Trump’s Latest China Salvo Could Hurt U.S. Nuke Industry

The Trump administration is increasing its economic pressure on China by restricting U.S. nuclear power exports, a move that could end up hurting an American industry desperate to compete in the world’s fastest-growing market for nuclear energy.

Senior administration officials say Beijing is stealing U.S. nuclear technology to gain a competitive edge and is also diverting U.S. nuclear technology toward military uses, such as propulsion systems for submarines and aircraft carriers. In response, after almost a year of review, the administration decided Thursday to restrict the export of some U.S. nuclear technology and components to China.

“The United States cannot ignore the national security implications of China’s efforts to obtain nuclear technology outside of established processes of U.S.-China civil nuclear cooperation,” U.S. Energy Secretary Rick Perry said in a statement.

The restrictions essentially prohibit any new technology transfers, as well as the export of advanced reactor technologies, including small, modular reactors that are seen by many as the industry’s future. Additionally, the U.S. government is essentially banning any and all U.S. exports to China General Nuclear Power Group, one of the country’s two big nuclear energy developers. China General Nuclear was indicted in 2016 for organizing an espionage campaign to acquire U.S. nuclear know-how.

But the new restrictions won’t apparently affect some of the highest-profile U.S. projects in China, such as the construction of new nuclear power plants using the state-of-the-art Westinghouse AP1000 reactor. Chinese utilities are currently building four Westinghouse reactors at two locations; the first just became operational.

For the U.S. nuclear power industry, further restrictions on its ability to compete overseas come as a blow. For a year, export licenses to China have been held up by the government’s review, and nuclear industry advocates have repeatedly warned U.S. officials of the economic harms of being locked out of the world’s one real growth market, potentially worth tens of billions of dollars in future sales.

China is building more nuclear power plants than any other country, with 20 under construction now and more in the pipeline, while nuclear power’s prospects in the United States are dim. U.S. government trade assessments routinely rank China as one of the most attractive markets for the U.S. nuclear industry.

“As China witnesses [U.S. government] policy change and the uncertainty in export approvals, it undoubtedly will attempt to replace U.S. companies with other suppliers,” said an industry advisory group in a March letter to U.S. Commerce Secretary Wilbur Ross. “Once displaced, it will be nearly impossible for U.S. companies to get back into this market. Given our diminishing domestic civil nuclear industry, exports are vital to U.S. companies’ survival.”

The industry’s trade association, the Nuclear Energy Institute, said it was working to assess the potential impact of the new trade restrictions. Westinghouse, the last U.S. maker of nuclear reactors, declined to comment on the new restrictions or how they could affect the company’s business in China.

The new export restrictions are just the latest Trump administration salvo aimed at China and its economic practices. The administration has slapped tariffs on hundreds of billions of dollars’ worth of Chinese goods, accused Beijing (without evidence) of interfering in next month’s U.S. midterm elections, and put more restrictions on Chinese investment in the United States. Washington is also trying to push back against what it calls China’s debt-trap diplomacy by offering more financing for developing countries.

Like many of the administration’s tougher measures toward China, there are multiple official explanations for the shift in nuclear exports.

Administration officials said Beijing was using illicit means to acquire U.S. nuclear technology and gain a competitive edge, which they said would have detrimental long-term impacts on the U.S. industry. China has developed a bigger, homegrown version of the Westinghouse reactor to power the bulk of its domestic nuclear power push and for export around the world and is hoping to become a leader in the next wave of advanced reactors.

“We understand U.S. industry could suffer in the short term,” an administration official said but added it would benefit U.S. nuclear suppliers in the long run by maintaining their competitive advantage.

The U.S. restrictions will “likely accelerate China’s indigenous innovation,” said Jane Nakano of the Center for Strategic and International Studies. “What they are both after is the first-mover advantage in advanced nuclear, including the opportunity to be the first to successfully export them to countries new to nuclear power generation.”

But officials also stressed U.S. concerns over the diversion of nuclear technology to military uses, citing especially Beijing’s interest in developing new nuclear-powered propulsion systems for its navy and building floating nuclear reactors to power its artificial islands in the South China Sea. Administration officials also raised broad proliferation concerns related to China’s acquisition of nuclear technology.

The U.S. State Department already flagged the direction the administration was heading on the China nuclear review this summer, when Christopher Ford, the assistant secretary of state for international security and nonproliferation, called for a recalibration of U.S. technology transfers with China, particularly regarding nuclear technology.

“Chinese officials have announced, in advance, that if they acquire anything through civil nuclear cooperation that would be useful to any military aspect of China’s use of nuclear technology, they will indeed use it for this purpose,” he said in a July speech.

An administration official on Thursday reiterated those concerns, saying they were worried about China’s “use of technology for weapons, for weapons systems, for weapons platforms, and diversion of technology for use by other countries.”

The new restrictions on China might not be the last challenge for a U.S. nuclear industry looking for fresh markets.

This spring, industry and administration officials made a trade trip to Saudi Arabia, hoping to secure a spot for U.S. nuclear suppliers as Riyadh prepares a massive nuclear energy push, including the construction of as many as 16 nuclear power plants. U.S. industry officials spy a market potentially worth as much as $100 billion.

But the United States and Saudi Arabia still have to agree on the terms of nuclear cooperation, including addressing concerns about the risk of proliferation, before any deals can be made, and competition from other potential suppliers such as South Korea is intense.

Meanwhile, all bets on business in Saudi Arabia might be off. In the wake of allegations that senior Saudi officials orchestrated the killing of the Saudi dissident Jamal Khashoggi this month, Congress is pushing for a tough U.S. response, possibly including economic sanctions and a hold on billions of dollars’ worth of arms sales.