The Department of Commerce is among the most powerful agencies of the federal government, influencing the design of domestic and international trade policies, which it then executes with broad discretionary powers in areas ranging from tariffs to the regulation of U.S. military exports.
The Trade Expansion Act of 1962 gave the Department of Commerce authority to investigate the effect of imports on national security. So, the Commerce Department’s Bureau of Industry and Security regulates transfers to foreign powers of civilian technologies with military applications. As Beijing and Washington compete for markets as well as technological and military influence around the world in their global power struggle, while maintaining significant direct and indirect trade, the Commerce Department is now a strategic agency, especially as Beijing seeks to buy off American political and business elites by any means at its disposal.
The Government Accountability Institute (GAI) has released a recent investigative report entitled Commerce Cronyism: Inside Deals, Conflicts of Interest & Chinese Connections. Subjecting the Department of Commerce to unusual scrutiny, the GAI is reported to have uncovered some truly troubling conflicts of interest.
Two things stand out in this report:
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- The GAI investigated the personal financial benefits that several Secretaries of Commerce have accrued by favoring their own interests through department decisions.
- The GAI revealed that Beijing may have corruptly influenced the Commerce Department under both Democratic and Republican administrations.
The report points out how the current Secretary of Commerce, Gina Raimondo, is married to Andrew Moffit, who after 20 years at consulting firm McKinsey & Co, joined software company PathAI, which specializes in artificial intelligence and its applications to medical diagnostics, as a staff director in 2020. Moffit then became a “strategic advisor” to PathAI.
Artificial intelligence developments are regulated by the Commerce Department’s Bureau of Industry and Security because they have direct military applications. They are sensitive technologies for U.S. national security. The Commerce Department can regulate the sharing of those American technologies with foreign employees, something Moffit would have been directly responsible for as PathAI’s chief of staff.
In 2019, U.S.-based venture capital firm Danhua Capital Management – DHVC – participated in a $60 million fundraising round for PathAI. DHVC maintains ties with a Chinese state-owned entity. DHVC’s relationship with PathAI, according to GAI’s analysis, could involve conflicts of interest related to national security risks. According to a Reuters report, Danhua would be part of a group of companies created by Beijing to penetrate Silicon Valley. Secretary Raimondo eased restrictions on Huawei, a company that the Trump administration had deemed a national security threat and that has also been flagged as a national security risk by Japan, Taiwan, France, Britain, Australia and Germany.)
GAI also points out that the Trump administration’s Secretary of Commerce, Wilbur Ross -who was severely criticized by the former president himself– was a shareholder of shipping companies with business in China and maintained investments in companies affected by the tariff policy while the Department of Commerce granted exemptions. Ross had previously presided over an auto parts company with operations in Mexico and after renegotiating the Free Trade Agreement with that country, he refused to publish the Department of Commerce’s investigation on the effects of foreign imports on the U.S. automotive industry.
While Penny Pritzker was the Obama administration’s Secretary of Commerce, GAI reports that buildings owned by the former official’s companies were reportedly leased to Commerce Department agencies and contractors. It also points out that in 2015 she awarded $10 million in grants to Clean Energy Trust, a nonprofit whose board of directors was co-chaired by Nick Pritzker, Secretary Pritzke’s cousin.