By Taking Aim at Chinese Tech Firms, President Trump Signals a Strategy Shift

In blacklisting surveillance companies, the United States is the first major government to punish China for its crackdown on Muslims.
By Paul Mozur and Edward Wong
Hikvision cameras in a mall in Beijing in May. The company was among those blacklisted by the Trump administration this week.

SHANGHAI — The world has largely sat by for nearly two years as China detained more than one million people, mostly Muslims and members of minority ethnic groups, in concentration camps to force them to embrace the Communist Party.
Now, the Trump administration is taking the first public steps by a major world government toward punishing Beijing. 

In doing so, it is opening up a new front in the already worsening relationship between Washington and Beijing: human rights and the dystopian world of digital surveillance.
Trump administration officials on Monday placed eight Chinese companies and a number of police departments on a blacklist that forbids them to buy American-made technology like microchips, software and other vital components. 

The companies are at the vanguard of China’s surveillance and artificial intelligence ambitions, with many of them selling increasingly sophisticated systems used by governments to track people.
The White House cited their business in East Turkestan, a colony of northwestern China that is home to a largely Muslim minority group known as the Uighurs. 

More than one million ethnic Uighurs and other minorities have been locked in concentration camps there.On Tuesday, Secretary of State Mike Pompeo announced visa restrictions on Chinese officials believed to be involved in the detention or abuse of Muslim ethnic minorities.
The announcements suggest that the Trump administration is increasingly willing to listen to the advice of American officials focused on the strategic challenges posed by China and who are concerned about its human rights abuses, even if President Trump himself never seems to pay much attention to those.
The restrictions were announced just two days before American and Chinese officials were set to begin a 13th round of trade talks, most likely putting a chill over the negotiations.
More broadly, the White House, in its blacklist announcement, signaled a willingness to take aim at China’s technological dreams. 

China has plowed billions of dollars into companies developing advanced hardware and software to catch up with the United States. 

Some of the companies added to the list on Monday are among the world’s most valuable artificial intelligence start-ups.

A showroom video promoting Megvii’s facial recognition abilities.

Much of that technology — including facial recognition and computer vision — can be used to track people. 

That includes smartphone tracking, voice-pattern identification and systems that track individuals across cities through powerful cameras. 

Washington officials have grown increasingly worried about China’s ambitions to export its systems elsewhere, including places known for human rights abuses.

“This is an important first step in making some of the companies that have benefited the most from the concentration camps system in East Turkestan feel the consequences of their actions,” said Darren Byler, an anthropologist at the University of Washington who studies the plight of the Uighurs.
He said the move signaled that abuse of minority groups in East Turkestan“is real and justifies a political and economic response.”
It is also a potentially groundbreaking use of a powerful tool that the American government typically uses against terrorists. 

The Chinese companies and police departments were placed on what is called an entity list, which forbids them to buy sensitive American exports unless Washington grants American companies specific permission to sell to them.
Use of the entity list over a human rights issue may be a first, said Julian Ku, a professor of constitutional and international law at Hofstra University.
“As far as I know, it was the first time Commerce explicitly cited human rights as a foreign policy interest of the U.S. for purposes of export controls,” he said, referring to the Department of Commerce, which manages the entity lists. 

“This is not an implausible reading of the regulations, but it is new and has potentially very broad applicability.”

The immediate effect on the Chinese companies is likely to be minimal, because many have stockpiled essential supplies, but they could feel increasing pain if they stay on the blacklist for months or years.
Perhaps more important, it can put a cloud over the companies’ reputations, limiting their sales in the United States or elsewhere and keeping them from hiring the world’s best technology talent.
“The U.S. move today puts up a big roadblock on the road to internationalization,” said Matt Sheehan, a fellow at MacroPolo, the think tank of the Paulson Institute.
“Most global technology companies are setting up labs abroad, partnering with the best universities around the world and looking to recruit top talent from everywhere,” he said. 

“That all just got a lot harder now that they’re marked with the scarlet letter of the entity list.”
The move followed more than a year of internal debate over how to punish China for its persecution of Muslims in  East Turkestan.
Senior officials on the National Security Council and in the State Department have pushed for the use of the entity list to target Chinese companies supplying surveillance technology to the security forces in  East Turkestan. 

They have also urged President Trump to approve sanctions that would penalize Chinese officials and companies involved in the abuses.
But top American trade negotiators, including the treasury secretary, Steven Mnuchin, have cautioned against policies that would upset trade talks. 

Mr. Trump has said he wants to reach a trade deal with China.
Until now, other top officials, most notably Mr. Pompeo and Vice President Mike Pence, have denounced China’s policies in East Turkestan but not enacted punitive measures. 

This month, American customs officials blocked products from a Chinese garment maker in East Turkestan, but they had held off on stronger action.
The Chinese companies on the list include Hikvision, a major maker of surveillance cameras, and the well-funded artificial intelligence start-ups SenseTime and Megvii.

A Hikvision camera in downtown Beijing. American officials worry that China will export its surveillance systems.

SenseTime said it set “high ethical standards for A.I. technologies,” while Megvii said it required “clients not to weaponize our technology or solutions or use them for illegal purposes.” 

It added that it had generated no revenue from within East Turkestan in the first half of 2019.

New York Times reporting showed that four of the companies on the list — Yitu, Hikvision, Megvii and SenseTime — helped build systems across China that sought to use facial recognition to automate the detection of Uighurs.

Government procurement documents, company marketing materials and official government releases tied all eight companies to various business operations and sales in East Turkestan. 

The many local East Turkestan police bureaus on the list buy commercial American technology like Intel microchips and Microsoft Windows software, according to procurement documents.
President Trump’s next step could be imposing sanctions on specific Chinese officials working in East Turkestan. 

Among the officials discussed is Chen Quanguo, a Politburo member who is the party chief in East Turkestan and an architect of the system of internment camps and surveillance.
The blacklist action is a sign that strategic advisors have become even more influential in the administration in recent weeks.
Matthew Pottinger, the senior director for Asia and an architect of policies aimed at countering China, was promoted to deputy national security adviser last month. 

Earlier, Robert O’Brien, the administration’s top hostage negotiator, replaced John R. Bolton as national security adviser. 

Mr. O’Brien has written that China poses an enormous challenge to the United States.
“This East Turkestan package has been in the works now for months,” said Samm Sacks, a cybersecurity policy fellow at New America, a think tank. 

“So the fact that it comes out now just ahead of the next round of trade talks sends a signal from those in the administration who want no deal.”

The right man in the right place

‘Death by China’ author Peter Navarro to lead new White House National Trade Council
By Demetri Sevastopulo and Shawn Donnan in Washington

Professor Peter Navarro

Donald Trump plans to create a National Trade Council inside the White House to oversee industrial policy and is appointing one of the architects of the populist economic message to run the new group.
Mr Trump has chosen Peter Navarro, a Harvard-trained economist, to head the NTC, his transition team announced on Wednesday in news reported first by the Financial Times. 

The author of books such as Death by China and Crouching Tiger: What China’s Militarism Means for the World has for years warned that the US is engaged in an economic war with China and should adopt a more aggressive stance — a message that the president-elect sold to voters across the US during his campaign.
“I read one of Peter’s books on America’s trade problems years ago and was impressed by the clarity of his arguments and thoroughness of his research,” Mr Trump said. 

“He has presciently documented the harms inflicted by globalism on American workers, and laid out a path forward to restore our middle class.”
The Trump transition team described Mr Navarro as a “visionary economist” who would “develop trade policies that shrink our trade deficit, expand our growth, and help stop the exodus of jobs from our shores”. 

His appointment is the second restructuring of trade policy that will see Mr Trump attempt to follow through on his focus to resurrect manufacturing, and create more industrial jobs, in the American economy.
The FT reported earlier this month that Mr Trump had tapped Wilbur Ross, a billionaire investor who has been nominated as secretary of commerce, to oversee his trade policy, creating a new inter-agency process that would cut the influence of the US Trade Representative, the office which has for years negotiated trade deals.
Mr Trump has yet to nominate his candidate for USTR, which traditionally sits in the president’s executive office, and the transition team has said it is still discussing internally how the role would fit with its broader trade agenda.
The Trump team said the NTC would focus on boosting manufacturing and also lead a “Buy America, Hire America” programme that would boost job creation in areas such as infrastructure and defence. 

It will work in tandem with three other offices in the White House: the National Security Council, the National Economic Council and the Domestic Policy Council.
They added that it would mark the first time there was an office dedicated to manufacturing inside the White House, in a strong signal that Mr Trump plans to follow through on the promises that he made on the campaign trail.
“We were a great team during the campaign, and we will be a great team during the administration,” said Mr Ross, who co-authored a white paper filling out the Trump economic policy with Mr Navarro during the campaign. 

It called for a focus on reducing the US trade deficit and boosting manufacturing, arguing both would help restore economic growth to a historical average of around 3.5 per cent per year.
Mr Trump has moved quickly to name a cabinet and team of top advisers that leans heavily on people with business and military experience and that mostly eschews people with executive experience in Washington.
The move to create the new office is likely to be seen as controversial by pro-China economists, many in the business community and pro-trade Republicans. 

It also raises questions about the role of the National Economic Council in a Trump White House. The NEC was established to perform similar functions by Bill Clinton following his 1992 election and Mr Trump has picked a heavy-hitter — former Goldman Sachs executive Gary Cohn — to head it.

Targeting the trade deficit is seen by some economists as likely to lead to protectionist trade policies. It may also be complicated by Mr Trump’s plans for an increase in spending and rising interest rates, both of which have already yielded a surge in the dollar that is likely to make US exports less competitive and lead to a larger trade deficit. 

Separately, Mr Trump on Wednesday named investor Carl Icahn to serve as a special adviser on regulatory reform.
The president-elect is also considering naming Matthew Pottinger, a former US marine who served in Iraq and Afghanistan, as his top Asia adviser in the White House, in what would amount to another appointment of a top official with a military background.
Mr Pottinger, a former Wall Street Journal correspondent in China who became a marine after the 9/11 terror attacks, is the frontrunner for the top Asia role, according to three people familiar with the deliberations. 

Mr Pottinger, a Chinese speaker, would advise Michael Flynn, the retired army general selected as national security adviser. 

Mr Pottinger served at the same time in Afghanistan as Mr Flynn and was one of the co-authors of a paper that the retired general wrote on the problems with the US intelligence apparatus.
“Matthew Pottinger is a member of our transition support element. He is being considered but no decision has been made,” said Jason Miller, spokesman for Mr Trump.