Key departments like Commerce have conflicting mandates. The Commerce Secretary's primary goal is to promote U.S. business abroad, which structurally disincentivizes them from implementing tough export controls that could harm those same businesses, thus undermining national security objectives.
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The most potent criticism of the U.S. chip controls wasn't flawed strategy, but the chronic underfunding and limited capacity of agencies like the Bureau of Industry and Security (BIS) to effectively enforce complex export bans against determined adversaries.
Major shaping legislation on China, from the CHIPS Act to sanctions, often originates in Congress. Congressional action creates durable policy that outlasts fleeting presidential administrations, providing guardrails and tools for the executive branch.
China operates as a two-speed economy. While the consumer side is slowing, Xi Jinping is pouring resources into a state-directed 'national security economy' focused on advanced tech and military modernization. U.S. policy should be narrowly tailored to disrupt this specific sector, not the broader economy.
The U.S.-China Commission proposes consolidating disparate economic tools like export controls into a single entity. This would prevent critical decisions from languishing at mid-levels within conflicted departments and create a single forcing function for action, reducing the need for constant NSC intervention.
Unlike Treasury's sanctions unit, which was deeply integrated into the intelligence community post-9/11, the Commerce Department's Bureau of Industry and Security (BIS) is not. This means the IC is reactive, providing information on request rather than proactively shaping export control policy with intelligence.
A major obstacle to securing U.S. supply chains is a deliberate lack of data. The government has avoided mandating data collection on critical dependencies, like pharmaceutical ingredients from China, out of deference to industry. This prevents policymakers from even understanding the extent of their vulnerabilities.
The U.S. reactively chases news headlines (like rare earths) without a rigorous framework to identify its most critical dependencies. Policymakers have not prioritized whether to secure wartime supply chains or mitigate China's leverage over consumer goods that could spark domestic political crises.
In trying to compete, the U.S. is mirroring China's protectionism and industrial policy. This is a strategic error, as the U.S. political system lacks the ability to centrally direct resources and execute long-term industrial strategy as effectively as China's state-controlled economy.
The U.S. government approaches economic foreign policy in a piecemeal fashion, with different factions advocating for trade, investment controls, or supply chain resilience separately. This lack of an integrated national economic security strategy leads to internal competition for resources and inconsistent policy application.
U.S. export controls on advanced semiconductors, intended to slow China, have instead galvanized its domestic industry. The restrictions accelerated China's existing push for self-sufficiency, forcing local companies to innovate with less advanced chips and develop their own GPU and manufacturing capabilities, diminishing the policy's long-term effectiveness.
