US-China business group blasts ban on Chinese tech products

The U.S.-China Business Council objected Monday to a law that restricts parts of the federal government from purchasing technology equipment produced by entities associated with the Chinese government.

Lawmakers created the restrictions last month in a six-month stopgap bill to fund the federal government, arguing they were needed to protect national security.

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But John Frisbie, the president of the China-focused business group, said the new rules are misguided, and urged House and Senate leaders to ensure the provision is kept out of future appropriations bills.

"The national security of the United States is critical, but it must not be used as a means of protectionism," Frisbie wrote in a letter to leaders. "Imposing a country-specific risk assessment creates a false sense of security if the goal is to improve our nation's cybersecurity."

Frisbie encouraged lawmakers to work with American tech companies on ensuring the security of their supply chains. The U.S.-China Business Council represents more than 200 American companies from a range of industries that do business with China, including Google, Oracle and Best Buy.

The provision opposed by the council bars several government entities from purchasing an information technology (IT) system unless the FBI or a similar agency reviews whether there is any "associated risk of cyber-espionage or sabotage" with the system, including if it is "produced, manufactured or assembled by one or more entities that are owned, directed or subsidized by the People's Republic of China."

The FBI would decide whether the purchase of the IT system "is in the national interest of the United States" and report that finding to Congress. The provision applies to NASA, the National Science Foundation and the Commerce and Justice departments.

The White House and several major business groups, including the influential U.S. Chamber of Commerce, have criticized the rule. On Friday, a White House spokeswoman said the implementation of the provision will be "challenging" and could prove "highly disruptive."

Business groups say the rule could make it harder for agencies to buy new computer systems, and warn that other countries might decide to retaliate against U.S. companies. Frisbie echoed those concerns in the group's letter to congressional leaders.

"As colleagues at other associations have recently noted to you, product security is a function of how a product is made, used, and maintained, rather than by whom or where it is made," he wrote.

Instead, the U.S. and Chinese governments should work together to clamp down on cyber espionage efforts against U.S. companies, Frisbie argued.

"Cybersecurity is of increasing concern to U.S. companies, regardless of the source, and it should be a priority for the U.S. government to address," he wrote. "To do so, the U.S. and Chinese governments should cooperate to address cybersecurity issues as they impact the commercial relationship, starting with one fundamental premise: commercial espionage should not be tolerated and if it is not addressed, it could undermine a constructive commercial relationship."

The controversial measure in the funding bill comes as concerns have been raised about Chinese tech equipment being used to spy on American companies and steal trade secrets.

Following a year-long investigation, the leaders of the House Intelligence Committee recommended that Huawei and ZTE be barred from doing business in the United States because they pose a threat to national security due to alleged ties to the Chinese government.

The funding law with the IT provision will expire Sept. 30.   

Brendan Sasso contributed to this report