PABLO MARTINEZ MONSIVAIS / APLove your nation. Celebrate its sovereignty. Never buy into the misguided idea that someone else’s country should tell you how to run yours. President Donald Trump’s speech to the United Nations General Assembly last week was an ode to chest-thumping nationalism. But in one specialized field of human endeavor, Trump seems to believe that America is not nearly great enough: sliming political rivals.
As a presidential candidate, now and in 2016, Trump has tried to outsource opposition research to countries whose legal systems are awash in corruption or tainted by political influence.
Three years ago, he looked into a bank of TV cameras and implored Russia, “if you’re listening,” to find Hillary Clinton’s deleted State Department emails. (Russia was listening and, we’ve since learned, hopped right to it, as Robert Mueller’s investigation showed.) Trump now faces an impeachment investigation in the House for pressuring Ukraine to dig up damaging information about the 2020 Democratic front-runner, former Vice President Joe Biden. Heedless of the impeachment machinery whirring on Capitol Hill, he stood outside the White House on Thursday and told reporters that he’d like to see the Chinese investigate the business dealings of Biden’s son Hunter in their country.
In so many other arenas, Trump has denounced and ditched international cooperation. He pulled out of the Iran nuclear agreement and the 12-nation Trans-Pacific Partnership, both of which Barack Obama had negotiated. He’s questioned whether the NATO military alliance is worth the price. “America first” was the slogan that helped Trump win the presidency. But he doesn’t seem to believe it’s the tactic that will help him keep it.
Trump sees foreign-policy priorities as bargaining chips, advancing or discarding them as his needs change. In an example from 2017, he dialed back public criticism of China because he wanted the country’s help ending North Korea’s nuclear program. That summer, his aides had drafted a speech aimed at intellectual-property theft, which they viewed as a bedrock Chinese trade practice. At Trump’s insistence, they eliminated virtually all references to China in hopes of not offending its leadership at a time when he was coaxing them to lean on North Korea.
These sorts of calculations fall within the bounds of traditional statecraft. What happens, though, when Trump tosses domestic politics into the mix? What if China agreed to plow forward with an investigation into the Bidens at Trump’s behest? Could that induce Trump to go softer in U.S.-China trade talks—negotiations that influence the price of consumer goods, the livelihood of American farmers, and employment levels? When a president conflates personal politics with the national interest, we’re left to wonder.
If Trump was worried about possible corruption involving Americans overseas, he could turn to his own country’s investigators for help examining their dealings. There is, of course, a law-enforcement agency with a long tradition of investigatory work here in the sovereign United States: the FBI. It would be an abuse of power for Trump to order the FBI or the Justice Department to fast-track an investigation into any political opponent, but he would be within his rights to pass along what information he may have, Richard Painter, who was the chief White House ethics lawyer under President George W. Bush, told me.
But Trump doesn’t want the bureau on the case. He’s spent much of his presidency savaging the FBI and the broader U.S. intelligence community, airing baseless accusations that they spied on him during the 2016 election. In an interview with ABC News in June, Trump was dismissive of the notion that it’s wrong for foreign governments to provide dirt on political opponents, and that the right thing for campaigns to do when they’re contacted is to involve the FBI.
“But when somebody comes up with oppo research, right, they come up with oppo research, ‘Oh, let’s call the FBI.’ The FBI doesn’t have enough agents to take care of it,” Trump told the network’s George Stephanopoulos.
Trump conveyed his disdain for the bureau’s leadership—officials he appointed—when Stephanopoulos reminded him that FBI Director Christopher Wray had recently testified to Congress that campaigns should report instances of foreign interference in U.S. elections. “The FBI director is wrong, because frankly it doesn’t happen like that in life,” Trump said. What’s wrong is not only saying, as Trump once did, that you’d accept help from foreign countries in an election, but strong-arming them into tarring a political opponent. After he said he’d like China to probe the Bidens, the Federal Election Commission chairwoman, Ellen Weintraub, retweeted a message she’d sent over the summer that it’s illegal to solicit something of value from a foreign national as part of a U.S. election.
“Is this thing on?” Weintraub wrote, cheekily, using a microphone emoji.
Between the entreaties made to China and Ukraine, it’s clear the blowback from 2016 has not made the president any more cautious, and he continues to blur the lines between his own interests and his duties as head of state. Take the batch of text messages released by House Democrats late Thursday night. Right before a July phone call between Trump and Ukrainian President Volodymyr Zelensky, Kurt Volker, a former U.S. special envoy to Ukraine, sent a message to a Zelensky aide. The note suggests that a summit meeting between the two leaders was conditioned on Ukraine’s willingness to investigate a discredited theory that Russia might not have been the ones that pilfered Democratic emails in the 2016 race.
Writing that he had “heard from the White House,” Volker told the aide that if Zelensky would agree in the call to “get to the bottom of what happened in 2016,” the administration would “nail down” a meeting between the presidents.
The texts show Ukraine was reluctant to go along with the scheme, which smacks of a quid pro quo. In one note in July, William Taylor, the top U.S. diplomat there, wrote that Zelensky was “sensitive about Ukraine being taken seriously, not merely as an instrument in Washington domestic, reelection politics.” Yet Ukraine may have decided that defying Trump is too risky. New reports show that Ukraine’s prosecutor general is reviewing how the country handled an investigation into the energy company Burisma Group, on whose board Hunter Biden sat. That inquiry could ostensibly lead to the sort of renewed investigation into the Bidens that Trump wants done.
There’s no obvious parallel to a president so brazenly enlisting foreign countries in schemes to discredit political rivals. As a Republican candidate in the 1968 presidential race, Richard Nixon took steps to sabotage then-President Lyndon Johnson’s efforts to reach a Vietnamese peace deal. Using private surrogates, Nixon delivered a message to South Vietnamese President Nguyen Van Thieu that if he delayed, he might get better terms in a Nixon presidency. Nixon’s aim was to deprive the Democrats of a breakthrough in the war that might tip the election in Vice President Hubert Humphrey’s favor. Johnson would later complain that the ploy amounted to “treason,” as the author John Farrell described in his biography of Nixon.
But Nixon was only a candidate at the time, a private citizen. Trump is a sitting president.
“If you want democracy, hold onto your sovereignty,” he said in his U.N. speech. In the months leading up to that address, we now know, he was compromising U.S. sovereignty and weakening its democracy, all to extinguish the chances of a campaign opponent. In the week after the speech, nothing’s changed.
Silicon Valley’s AMD gave Chinese partner ‘keys to the kingdom’—and sparked a battle over national security
Advanced Micro Devices Inc. transformed itself from a financially struggling company to an investor’s dream in just three years, a turnaround that began with a decision to help Chinese partners develop advanced computer-chip technology.
That deal may have helped save the company, but it alarmed U.S. national-security officials, who saw it as a threat to their goal to rein in China’s supercomputing industry. Last week, after years of friction, the Commerce Department issued an order that effectively bars several Chinese entities—including AMD’s partners—from obtaining American technology.
It looked as though the U.S. had succeeded in stanching the flow of cutting-edge computer technology to China. In reality, it was too late. Chinese versions of AMD chips already have been rolling off production lines. That technology is helping China in its race with the U.S. to build the first next-generation supercomputer—an essential tool for advanced civilian and military applications.
AMD’s Chinese partner, a military contractor, already used those chips to build what may prove to be the world’s fastest supercomputer, according to high-performance computing experts briefed on the project.
The partnership with the Santa Clara, Calif.-based chip maker was a game changer for China, which has long been unable to match the U.S.’s supercomputing power because of its inferior chips, one product the country has so far struggled to master. The AMD deal gave China access to state-of-the-art x86 chips, which are made by only two companies in the world: AMD and IntelCorp. They are the most dominant processor technology in use today.
“It’s the keys to the kingdom,” said retired Brig. Gen. Robert Spalding, who served on the National Security Council in 2017 and 2018 and discussed strategies to stop the AMD deal with officials at other agencies. “Everything today is built on x86.”
Chip Clash
A deal between Advanced Micro Devices and Sugon Information Industry granted China access to U.S. chip technology.
U.S. government
Chinese government
regulates
partners with
AMD
team up
Sugon
in a deal that gave China advanced chip tech, which the U.S. fears would help China’s military:
2
3
1
Develop nuclear weapons
Enhance missile defense
Pursue artificial intelligence
Sources: Sugon company statements; interviews with U.S. officials
AMD said in a written statement that it “has and will continue to comply with all U.S. laws,” and that the technology transferred to China in the deal wasn’t as high-performing as other U.S. products commercially available there at the time.
Commerce Department officials said last week’s action was made in consultation with other agencies. It followed weeks of inquiries by The Wall Street Journal about AMD’s Chinese partnership and the belief of some government officials that AMD had plotted a sophisticated end-run around regulators.
This account of the protracted battle over the deal between AMD and the government is based on interviews with more than a dozen current and former government officials familiar with AMD’s China deal, senior chip-industry executives, lawyers and company and government filings in the U.S. and China.
When Lisa Su was named AMD’s chief executive in October 2014, the company was desperate for cash, its debts were mounting and its revenue was declining. Its stock had dipped to around $3 a share. Some analysts predicted it would seek bankruptcy protection.
Three weeks after getting the top job, Ms. Su, a Taiwan-born New Yorker, jetted to Beijing to meet officials at China’s Ministry of Industry and Information Technology. A Chinese vice minister urged her to partner with China “to achieve mutual benefits based on AMD’s technological strength,” according to a ministry press release at the time.
In February 2016, AMD reached a joint-venture deal involving a leading Chinese supercomputer developer, a state-backed military supplier called Sugon Information Industry Co., to make chips licensing AMD’s x86 processor technology.
“Making contributions to China’s national defense and security is the fundamental mission of Sugon,” its website read as recently as December 2016. Sugon also makes computers for civilian use.
In exchange, the Chinese government gave AMD a lifeline: $293 million in licensing fees plus royalties on the sales of any chips developed by the venture.
That April, AMD got another boost from Beijing. It said it would get a $371 million payout for selling an 85% stake in two of its semiconductor factories in China and Malaysia to an entity controlled by China Integrated Circuit Industry Investment Fund Co., a state-backed financier known as “the Big Fund.” Its mission is to develop China’s indigenous chip industry.
Scientists examine a prototype of China’s next-generation exascale supercomputer at the National Supercomputer Center in Tianjin.PHOTO: XINHUA/ZUMA PRESS
The U.S. and China are competing to develop the world’s first exascale computer, a next-generation supercomputer that would be capable of doing one quintillion—or one billion billion—calculations per second. While supercomputers are used in tasks such as weather forecasting and cancer research, they also are integral to the development of nuclear weapons, encryption, missile defense and other systems. The chips American companies produce to power supercomputers, including AMD’s x86, are superior to any China can make on its own.
“Semiconductors are a space where the U.S. still leads China and the rest of the world,“ says William Evanina, the U.S. government’s top counterintelligence official.
Computing Power
The U.S. still makes many of the world’s top supercomputers…
Source of the world’s top supercomputers*
1
2
3
4
5
U.S.
China
6
7
8
9
10
Switz.
Japan
Germany
…but China has been adding to its total.
Number of systems on list of 500 fastest
300
250
U.S.
200
150
100
50
China
0
2000
’10
*Rank based on maximum achieved performance
Source: Top500
Shortly before AMD announced the Sugon deal, Defense Department officials learned of a presentation the joint-venture partners made in China talking up the deal’s potential to transform the country into a leader in processor technology.
Pentagon officials quickly began seeking ways to unwind the deal, according to people familiar with the matter. They questioned company representatives and repeatedly tried to get them to submit the deal to a review by the Committee on Foreign Investment in the U.S., or Cfius, according to those people.
Companies routinely seek approval from the committee for deals that raise national-security issues. The committee is led by the Treasury Department and includes the Defense, Commerce, Justice and Energy departments, among others. It can recommend that the president block foreign investments in U.S. assets for national-security reasons.
AMD didn’t submit the deal for committee review, arguing Cfius didn’t have jurisdiction to review that type of joint-venture, according to people familiar with the matter. The company also claimed it wasn’t turning over any state-of-the-art technology. Pentagon officials found that response at odds with how the joint-venture had portrayed itself in China.
Treasury officials, who have the final say on the consensus-driven Cfius panel, ultimately agreed with AMD’s assessment that the deal fell outside its remit. That left AMD and Defense officials at a stalemate through the end of the Obama administration and the first months of the Trump administration.
A Treasury spokesman declined to comment, as did the Defense Department.
Commerce Department officials also were investigating the deal for compliance with export controls. In June 2017, following a series of inquiries, they sent AMD an “is informed letter” that alerted the company they suspected the China deal violated export controls. AMD replied that it was complying with all regulations, according to people familiar with the matter.
In its statement to the Journal, AMD said that starting in 2015, it “diligently and proactively briefed the Department of Defense, the Department of Commerce and multiple other agencies within the U.S. government before these joint ventures were entered into, and we received no objections to their formation or the transfer of technology.”
Before the transfer of any technology, AMD said, the Commerce Department notified the company that it wasn’t restricted or otherwise prohibited from being transferred.
Current and former national-security officials said in interviews they believe AMD designed the deal’s complex structure, which involved the creation of two interlinked joint ventures, to sidestep U.S. regulations. AMD said the deal was structured for business and technological reasons and to comply with regulations, not to evade them.
AMD controls the first joint venture, which licenses the U.S. chip maker’s x86 intellectual property and manages production of the chips. The second venture, controlled by AMD’s Chinese partner, designs the devices that use the chips and sells the final products.
China’s new chips are based on AMD’s own EPYC processors.PHOTO: ADVANCED MICRO DEVICES
The arrangement enables AMD to share technology with China while retaining control over the entity working with its intellectual property. The creation of the second, China-controlled joint-venture allowed the parties to claim that the resulting product was indigenously developed in China, a key goal of the Chinese government.
While Cfius has jurisdiction to review foreign purchases of U.S. chip assets, it doesn’t have clear authority to review overseas joint ventures that don’t grant a foreign entity control over a U.S. business.
AMD didn’t have to seek an export license from the Commerce Department because it stripped out the parts of its x86 chip that would have required licenses, such as encryption technology, which China didn’t need anyway.
The x86 chips under development for China, code-named Dhyana, are similar to AMD’s own EPYC chips, minus U.S. encryption technology that AMD omitted, say people familiar with the deal.
The joint venture’s U.S. managers stressed to employees that the Dhyana chip was being developed for commercial purposes, such as providing processing technology to Chinese tech giants such as BaiduInc. or Tencent HoldingsLtd. , according to one of the people familiar with the deal.
Sugon, however, told state-run media that the x86 technology could serve China’s bid to build the world’s first exascale supercomputer. The joint venture’s job postings in Chinese implore candidates to help strengthen China’s domestic chip ambitions.
Sun Ninghui, head of the computing-technology institute at the Chinese Academy of Sciences, which works closely with Sugon, likened its chip development strategy to what China did with high-speed trains—introduce a foreign technology to the market, absorb it, and then innovate to make China a leader.
“This gradually advances our ability to comprehend their core technologies,” Mr. Sun told a government-run newspaper. “That way, we no longer can be pulled around by our noses.”
By mid-2017, concerns about AMD’s China deal had reached the Trump White House. Retired Gen. Spalding, who left the National Security Council last year, said of AMD: “They’re using the letter of the law to violate the spirit of the law.”
In November 2017, Sen. John Cornyn (R., Texas) and then-Rep. Robert Pittenger (R., N.C.) introduced legislation to expand Cfius’s authority, including broader powers to review joint ventures overseas.
There was heavy opposition from many companies and trade organizations, which feared Cfius interfering in their overseas activities, and the provision didn’t make it into the final version of the legislation that passed in August 2018.
Defense Department officials decided to unilaterally submit AMD’s Sugon deal to Cfius for review, despite Treasury’s earlier interpretation that it fell outside the panel’s jurisdiction. Only rarely in Cfius’s 44-year history has the committee been asked to review deals without the cooperation of either party involved, according to lawyers who track the confidential cases.
As the Cfius filing sat in limbo, Lisa Porter, the Defense Department’s deputy undersecretary for research and engineering, criticized AMD’s China deal in front of industry executives. AMD officials hired Beacon Global Strategies, a Washington-based consulting firm that employs former top national-security officials, to try to make peace.
On Friday, however, the Commerce Department announced the new export restrictions banning Sugon and its affiliates on the AMD deal from accessing U.S. technology without a license. The move, which followed the imposition of similar export restrictions last month targeting Chinese telecommunications giant Huawei Technologies Co., effectively forces AMD to unwind the deal.
In its decision, the Commerce Department said the Chinese entities were determined “to be acting contrary to the national security or foreign policy interests of the U.S.” It added: “Sugon has publicly acknowledged a variety of military end uses and end users of its high-performance computers.”
In a statement on its WeChat account, Sugon said the decision would severely disrupt its cooperation with U.S. partners. It said it had complied with all U.S. laws and would seek to discuss the issue with U.S. officials. “We believe there is a large gap in the understanding of Sugon’s corporate circumstances on the part of relevant U.S. authorities,” it said.
The Commerce action will make it hard for China to make future generations of the x86 chip, and it’s unclear if AMD’s partners will be able to continue producing the current version without the U.S. company’s technical assistance, according to experts in semiconductor technology. But China gained significant technical know-how through the deal, which has already yielded chips currently powering supercomputers.
For AMD, pushing back against U.S. national security officials while its China partnership gained traction paid off. The chip maker used the cash infusion to get back on its feet and has since introduced an array of competitive new products.
The company’s stock price has risen to around $30 per share recently, from under $2 in early 2016. AMD’s shares were the S&P 500 index’s top performers last year, rising nearly 80%.
Chinese negotiators emboldened by perception U.S. was willing to compromise
The hardened battle lines were prompted by Beijing’s decision to take a more aggressive stance in negotiations, according to the people following the talks. They said Beijing was emboldened by the perception that the U.S. was ready to compromise.
In particular, these people said, Mr. Trump’s hectoring of Federal Reserve Chairman Jerome Powell to cut interest rates was seen in Beijing as evidence that the president thought the U.S. economy was more fragile than he claimed.
Beijing was further encouraged by Mr. Trump’s frequent claim of friendship with Chinese President Xi Jinping and by Mr. Trump’s praise for Chinese Vice Premier Liu He for pledging to buy more U.S. soybeans.
An April 30 tweet, in which Mr. Trump coupled criticism of Mr. Powell with praise of Chinese economic policy, especially caught the eye of senior officials. “China is adding great stimulus to its economy while at the same time keeping interest rates low,” Mr. Trump tweeted. “Our Federal Reserve has incessantly lifted interest rates.”
“Why would you be constantly asking the Fed to lower rates if your economy is not turning weak,” said Mei Xinyu, an analyst at a think tank affiliated with China’s Commerce Ministry. If the U.S.’s resolve was weakening, the thinking in Beijing went, the U.S. would be more willing to cut a deal, even if Beijing hardened its positions.
That assessment, however, flies in the face of a strong U.S. economy. Gross domestic product in the first quarter rebounded from the end of 2018, with growth clocking in at a seasonally adjusted annualized rate of 3.2%, up from 2.2% the prior quarter. The jobs report for April, released on Friday, showed the unemployment rate falling to 3.6%, the lowest in nearly 50 years.
But at the same time, China’s economy has stabilized this year following months of weakness. Although China’s exports dropped unexpectedly in April, its first-quarter growth came in at 6.4%, beating market expectations. The generally improving economic picture gave Beijing more confidence in trade talks, as did a recent conference on the country’s vast infrastructure-spending program, called the Belt and Road Initiative, which was attended by about 40 heads of government and state.
Chinese leaders saw the conference turnout “as China has more leverage to improve relations with other countries and with the U.S. business community,” said Brookings Institution China specialist Cheng Li. “It made them play hardball.”
If China misread the signals—and vice versa—it wouldn’t be the first time.
The history of U.S.-China trade negotiations is filled with misunderstandings, as the two nations, with very different political systems, struggle to figure out each other’s intentions.
.. In another apparent sign of mixed signals, Trump administration officials had thought they had made it clear that they were weary of negotiations and that it was time for Beijing to make specific commitments to change laws, including adding protections for intellectual property and barring the forced transfer of U.S. technology.
As talks resume Thursday, one big question mark is whether China will agree to U.S. demands for changes in Chinese law to implement the trade deal. Beijing maintains this would impinge on Chinese sovereignty and take too long to implement, but Beijing had made similar commitments in prior trade deals, including those it signed to join the WTO in 2001.
U.S. officials say Beijing has failed to make good on those commitments, while China has promised to further liberalize its economy.
“The U.S. is correct to seek a multiprong approach of not relying solely on commitments but also actually changes to the laws, so as to ensure Chinese leadership intentions are fully conveyed down to all local levels of government,” said Harvard Law Professor Mark Wu.
Catch-up is how economists explain the success of China and other fast-growing developing economies. Not having to invent the wheel, the microchip or the theory of continuous improvement is a distinct advantage over having to invent them.
This is not a small part of the Huawei story. Its rise in 32 years to be the world’s largest telecom-equipment manufacturer and the second largest maker of smartphones is a story of catch-up—of learning from the West, but also stealing from the West. Or to put it more politely, Huawei has taken advantage of the fact that Beijing is not interested in enforcing the intellectual-property rights of foreigners under Chinese law.
An early Huawei router design was shown to have been filched from Cisco, right down to copying the typos in the instruction manual. This week a U.S. criminal indictment piggybacking on a successful private lawsuit by T-Mobile shows persuasively that Huawei stole the design of a robot, known as Tappy, for testing the durability of cell phones.
Nobody in his right mind thinks these episodes are exceptions. Nobody even needed these episodes to suspect that Huawei’s spectacular success has not been the product entirely of its own ingenuity and hard work (though these have been considerable). U.S. and other Western companies also vigorously “learn” from each other right up to the limit prescribed by our patent laws. In China, there is no limit. Stealing is regarded as a national development strategy and patriotic duty. The U.S. indictment alleges that Huawei even offered bonuses to employees who successfully purloined a competitor’s trade secrets.
This might seem clever, but it points to a problem for China’s own development—and not only because it antagonizes trade partners. China wants higher-order technology and investment from the West. It won’t come if trade secrets aren’t honored and enforced. China’s own firms cannot develop to their potential, at home or globally, if their own intellectual property isn’t secure even as they are distrusted abroad as agents of Chinese spying.
Which brings us to the growing tranche of U.S. legal actions directed at Huawei. We might prefer that prosecution of its chief financial officer, Meng Wanzhou, now awaiting extradition from Canada, were over something other than violating U.S. sanctions on Iran. But the U.S. is nonetheless positioning itself to destroy China’s shiniest success story, as it almost did ZTE until Donald Trump relented in a last-minute olive branch to Xi Jinping.
If Ms. Meng is extradited and convicted, she can be given a stiff prison sentence. The U.S can impose heavy fines on her company for sanctions-busting as well as for unrelated technology convictions. The long arm of U.S. law can seize Huawei assets and threaten key employees—including founder and CEO Ren Zhengfei—with arrest if they set foot outside China. Washington can turn up the pressure on other nations to exclude Huawei equipment from their networks. Perhaps most damaging, it can stanch Huawei’s access to still-vital U.S. building-block technologies.
In U.S. Trade Representative Robert Lighthizer, Mr. Trump has a general who probably would be happy to command such a war. Mr. Xi’s government might respond by stirring up patriotic froth in China’s media. Beijing might start seizing U.S. businesspeople as hostages, as it already has done Canadian businesspeople in apparent response to the Meng extradition fight. If so, look out below.
The Trump administration tends to exaggerate how much U.S. prosperity and security depend on getting tough over China’s trade practices. Our national strength is overwhelmingly made at home.
On the other hand, if China wants to go down this road, it might as well unfurl a banner declaring itself North Korea writ huge—a country that intends to thumb its nose at international norms, a pirate nation living by blackmail and theft. Six years ago this column was spanked by foreign-policy types for saying a tad too bluntly that stealing was an activity that “unites the private and public selves of Chinese officials.” But it’s true. For the sake of its own development, China needs to start separating business from the state, and holding its companies to some cognizable standard of lawfulness.
So here’s a question: Do you trust both sides to manage this conflict? Washington should be able to mete out technology sanctions, arguably necessary to protect U.S. security and military advantage, without throwing the entire economic relationship out the window. It can uphold our laws and prosecute Huawei for clear violations without trying to bury China’s entire output of exported iPhones, coat hangers and flat-screen TVs in tariffs.
For its part, getting into a full-scale economic war over practices that Beijing knows are indefensible and need to change would be an exceedingly poor decision by China’s maximum leader, Mr. Xi. Unfortunately, poor decisions have been a métier, off and on, of China’s Communist Party over the past 70 years.
We should not kid ourselves about the risks. Not all risks can or should be avoided, however.
