MICHEL MARTIN, HOST:
We wanted to hear more about why this deal is so significant, so we've called Peter Harrell. He's an attorney who advises companies and investors on international risks. He's a nonresident fellow at the Carnegie Endowment for International Peace. He also served as senior director for international economics in the Biden administration, and he's here with us now. Good morning.
PETER HARRELL: Michel, thanks for having me on.
MARTIN: So say more about what is so new about this deal. I keep hearing the word unprecedented. Is it, and how so?
HARRELL: Well, what's new about this deal is the fact that Nvidia and AMD have agreed to pay 15% of their China revenues to the U.S. government. Traditionally, when the government has issued export control licenses, it has done so for free. Sometimes there's a very small fee of a few thousand dollars associated with processing an application. But there's just never before been this kind of concept where the government has said, we'll let you sell this stuff abroad, but you got to give us sort of a rev share, if you will - a revenue share - of what you're making.
MARTIN: So are you hearing from other companies about this? What are they saying?
HARRELL: Well, I think there's a lot of surprise in industry because this is very new. This is something that is unprecedented. And of course, companies are wondering what this means for them. Is this going to be a precedent that will be applied more broadly? Are other exporters, especially in the high-tech sector, going to begin to get requests to share their revenue? Or is this going to be some kind of one-off that, you know, maybe applies to Nvidia and AMD but won't apply more broadly?
MARTIN: Well, traditionally, though - haven't been a consideration about selling technology where national security concerns were paramount. Does this shift the priority?
HARRELL: Well, that is why, from a policy level, this is so unprecedented. Traditionally, the government has not charged a fee because it has been reviewing these licenses solely on the basis of, does allowing this export to China hurt U.S. national security, or does it help U.S. industry in ways that do not hurt national security? So they'd review the product and see, well, this is just, you know, too high-risk a piece of equipment or too advanced a chip to go to China, and there's never been a financial part of this.
And this, I worry, really changes the incentives for the government because instead of reviewing this license application on the basis of, does allowing China to buy this chip hurt U.S. national security? - now the government's going to be thinking, well, maybe it does or it doesn't hurt U.S. national security, but we could get 15% out of this. And that really changes the incentive structure and the basis on which these things have historically been granted.
MARTIN: So to that end, a number of national security experts sent a letter to Secretary of Commerce Howard Lutnick last month expressing concern over the exports of these chips to China. The president on Monday said at a press conference that there's nothing to worry about. Do you have an opinion about who's right here?
HARRELL: So I do think these - selling these chips to China poses a national security risk. I take President Trump's point that these are not actually the most advanced chips anymore. These are chips that are two or three years out of date. That said, they are still more advanced than anything China can make indigenously. And so this is giving China a computer - compute capability that it wouldn't otherwise have. And, of course, simply charging Nvidia 15% does nothing to address the national security risk. You could think about ways to address the national security risk. Maybe only sell them even older chips, not even chips this advanced, or maybe limit, you know, very specifically and very carefully who can use these chips. But simply taking 15% off the top doesn't do anything to address potential national security risks.
MARTIN: So before I let you go, we have about a minute left here. A number of the president's policies, particularly these kind of unprecedented ones, have experienced legal challenges. Some have been successful. Some have not. Do you anticipate a legal challenge to this, and who would bring it?
HARRELL: So, Michel, I think your last point there is really the key question. Who would bring it? I do think there are questions about whether this is legal. Congress in 2018, when it passed a new export control law, included a provision in that law that appears to prohibit the Commerce Department from collecting fees for export control licenses. The statute says no fees shall be collected or required, so there would seem to be a basis for a legal challenge. That said, you know, Nvidia and AMD just agreed to this deal, so it's hard for me to see them turning around and suing over it. I think that if this becomes more common - if the Commerce Department starts saying, we want 15% across the board to other exporters - down the road, you may see a legal challenge.
MARTIN: That's Peter Harrell. He's a nonresident fellow at the Carnegie Endowment for International Peace. Mr. Harrell, thank you so much.
HARRELL: Thank you.
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