. companies’ performance but also fail to achieve the original goal of containing China while benefiting foreign companies. Consequently, the U.S. is expected to exert more pressure on companies, including those in Korea, to participate in export controls against China.

That day, Secretary Raimondo explained that she is having many conversations with the industry to ensure that Nvidia’s release of H20 and other AI semiconductors for China does not deviate from the U.S. government’s intentions. She emphasized that if companies redesign semiconductors with specific performance for China, she will take control of it the next day.

In response, China has fired back at the U.S.’s actions by amending its Mineral Resources Law. According to the state-run Xinhua News Agency, on the 2nd, the Chinese State Council held a commercial conference chaired by Premier Li Qiang the day before, discussed and adopted amendments to the Mineral Resources Law, and decided to submit them to the Standing Committee of the National People’s Congress. The conference said, “We must firmly establish the foundation of mineral resources by accelerating exploration, development, storage, production, deepening international cooperation, and strengthening the stockpile system.” It also emphasized the need to innovate technology and equipment, promote the greening of the industry, and enhance the competitiveness of the mineral resources industry network.

China has dominated the global rare earth market since 1992 when Deng Xiaoping said, “The Middle East has oil, but China has rare earths.” It has already begun export controls on essential elements such as gallium, germanium, and graphite for advanced semiconductors and electric vehicle batteries. Additionally, on the 7th of last month, traders had to start reporting rare earth and iron ore imports and exports to the authorities in real-time. China’s series of actions is seen as a signal that if the U.S. intensifies its export controls against China, China will also tighten its control over rare earths.

The U.S. relied on China for 74% of its rare earth imports from 2018 to 2021.

By. Lee Tae Kyu