Commission Criticizes Lack of Preparedness; U.S. Likely to Implement Sweeping Rule on Tech-Related Transactions

The National Security Commission on Artificial Intelligence (NSCAI) published its final report on March 1. The report stresses the importance of domestic investment in innovation and education, as well as a transformation of the federal approach to technology in national security. At the moment, the report indicates, the United States is “not prepared” to compete with China in a global technological competition. 

The NSCAI recommends only tailored restrictions (for instance, on advanced semiconductor technology) on exports to other countries. Meanwhile, the Department of Commerce appears set to move forward with a rule introduced by the Trump administration that could constrain a broad array of tech-related business transactions involving a “foreign adversary.”

As currently written, the rule would authorize the Commerce Department to require licenses for, or disallow entirely, a host of transactions involving technologies deemed to be national security threats. (Any transactions already under the purview of the Committee on Foreign Investment in the United States will be exempt.)

The purpose of the rule is reportedly “to prevent foreign adversaries from exploiting vulnerabilities” in technology supply chains, especially in information and communication services. The rule specifies that China, Russia, Iran, North Korea, Cuba and the Maduro regime of Venezuela are “foreign adversaries,” though this may not be an exhaustive list.

In addition to the NSCAI’s suggestions for more selective export controls, at least two experts have proposed revisions to the rule that avoid “blanket bans” in favor of narrower prohibitions and more uniform security standards.

The rule is scheduled to go into effect on March 22. If it moves forward, it will indicate the Biden administration’s willingness to maintain sweeping controls on technology-related commerce. 

Tech and the Two Sessions

At the “Two Sessions”—the annual meetings of China’s most important political bodies, the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC)—tech leaders have offered support and proposed new ideas for government policy initiatives including rural revitalization, carbon emissions reduction and accelerated development of artificial intelligence. Alibaba, JD and Pinduoduo are pitching in to boost the “smart agriculture” sector, after the National Rural Revitalization Bureau officially opened on Feb. 25. Chinese tech firms appear to be availing themselves of a remaining area of cooperation between themselves and the central government. 

The 14th Five-Year Plan, released March 5, suggests that the central government is focused on winning the tech war. The Chinese strategy relies in part on “indigenous innovation”—a combination of basic scientific research investment and competition-friendly regulation. (It’s worth remembering that the Chinese effort toward technological innovation has been part of President Xi Jinping’s tenure for more than a decade and may stretch back as far as former Chinese President Jiang Zemin.)

The CPPCC is set to hear a proposed law for greater regulation of facial recognition technology and personal data. And protections of data privacy, along with labor rights, are expected to be bolstered by the NPC, possibly as a way to ease approval in Europe of the recently signed Chinese-European trade and investment agreement and to prepare for a potential entry into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. 

Ant Walks a Tightrope

The head of the China Banking and Insurance Regulatory Commission (CBIRC), Guo Shuqing, said on March 1 that he expects all financial technology firms in China to comply with new financial reporting and capital requirements within two years. In February, the CBIRC introducedBecome a supporter of IT Security News and help us remove the ads.