New Delhi: US President Joe Biden Wednesday invoked a national emergency under various statutes of US law to limit investments made by American companies in Chinese high-end technology sectors – semiconductors and microelectronics, quantum information technologies and artificial intelligence.
In a statement published by the White House, President Biden signed an Executive Order on addressing, “United States Investments In Certain National Security Technologies And Products In Countries Of Concern.” The countries of concern are the People’s Republic of China, and the Special Administrative Regions of Hong Kong and Macau.
The US Treasury Department simultaneously released an ‘Advanced Notice of Proposed Rulemaking’ (ANPRM) seeking public comments and stakeholder participation to contribute towards the formulation of the rules for the implementation of the programme. The public was given 45 days to comment on the proposed regulations. According to the department website, the ANPRM will be followed by the draft regulations at a later date.
President Biden’s latest executive order is a part of US’ larger attempts to prevent Chinese firms from accessing high-end technology in the ongoing trade war of the two countries. These measures also come at a time when China’s economy has tipped into deflation. Exports for the month of July fell by 14.5 percent year-on-year. China is also facing a heightened debt burden.
While this is not the first time that a US President has invoked powers under the National Emergency Act (NEA) and the International Emergency Economic Powers Act (IEEPA) since their inception in 1976 and 1977, this was the the first time that it has been used to impose investment rules on U.S firms abroad, reported Politico.
ThePrint explains the powers under which President Biden restricted American investment in China, Hong Kong and Macau and what the executive order means.
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President Biden’s latest salvo against China
The executive order states the reasons for restricting US investments in China’s high-technology sector is because President Biden, “find that countries of concern are engaged in comprehensive, long-term strategies that direct, facilitate, or otherwise support advancements in sensitive technologies and products that are critical to such countries’ military, intelligence, surveillance, or cyber-enabled capabilities.”
“Moreover, these countries eliminate barriers between civilian and commercial sectors and military and defense industrial sectors, not just through research and development, but also by acquiring and diverting the world’s cutting-edge technologies, for the purposes of achieving military dominance,” it adds.
In effect, the order highlights that these countries have been using American investments to help enhance their semiconductor and microelectronics technology, AI and quantum computing thereby helping the advancement of technologies that provide military advantages to those countries and pose a security risk for the US.
“Today the US is taking a strategic first step to ensure American investment does not go to fund Chinese military advancement,” Senate Majority Leader Chuck Schumer said.
The new rules will not have retroactive effect, but will prevent new investments, said Reuters.
In its press release issued 9 August, the US Treasury announced that the new rules would complement the existing export controls on advanced technology to China announced in October 2022.
The Treasury Department is considering prohibiting US investments in Chinese entities engaged in the development of electronic design automation software, semiconductor manufacturing equipment, manufacturing in quantum computers and certain components, development of quantum sensors and communication systems, and entities engaged in activities related to software that incorporates artificial intelligence, to name a few.
A Chinese foreign ministry spokesperson called the executive order, “blatant economic coercion and technological bullying,” by the US in a statement made on 10 August. “The move’s real aim is to deprive China of its right to develop and selfishly pursue US supremacy at the expense of others,” it added.
Emergency powers of US President
As per the executive order signed by President Biden, the laws under which he has imposed these new measures stem from the NEA and the IEEPA.
The National Emergency Act was signed into law by President Gerald Ford in 1976 and came into effect in 1978. Under the NEA, the President has significant discretion to declare an emergency — there are no statutory requirements apart from the word ‘emergency’ itself, on the qualification of what type of event triggers it as per a report by the Brennan Center for Justice at New York University School of Law.
As per the law, a national emergency terminates after a period of one year, unless the President renews it for another year. A renewal is a routine action. The US Congress has the power to terminate a national emergency. Since the inception of the law, the US Congress has twice voted to rescind a declaration of national emergency by a President and has done so successfully only once.
The first time was when President Donald Trump declared a national emergency to secure funding for the construction of a border wall that the Congress specifically declined to fund. President Trump vetoed the US Congress resolution, and there was not enough of a majority to override a Presidential veto.
In April this year, the US Congress passed a joint resolution to end the national emergency surrounding the COVID-19 outbreak — the only successful attempt to end a national emergency till date, as President Biden signed the resolution into law.
The IEEPA — passed in 1977 and signed into law by President Jimmy Carter — has been invoked at least 67 times till March 2022. It gives the President the powers to regulate a variety of economic transactions, including introducing economic based sanctions as per a report by the Congressional Research Service.
Since March 2022, President Biden has invoked the IEEPA three times, prohibiting Russian affiliated shipping vessels from entering US ports, bolstering efforts to bring hostages and wrongfully detained US nationals home, and the latest salvo against China.
His predecessor Trump used the IEEPA to block the Chinese social media app TikTok from operating in the US in September 2020. The executive order was blocked by US courts.
(With inputs from Kritika Rajput)
(Edited by Tony Rai)
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