U.S. tech on guard against China as scrutiny increases on security, human rights

U.S. tech on guard against China as scrutiny increases on security, human rights

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KUNSHAN, China — It looked like the U.S. tech industry had been given a reprieve in late June when President Donald Trump reversed course on a decision to effectively bar companies from doing business with Chinese telecom giant Huawei.

But experts say that the cooling trade tensions with China mask a deeper change in how tech companies that once counted on China as an important partner and prospective market opportunity now approach doing business with companies like Huawei.

“The trade fight over tech isn’t going to stop,” said James Lewis, senior vice president at the Center for Strategic and International Studies, a Washington think tank.

“There’s been a sea change in political and corporate attitudes toward China. All the things that China does — its corporate espionage campaigns, its serious human rights violations — make companies a little nervous. They still want to do business with China, but they’re a lot more cautious.”

Concern about how U.S. tech firms, unwittingly or not, may enable Chinese military capabilities or domestic surveillance is now top of mind in Washington. Scrutiny of U.S. tech companies and their customers, partnerships and personnel may well intensify, with the Huawei case being only one example.

“For tech companies, the operating environment is now highly politicized,” said Adam Segal, chair of emerging technologies and national security at the Council on Foreign Relations, a think tank. “They have to be a lot more sensitive to the potential uses there are in China and the types of technologies they’re involved in.”

In such an interconnected industry — where expertise, ideas and parts routinely travel between the United States and China — pitfalls abound.

Google’s work on artificial intelligence in China has drawn criticism from the Pentagon. Likewise, lawmakers responded angrily to reports that Microsoft had collaborated with a Chinese university run by that country’s military.

A partnership between Advanced Micro Devices, a California-based chipmaker, and a Chinese military contractor to build chips for supercomputers has drawn scrutiny, too. Last month the Commerce Department issued new export restrictions that will effectively unwind the tie-up.

“It is deeply disturbing that American companies are choosing to do business with the Chinese government as it continues to expand its mass surveillance and targeting of its own people,” Sen. Marco Rubio, R-Fla., an outspoken China hawk, told NBC News.

“American companies should rethink their role in aiding China’s human rights abuses and efforts to supplant America’s global leadership,” he said.

Part of the difficulty faced by U.S. firms — even those that comply fully with export controls — is that many of the technologies in question are “dual use,” with military and civilian applications.

Export controls are “based on the assumption of good faith compliance both by the exporter and by the recipient,” said Kenneth Nunnenkamp, a partner specializing in trade and national security at Morgan Lewis, a law firm.

American companies exporting dual-use technologies must verify that they will not be used for nefarious purposes and obtain assurances from the recipients to that end, which can be hard to confirm.

Even for firms that abide by export control rules, reputational risk accompanies entry into China’s domestic surveillance market.

“There’s a sort of reckoning going on right now internally within companies about what’s required legally, and even if it’s not required legally, what are the ethical considerations,” said Samm Sacks, a fellow specializing in China and technology at New America, a think tank.

More on MSNBC’s ‘On Assignment with Richard Engel’ Made in China Sunday at 10 p.m. ET

Growing government oversight has not stopped all companies and entrepreneurs from doing business in China, even for some technologies that are seen as important to the country’s high-tech surveillance systems.

David Brady, a professor at Duke University’s satellite campus near Shanghai, developed a gigapixel camera that he sells to police departments across China for surveillance purposes. The camera, which he calls the Mantis, goes for $20,000.

“I personally don’t think it’s my position to tell China in what ways it can use or not use cameras,” Brady said. “It’s a society that can take care of its own regulations and laws.”

Another dilemma facing U.S. policymakers is that even if they enact tighter export restrictions, China may find suppliers elsewhere.

Establishing industrywide principles about responsible use might offer clarity to U.S. tech firms about what level of cooperation with China is acceptable, experts say.

“If we’re not clear on what constitutes misuse, how can we attempt to stop it?” said Lindsay Gorman, a fellow studying emerging technologies at the Alliance for Securing Democracy, a national security advocacy group.

“Having some principles on what level of involvement is okay would be essential to ensuring that our technologies don’t end up in the hands of people who are undermining human rights.”

Richard Engel reported from Kunshan, and Kennett Werner from London.

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