U.S. Tech Transfers to China Targeted by New Security Bill

(Bloomberg) -- The U.S. hasn't done enough to counter the use of technology transfers and supply chain infiltration from countries like China, leading to a grave national security risk, according to two U.S. senators.

To guard against state-sponsored technology theft and risks to supply chains that provide technology to U.S. consumers, Senators Mark Warner and Marco Rubio have proposed legislation requiring the White House to establish an “Office of Critical Technologies and Security.”

The pair are also taking aim at foreign products, such as those manufactured by Chinese telecommunications companies ZTE Corp. and Huawei Technologies Co., which have come under fire in the U.S. as threats to national security.

“It is clear that China is determined to use every tool in its arsenal to surpass the United States technologically and dominate us economically,” Warner, a Virginia Democrat, said in a statement on Friday. “We need a whole-of-government technology strategy to protect U.S. competitiveness in emerging and dual-use technologies and address the Chinese threat.”

Tighter Controls

The bill would add to a broader effort by the Trump administration to clamp down on what it says is China's aggressive strategy to boost its technological know-how, often at the expense of U.S. companies. In 2018 Trump signed a measure to heighten scrutiny of Chinese investment in the U.S. and is considering tighter controls on exports of American technology.

China's technology transfers are a significant national security risk, the senators said in the statement, adding that the U.S. is also facing major challenges to the integrity of key supply chains as a result of reliance on foreign products.

“China continues to conduct a coordinated assault on U.S. intellectual property, U.S. businesses, and our government networks and information with the full backing of the Chinese Communist Party,” Rubio, a Republican from Florida, said in the statement. “The United States needs a more coordinated approach to directly counter this critical threat and ensure we better protect U.S. technology.”

The proposed critical technologies office would coordinate efforts between the National Security Council and the National Economic Council to counter these threats, according to the text of the bill. The office would also work with state and federal agencies and consult with experts outside the government. The person in charge of the office would report directly to the president and have positions on both the NSC and the NEC.

Huawei, ZTE Focus

In addition, the office would also be expected to warn U.S. consumers and business executives about the risks posed by Huawei and ZTE.

Both companies are barred from U.S. government procurement contracts, and Huawei executive Meng Wanzhou was arrested in Canada in December on allegations she defrauded banks to violate Iranian sanctions. The daughter of Huawei's billionaire founder Ren Zhengfei, she faces extradition to the U.S. in a case that's heightened tensions between the U.S. and China as the two countries face off in a trade war.

--With assistance from David McLaughlin.

To contact the reporter on this story: Daniel Flatley in Washington at dflatley1@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Sara Forden, Ros Krasny

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