New Evidence on the Role of Subnational Diplomacy in China’s Pursuit of U.S. Technology – Lawfare

In a recent interview, FBI Director Christopher Wray explained that the Peoples Republic of China has stolen more U.S. corporate data than all other nations combined and is seeking to acquire American trade secrets and intellectual property on a scale that is unprecedented in history. China reportedly relies on a combination of industrial espionage, academic contacts, investment, and cyber theft in pursuit of this acquisition. Senior U.S. officials have observed that China also relies on subnational relations with U.S. state governments, but the nature and extent of those relations have generally been unclear. In this post, I will help to address that lack of clarity by presenting new evidence that China has entered into a substantial collection of written agreements with U.S. states for the purpose of promoting technology transfer in a number of strategically sensitive fields of innovation, including information technology, nanotechnology, aerospace, biotechnology, and semiconductors. Most of these agreements appear to have been adopted not only without federal notice, consultation, or approval, but also at Chinas initiative and without public disclosure. The evidence thus suggests that subnational diplomacy has played an inconspicuous but material role in Beijings effort to acquire cutting-edge American technology. To address this and other problems that can arise from state engagement in foreign relations, Congress should enact legislation to ensure federal monitoring and public disclosure of future agreements.

Background

Before getting into the details of the evidence, a bit of background on how it emerged: In 2019, the Trump administration filed a lawsuit to challenge the constitutionality of a 2017 agreement on carbon dioxide emissions between California and the Canadian province of Qubec. The lawsuit failed in the district court but not before revealing a marked lack of transparency about the nature and extent of U.S. state agreements with foreign governments. States typically do not publish these arrangements, so neither the litigants nor amici had a clear sense of whether Californias was typical or aberrational. Duncan Hollis conducted an important study on state practice in this area in 2009, but a decade passed, no one followed up, and there was reason to believe that conditions had changed, so I decided to use state public-records laws to investigate. In 2020, my research assistant and I filed more than 650 public-records requestsone with every major executive department and administrative agency in each of the 50 statesin an effort to obtain copies of all commitments in force at that time.

The New Evidence

The results were surprising in a variety of ways, and two of the biggest surprises involved China.

The first was that, although U.S. states have traditionally entered into the largest number of agreements with Canada and its provinces, states disclosed more operative commitments with China than with any other country. It appears, moreover, that this shift occurred sometime in roughly the past decade. Holliss 2009 study found that states had concluded 70 agreements with Canada, followed by 61 with China or Taiwan and 41 with Israel. In contrast, the new evidence shows that, out of a total of more than 600 agreements in force between U.S. states and foreign governments in 2020, 115 are with mainland China alone, followed by 94 with Canada and 59 with Mexico. The agreements with China include 24 different U.S. states as parties and focus on economic relations more than any other issue. Many may still be in effect.

The second surprise was that, although the agreements with China often seem innocuous or beneficial to state and national interests, well over a dozen expressly promote cooperation, collaboration or even technology transfer in strategic sectors. For instance, Alabama, California, Maryland, and Pennsylvania have signed memoranda of understanding that call on them to foster cooperation between U.S. and Chinese firms in the field of information technology. A 2016 agreement between New York and China provides that the parties will support cooperation in nanotechnology. A 2015 memorandum of understanding between Washington and China states that the parties will support companies to cooperate in the aerospace industry. Iowa, Maryland, Massachusetts, Ohio, and Texas have each pledged to promote cooperation with China in biotechnology. Idahohome to Micron Technology, one of the largest manufacturers of semiconductors in the U.S.has an arrangement with Chinas Ministry of Commerce to facilitate trade and investment activities in the semiconductor industry. And many other commitments call for economic cooperation in general terms. Implementation may very well complicate federal efforts to protect U.S. technological leadership by encouraging private transactions that flout U.S. export controls, expand Chinas influence over American companies, and burden federal oversight by the Committee on Foreign Investment in the United States.

Certain features of the agreements and their adoption make these risks especially concerning. First, it appears that China took the lead in much of the drafting. Several documents use the same formatting, language, and organization, even though they involve different states as parties. Others use syntax that is atypical for a native English speaker. These patterns seem to indicate that the Chinese government has been handing predrafted documents to their state counterparts and simply asking for signatures. If that is indeed the case, there is reason to question whether states are getting as much out of the agreements as China, and whether they are resisting any language that disserves U.S. national interests.

Second, most of the agreements have been in effect for a decade or more. Idahos arrangement on semiconductors, for example, was signed in 2006. This longevity has created ample opportunities for implementation.

Third, state governments generally have not been transparent about the agreements. As far as I can tell, only three are referenced in official state sources, only one is available online, and states have not reported them to Congress or the executive branch. In my 2021 interview with Reta Jo Lewis, former State Department special representative for global intergovernmental affairs, she explained that the State Department is not responsible for monitoring subnational engagement in foreign relations and that states typically enter agreements with foreign governments without consulting or notifying federal authorities. I have not seen any evidence to the contrary in these cases.

Finally, Chinas engagement with U.S. states is likely to persist. In a recent article in The Diplomat, Flora Yan reported that, under the Biden administration, China-U.S. subnational exchanges have largely continued, with signs indicating expansion. For Beijing and states alike, the incentives for such expansion seem obvious: enhanced trade and investment between the worlds two largest economies, along with a potential way around U.S. federal gridlock and hostility. These incentives may very well spur states to enter additional agreements of concern in the future.

To be sure, it is not clear whether anything has or will come from the agreements. All appear to be nonbinding, so states may simply disregard them. At the same time, it is hard to imagine that states would enter commitments with a foreign sovereign in the absence of any intention to comply. There is anecdotal evidence, moreover, that even nonbinding subnational arrangements have generated economic benefits in the context of Sino-U.S. relations. This suggests that states have acted to fulfill their agreements in at least some cases.

A Proposal for Reform

The circumstances create a strong case for transparency going forward. As I explain in a new article detailing my research, Congress should respond by enacting legislation that is loosely analogous to the Case-Zablocki Act. This legislation would require states to timely transmit to the State Department the text of all commitments with foreign governments, including Chinas. It would also require the department to publish the results on a public website. Such legislation has precedent in foreign countries such as Australia (see also the resulting online database) and in reporting mandates that Congress has imposed on states in various other contexts.

The benefits of the resulting transparency seem clear. It would help to deter states from violating the Constitutions Compact Clause, which generally requires them to obtain congressional consent to enter into any binding Agreement or Compact with a foreign power. It would help to deter states from infringing the Article I Treaty Clause, which prohibits them from entering into any Treaty. It would promote the accountability of state officials by facilitating public knowledge of any commitments that disserve state or national interests. It seems unlikely to discourage agreements that advance those interests. And it would likely create only limited financial and administrative costs.

Recent congressional interest in subnational diplomacy suggests that there may be a realistic chance for reform. In the 116th Congress, Rep. Ted Lieu and Sen. Chris Murphy each introduced the City and State Diplomacy Act, part of which would have required the State Department to maintain[] a public database of subnational engagements. In the 117th Congress, Lieu and Murphy introduced newer bills that omitted the original provision for a public database but proposed to task the State Department with tracking subnational engagements. Although not enacted into law, this language also appeared in a version of the National Defense Authorization Act for Fiscal Year 2022 (NDAA) that passed the House of Representatives in September 2021, so the notion of federal monitoring clearly enjoys substantial support.

To address the risks posed by state agreements with foreign governments, and with China in particular, Congress should revive the City and State Diplomacy Act, with a few key revisions. First, drafters should expand the bills definition of subnational engagements. All of the recent versions defined this term as formal meetings or events between elected officials of State or municipal governments and their foreign counterparts. Agreements, however, are not meetings or events under the ordinary meanings of those terms, so this definition would exclude all agreements from federal oversight, even while requiring the State Department to monitor attendant events such as signing ceremonies. It is hard to see the logic in that choice, given the general importance of written agreements for structuring and managing foreign relations. In addition, it is common for agreements to be signed not by a states elected officials but rather by appointees. The recent definition would thus exempt many agreements from federal monitoring even if they somehow qualify as meetings or events. To correct these problems, the next iteration of the City and State Diplomacy Act should redefine subnational engagements explicitly to include all written commitments.

Second, Congress should not task the State Department merely with tracking subnational engagements, as proposed in the most recent version of the bill. While better than nothing, tracking per se does not ensure the disclosure of any engagements to the public or even to Congress, which holds primary authority to grant or withhold consent to state agreements and compacts with foreign powers under the Compact Clause. A separate provision of the bill recommended annual briefings to Congress regarding the departments work on subnational diplomacy, but that language also seems insufficient, as it leaves open the possibility of briefings that detail State Department activity but omit information about the subnational engagements themselves. To address this issue, legislators should revive the original proposal for a public database, thereby promoting access to agreement texts for Congress and voters alike.

Finally, Congress should add language to facilitate the databases creation and maintenance. The recent bills contained no requirement for states to notify the State Department of their engagements, much less a deadline for notification. Nor did the bills contain any provision to enforce or even encourage state cooperation with federal efforts to create the database. These omissions created a risk of belated and incomplete collection on the part of database managers. To fix them, legislators should require states to provide copies of the texts of their agreements to the State Department and impose a deadline for doing so. The Case-Zablocki Act, for example, requires the transmittal of the text of an international agreement to which the U.S. is a party no later than 60 days after entry into force. If concerned about state compliance, Congress might also consider enforcement options, such as a provision indicating that no commitment shall carry any force or effect prior to transmittal, or a provision that expressly conditions the availability of pertinent federal funding on state compliance.

Conclusion

As a general matter, it is neither surprising nor troubling that U.S. states enter into agreements with foreign governments. It is striking, however, that they typically do so without notifying the public or even the federal government. And it is concerning that a significant number of the agreements affirmatively encourage the transfer of strategically important technologies to Americas chief geopolitical rival, despite U.S. federal efforts to protect American technological leadership. These conditions call for transparency and federal monitoring under a revived and revised City and State Diplomacy Act.

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New Evidence on the Role of Subnational Diplomacy in China's Pursuit of U.S. Technology - Lawfare