The U.S. government’s efforts to stop Russia and China from using American equipment to boost their defense sectors has resulted in tough rules — but leaky enforcement. As a result, American-made tools keep turning up in Russian missile factories and in Huawei’s supply chain. With war in Europe and China threatening its neighbors, that’s just not good enough.
The United States and its allies make the most advanced tools for both precision metalworking and semiconductor manufacturing. With international tensions rising, the United States and its allies have been right to try to prohibit adversaries from using these tools to manufacture weapons that undermine America’s military edge. In October 2022, the United States imposed restrictions on American firms selling and servicing equipment to manufacture chips below the 14-nanometer level, which covers chips necessary for building supercomputers and training frontier artificial intelligence models, aiming to limit China’s access to the chip technology used to train A.I. systems for military use. And when Russia invaded Ukraine in 2022, the United States and its allies tightened sales of cutting-edge machine tools to Russia to prevent them from being used for military purposes.
But tough restrictions on paper haven’t stopped Russian and Chinese factories from procuring American-made machinery. Industry analysts believe that Chinese chipmakers have succeeded in diverting imported equipment to produce more advanced chips. Many Western and Japanese metalworking machines have been found in Russian defense factories churning out armaments used against Ukrainian cities.
Companies note that their tools can be sold legitimately to one customer and then resold to a Russian or Chinese defense manufacturer without their knowledge. They claim that once a machine is in a customer’s hands, they can’t control how it is used.
Right now, the Commerce Department tries to enforce export controls by knocking on companies’ doors to see if they’ve violated any rules. However, a 2004 agreement signed by the United States and China permits only two American export control officers to work in China. These two officers average 55 site visits a year, verifying roughly 1 percent of all licenses. Even for the facilities they do visit, companies often have over 100 days between when a request is made and access is granted, giving firms plenty of time for obfuscation. Most U.S. allies have even less effective verification regimes, which is why a disproportionate share of the restricted equipment reaching Russia today is being diverted through them.
We cannot expect foxes, even U.S.-incorporated ones, to guard the henhouse. We believe that some Western firms may prefer not to know too much about their customers, lest it becomes harder for them to turn a blind eye. What’s more, companies face commercial incentives to guarantee the confidentiality of customers’ data. Because of this, self-policing has been a failure.
So how can the West tighten enforcement of these rules? Companies making controlled tools should be mandated to install tamperproof geolocation in them. An Apple AirTag costs less than $30. Manufacturers of million-dollar tools can surely find a cost-effective way of incorporating government-approved geolocation into their dual-use devices and providing real-time verification to the Commerce Department. Ideally, if a prohibited tool were transferred into Russia or a prohibited Chinese plant, it would be disabled automatically. At the very least, investigators would have a track record of where the tool had been.
Geolocation should be just the start. The most complex manufacturing tools rely as much on software as on precision drill bits. The metalworking tools used to make airplanes and artillery pieces have complex computer control systems. It’s technically possible not only to know where tools are but also what they’re being used for.
The United States needs key manufacturing allies like Japan and Germany to present a united front. After all, a Japanese-made tool was even seen in a news report inside a Chinese nuclear research facility. The Biden administration should push to internationalize these tougher regulations with key allies in Europe and Asia.
Making more demands on companies would be far from unprecedented. The Treasury Department has hit banks with billion-dollar fines for facilitating money transfers to terrorist groups and drug cartels. Facing big penalties, banks invested in impressive compliance operations. As a first line of defense, some banks today don’t allow the use of VPNs on their websites precisely so they can geolocate requests and prevent transactions in sanctioned countries. It’s not a big leap to demand that Western toolmakers implement similar controls.
During the Cold War, the West imposed expansive controls on metalworking tools to prevent them from being used for Soviet military purposes. Getting serious about machinery export controls today is one of the most cost-effective ways to meaningfully limit our adversaries’ militaries. Facing a revanchist Russia and adversarial China, we need to revitalize these techniques, or else our tools will continue to be used to build their militaries.
Chris Miller is the author of “Chip War,” an associate professor at the Fletcher School at Tufts University and a nonresident senior fellow at the American Enterprise Institute. Jordan Schneider is the founder of “ChinaTalk,” a podcast and newsletter about tech policy and U.S.-China relations.
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