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More US Trade, Investment Controls Likely This Year, Experts Say

The U.S. is likely to continue using export controls, investment restrictions and other economic policy tools against China this year, particularly as the upcoming presidential election draws closer, trade and economic policy experts said this week.

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Gregory Allen, director of the Wadhwani Center for AI and Advanced Technologies at the Center for Strategic and International Studies, is expecting more developments surrounding the U.S. outbound investment screening regime, which the Treasury Department is still drafting (see 2308090066 and 2310050035). He expects that to be a more “significant trend” in U.S. economic policy toward China than other trade restrictions such as export restrictions, mostly because the U.S. already took major export control actions last year when it updated its license requirements for certain shipments of chips and chipmaking tools to China (see 2310170055 and 2401030053).

“I don't expect anything in 2024 that was as significant as what happened in 2023 or 2022,” Allen said during a Jan. 16 virtual event hosted by CSIS.

But others didn’t necessarily agree, including CSIS Scholl Chair in International Business William Reinsch, who said President Joe Biden may feel pressure during the election year to address criticisms from Republicans that he is too “soft” on China.

“His way to counter that has been with export controls and investment screening,” Reinsch said. “And I think you're going to see more of that, for political reasons, if not for substantive reasons.”

Emily Benson, director of the CSIS Project on Trade and Technology, said she wouldn’t be surprised to see the U.S. trend toward “broader attempts at decoupling” with China in 2024. That may include new export controls and investment restrictions, efforts with allies to counter Chinese economic coercion, and tariffs on Chinese imports.

She said broader decoupling may be caused by Congress, pointing to a December report released by the House Select Committee on China that called on the Biden administration to strengthen export controls against China and give it new tools to restrict a broader range of inbound and outbound investments (see 2312120050).

That report “really is an attempt to adjust the conversation back towards decoupling,” Benson said, adding that the committee’s recommendations were probably “harmful at the end of the day,” especially one that called on the U.S to revoke permanent normal trade relations with China.

“While the select committee cannot produce legislation,” Benson said, they have been “exceedingly successful in moving the conversation towards a more hawkish dialogue in Washington, and I think that will also play out in the election.”

She also noted that European countries are also increasingly outlining “their own approaches to economic security,” specifically mentioning Japan, the EU and Germany, which published a national security strategy in June (see 2306140064). Benson said she’s monitoring how other countries articulate their economic security policies, including Italy, which takes over the Group of 7 presidency this year.

“All signs point to the fact that Rome is very likely to carry forward that agenda,” she said, although it depends on “making sure there's export control parity among close partner countries as a prerequisite for deeper cooperation.”