How to avoid becoming collateral damage in the US-China “tech war”
The benefits of paying close attention to details of US export controls and economic sanctions
Amid global market uncertainties and shifting regulatory priorities, where the only constant is change, Taiwanese businesses still can plot strategic pathways to success.
Welcome to our fourth report on global trends and opportunities for Taiwanese companies and investors conducting business internationally.
Although disruptive forces continue to buffet markets worldwide, advantages exist for savvy business leaders who pay close attention to global trends and act accordingly.
With the United States focusing more and more on China's technology industry as a national security priority, Taiwanese companies should take specific steps to decrease their risk of becoming collateral damage in a US-China "tech war." Similarly, despite a heightening US-China trade war, careful assessments of any supply chains that include China-made parts and related actions can help protect Taiwanese companies' access to US markets.
Design patents offer increasingly useful protections for design-focused Taiwanese companies that operate in the US. In the energy sector, Taiwan's offshore wind sector demonstrates vibrant potential for growth, particularly if Taiwan successfully resolves a few key challenges.
A new dynamism in the European Union's approach to antitrust enforcement provides guidance for growth-focused Taiwanese companies. And a recent change to US antitrust enforcement policy provides a compelling incentive for Taiwanese businesses to review their internal compliance programs and controls.
We hope you find this useful, and we look forward to seeing Taiwanese businesses grow and thrive in the year ahead.
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Over the past ten years, the United States has increased its focus on the Chinese technology industry as a national security matter and a key issue in trade dealings. Most recently, this focus is evident in the US-China trade negotiations and in the US government's high-profile actions against ZTE, Huawei and others on China-related issues.
The "weapons" on the US government's side of this battle include export controls, economic sanctions, foreign investment review and other trade restrictions:
With so much at stake, what can Taiwanese businesses do to protect themselves from US export controls, economic sanctions and similar issues?
As the US expands its playbook and takes an increasingly combative approach to trade, you can decrease your company's risk of becoming collateral damage in the US-China tech war by taking proactive steps to comply with applicable US laws. As an added benefit, it can also increase your marketability as a reliable trade partner.
Here's where to start:
Companies of all industries, sizes and nationalities have been caught in the crossfire of the US-China tech war. Regardless of your location, to defend against fallout from the US-China conflict, you need to know how it can impact your business.
Start by examining the extent of your exposure to the US and Chinese markets:
Undertake this evaluation before you become a casualty of the conflict: for example, by suddenly losing access to your US supply chain. A wait-and see approach to compliance with US law can be costly.
Once you understand your exposure to the US and Chinese markets, evaluate where you could face risks. Effective protective measures will require a full understanding of your risk profile to calibrate an appropriate compliance response. Most of the US-China tech war's "weapons" depend on a connection to the US.
Initial risk factors to consider include:
The next set of risk factors to evaluate is whether your business involves Chinese counterparties subject to US scrutiny. These include Chinese counterparties that are:
And although US restrictions can apply regardless of your industry, consider whether you operate in any "targeted" higher-risk areas, such as:
You can mitigate your risk exposure by implementing a US economic sanctions and export control compliance program. A properly executed compliance program could save you significant costs, such as loss of suppliers or customers, as well as possible civil and criminal penalties.
Robust corporate compliance programs that lead to fewer or less stringent US actions generally contain these key elements:
There is no one-size-fits-all program. Rather, you should tailor an effective compliance program to your business and risk profile, including by working with US lawyers to develop and implement appropriate compliance systems.
The US-China tech war is developing rapidly, driven by political considerations against the backdrop of a relatively unpredictable US administration.
This means that Taiwanese companies should consider a proactive approach to monitor and, as needed, engage in this shifting landscape. A few tools can provide useful support in these uncertain times:
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2019 White & Case LLP