Export controls have become Washington's primary weapon in the AI competition with China, but a major new analysis suggests this strategy alone is backfiring. A report from the Center for Strategic and International Studies (CSIS) finds that while restrictions can delay China's access to advanced semiconductors and AI technology, they also encourage Chinese companies to design around American technology, reduce revenues for US firms, and strain relationships with allied nations.

How Have Export Controls Changed Since the Cold War?

The US government has relied on export controls for decades, but the modern tech competition with China operates in a fundamentally different landscape than Cold War-era restrictions. Back then, the Soviet Union was largely isolated from global supply chains. Today, China is deeply woven into worldwide semiconductor manufacturing, possesses substantial domestic innovation capabilities, and has responded to American restrictions through aggressive circumvention strategies, domestic substitution efforts, and massive investment in technological self-sufficiency.

This shift matters enormously. When the US restricts access to cutting-edge chips used in artificial intelligence systems, Chinese companies don't simply give up. Instead, they accelerate their own research programs, invest billions in alternative technologies, and work with allies to find workarounds. The result is a cat-and-mouse game where restrictions provide short-term delays but long-term strategic disadvantages for American technology companies.

What Are the Unintended Consequences of Broad Export Restrictions?

The CSIS report identifies several ways that overly broad or frequently changing export controls can undermine US competitiveness:

• Revenue Loss for US Firms: American semiconductor and software companies lose significant market share and profits when they cannot sell to China, one of the world's largest technology markets. This reduces their ability to fund research and development.
• Design-Around Strategies: Chinese engineers respond to restrictions by developing alternative technologies that don't rely on US components, reducing American technological leverage over time.
• Allied Coordination Challenges: Frequently changing restrictions complicate efforts to work with international partners like Japan, South Korea, and the Netherlands, which also manufacture critical chips and technologies.
• Acceleration of Self-Sufficiency: Restrictions accelerate China's localization drive in semiconductors, pushing Beijing to invest even more heavily in domestic chip design and manufacturing capabilities.

The paradox is striking: by trying to slow China's AI progress through export controls, the US may actually be speeding up China's efforts to become independent from American technology. This creates a scenario where restrictions achieve tactical wins but strategic losses.

What Does the CSIS Report Recommend Instead?

Rather than abandoning export controls entirely, the CSIS analysis argues for a more surgical approach embedded within a broader technology strategy. The report emphasizes that carefully targeted controls should form just one part of a comprehensive US response to Chinese competition. The full toolkit should include sustained investment in research, talent development, advanced manufacturing capacity, commercialization support, and stronger collaboration with allied nations.

"Export controls can delay access to critical technologies, but broad or frequently changing restrictions can also reduce revenues for U.S. firms, encourage companies to design around U.S. technology, and complicate coordination with allies," the report stated.

CSIS Report, Rethinking Export Controls as a Tool in Modern Technology Competition

This recommendation reflects a growing consensus among technology policy experts that the US cannot compete with China through restrictions alone. Instead, American strength must come from superior innovation, a larger pool of AI talent, more advanced manufacturing infrastructure, and the ability to commercialize breakthroughs faster than competitors. Export controls should be one tool in this larger arsenal, not the entire strategy.

How Can the US Build a Stronger Technology Strategy?

The CSIS analysis points toward several concrete areas where the US could invest to maintain its edge in AI and semiconductors without relying solely on export restrictions:

• Research Investment: Sustained funding for basic and applied AI research at universities and national laboratories, ensuring the US continues to produce breakthrough innovations that China cannot easily replicate.
• Talent Pipeline: Policies that attract and retain top AI researchers, engineers, and mathematicians from around the world, recognizing that talent is often more important than any single technology.
• Manufacturing Capacity: Domestic and allied semiconductor fabrication plants that reduce dependence on any single country and ensure supply chain resilience during geopolitical tensions.
• Commercialization Speed: Faster pathways for turning research into products and services, allowing US companies to capture market share before competitors can catch up.
• Allied Coordination: Deeper partnerships with Japan, South Korea, Taiwan, the Netherlands, and other technology leaders to align export policies and prevent China from exploiting gaps in the international system.

The stakes in this competition are enormous. AI technology will shape everything from military capabilities to economic productivity to scientific discovery over the coming decades. But the CSIS report suggests that the US cannot win this race by simply saying "no" to China. Instead, America must say "yes" to a more ambitious, comprehensive strategy that plays to its genuine strengths: innovation, talent, manufacturing excellence, and the ability to work with allies.

As export controls continue to evolve and China accelerates its self-sufficiency efforts, policymakers face a critical choice. They can continue down the path of increasingly restrictive controls, hoping to slow Chinese progress. Or they can shift toward a strategy that combines targeted restrictions with massive investments in American technological capabilities. The CSIS report makes clear that the second approach is more likely to determine who wins the AI race.

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