Commerce lacks intelligence resources to keep U.S. tech from fueling Chinese cyberthreat, experts warn

Written by Suzanne Smalley

The Commerce Department unit that approves sensitive US technology exports does not have the intelligence resources to fully understand the national security implications of selling advanced equipment and software to China, several experts and a former government official told CyberScoop.

These critics are particularly concerned about the high proportion of technology approved for the Chinese market, and question whether the Bureau of Industry and Security has the human and intelligence connections to carry out its mission of safeguarding US and American national security to protect economic interests.

For example, last year the BIS approved 86% of all technology export licenses, a number of experts say that is far too high given national security concerns as many of the technologies have potential military uses. And several experts estimate that the entity has approved about 90% of all export licenses for technology sales to China over the past decade.

“They could use better information, no doubt about that,” Derek Scissors, senior fellow at the American Enterprise Institute, told CyberScoop. “They have not made the transition to China a national security issue.”

The Biden administration recently made a series of policy decisions to protect U.S. national security in response to what it portrays as increasing technological threat and cybersecurity threat from China. Last month, the government signed legislation providing $50 billion to support the expansion of US semiconductor chip manufacturing in a bid to reduce Americans’ reliance on Chinese-made chips. Reuters reported last Thursday that next month the White House will expand export bans on semiconductors used to advance artificial intelligence technology and chip-making equipment.

But critics say BIS is a weak link in US efforts to compete with China on technologies like artificial intelligence, chip manufacturing and other core technologies that also play a fundamental role in national security. “As our industries weaken — semiconductors, telecommunications, critical minerals and rare earth elements, high-capacity batteries, and pharmaceutical and medical devices — our national security is at risk,” Nazak Nikakhtar, a former BIS chief, said in June from a Senate Intelligence Committee hearing .

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Nikakhtar, who now leads the national security practice at law firm Wiley Rein, told lawmakers that trade has ignored the threat posed by China for too long, leading to “supply chain vulnerabilities in hundreds of critical products, from semiconductor to… electronics manufacturing, to the development of active pharmaceutical ingredients.”

She testified that as the former head of the United States Department of Commerce’s Committee on Foreign Investments, which reviews foreign investments for national security reasons, her team was “completely in the dark, our intelligence agencies didn’t have adequate information, and I was often up until three in the morning.” in the office and used whatever open source information I could find to get to the ultimate beneficial owner.”

The message from critics that the BIS needs to strengthen its intelligence capabilities has prompted some action in Congress. The Intelligence Authorization Act of 2023 provides a provision for the Director of National Intelligence to conduct a pilot program to “evaluate the feasibility and desirability of providing information from publicly available, publicly available and commercially available information to the Department of Commerce in support of export control and investment screening.” -Functions of the Department.” The provision is expected to be passed.

A spokesman for Senate Intelligence Committee Chairman Mark Warner, D-Va., said the committee added a provision to enhance intelligence support for trade activities “critical to U.S. economic and national security, such as export controls.” and the listing of companies”.

BIS has also recognized that it needs to increase its staff. Its leadership recently asked Congress for nearly $200 million in discretionary spending and 593 positions to meet its goals, per its fiscal 2023 budget request. The office currently has 448 employees, almost all of whom are in export administration and -enforcement work.

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Still, BIS defended its current work, telling CyberScoop that it already works closely with the intelligence community, including through “direct access” to its information.

“As the threat environment has evolved in terms of nation-state threats, emerging technologies, and a growing number of contested domains, we continually work to build on these relationships, providing additional resources and utilizing all sources of intelligence to fulfill our important and growing mission ‘ Undersecretary for Industry and Safety Alan Estevez said in a statement to CyberScoop.

A spokesman for the Department of Commerce highlighted the Office of the Director of National Intelligence’s pilot as an example of the agency’s work to increase intelligence-gathering efforts. The ODNI declined comment as legislation to create the pilot program with BIS has not yet been passed.

But critics say that just looking at the number of technology exports BIS approves is cause for concern. The US exported $125 billion worth of goods to China in 2020, and BIS officials needed a license for less than half a percent, according to a Wall Street Journal analysis of Commerce Department data. Of that fraction, the agency approved 94%, or 2,652 of the applications it received for technology exports to China this year, the Journal reported. (Some experts argue that the data shows an artificially high number of approvals, since companies typically don’t apply for licenses knowing they will be denied).

Kevin Wolf, an attorney at Akin, Gump, Strauss, Hauer & Feld, who ran BIS for seven years during the Obama administration, said the agency needed to act more aggressively than in the past.

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“Export controls need to be thought of and deployed more broadly than has traditionally been the case in response to China’s technology acquisition and exploitation goals,” Wolf told CyberScoop, arguing for a significant increase in funding. “I don’t think that’s really a debate anymore.”

But Wolf said it was important to manage this change in partnership with US allies, a process that will take time and much effort. Even with more funding available, finding subject matter and technology experts to do the analysis needed can be difficult, he said.

Other analysts pointed out that BIS needs more Chinese language experts. “For BIS, a lack of Chinese language skills can really hamper investigations, both in terms of enforcement and new listings,” Emily Weinstein, a research fellow at the Georgetown Center for Security and Emerging Technology, said via email.

Overall, the role that the Department of Commerce plays in the national security bureaucracy “is probably still opaque to much of the IC,” said Gavin Wilde, a former National Security Agency official who is now a senior fellow at the Carnegie Endowment for International Peace . “As government increasingly relies on BIS to counter and compete with adversaries, it would make sense to deliberately strengthen Commerce’s reputation and presence as an IC partner and consumer alongside the usual suspects.”

Jon Bateman, another senior fellow at Carnegie, said trade and the BIS are now more important than ever to US foreign policy.

“If we accept that China is a key great power competitor and the key bilateral challenge, and that much of that challenge is related to these complicated economic relationships and this technological competition that intersects the military dimension, the economic dimension and the informational dimension,” he said, “one could argue that the BIS is at the center of US foreign policy, decision-making and action.”

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