Why We Should Be Wary of Export Controls

In recent weeks, the United States and its allies have levied unprecedented economic sanctions, including multilateral export controls, against Russia in response to its invasion of Ukraine. In announcing its export controls, the U.S. Department of Commerce noted, “Russia’s invasion of Ukraine flagrantly violates international law, is contrary to U.S. national security and foreign policy interests, and undermines global order, peace, and security.” It added that the goal of U.S. export controls is to “restrict Russia’s access to items that it needs to project power and fulfill its strategic ambitions.” 

In theory, export controls can be a potent tool to protect and advance U.S. interests, including foreign policy and technological considerations. By restricting the export of certain products or services, the United States can prevent a foreign adversary from obtaining a tool it could use against U.S. interests, or we can stall a competitor’s technological progress such as Huawei’s 5G products. At the same time, excessive use of export controls can easily backfire. Obviously it makes sense for the United States to prohibit the export of materials necessary to make a nuclear weapon, but it is a thornier calculus where the product or service in question has both civilian and military applications, such as semiconductors. Policymakers in the United States considering future export controls should implement some basic guardrails to ensure a proper calibration between national security and ensuring the relative free flow of goods and services across borders, which is instrumental to ongoing American prosperity—and ultimately, national security. 

First, policymakers should be judicious about invoking “national security” as a justification to restrict international trade. The Trump administration’s misguided “national security” tariffs on steel and aluminum imported from basically every country in the world, including Ukraine, was a clear abuse of the relevant statute. The tariffs triggered predictable foreign retaliation, made steel-using domestic producers less globally competitive due to higher input prices, and fostered distrust among longstanding allies. They also undermined future U.S. invocations of “national security” by establishing a precedent that Washington can cloak aggressive protectionism under a defense-related banner. Policymakers should provide a narrow definition of “national security” tied to defense and defense-related goods and services, unlike the Trump administration’s tariffs, which covered non-defense related products like steel rebar.

Second, policymakers must consider the economic implications of their actions.  Some in Washington treat sanctions and export controls as costless. However, like import tariffs, export restrictions can harm domestic exporting firms (who lose foreign sales or are forced to sell at lower prices) or importing firms denied access to inputs by foreign retaliatory “copycat” actions, thus lowering domestic investment and economic growth. An overly restrictive export control regime thus poses significant long-term risks to the U.S. economy. Eric Hirschhorn, under secretary of commerce for industry and security during most of the Obama administration, observed, “when we unilaterally control any technology too tightly, there’s a good chance that we will drive research and development, and ultimately production, offshore.” Likewise, a stringent export control regime could dissuade foreign firms from setting up operations in the United States. While there is a stronger national security nexus involved with Russia’s invasion of Ukraine than, say, steel imports from Canada, our recent history of security-based trade restrictions should give pause to policymakers thinking about imposing export controls going forward. The economic concerns should not be taken lightly.