China's trade imbalance with the U.S. may be partly due to the U.S. over-regulating and restricting the sale of too many technologies.

HONG KONG -- Selling something as innocuous brake pads can easily get a company into trouble if it's found to be exporting them into China without a special license. The same rules apply for a host of different items, such as the ubiquitous SIM card, which can be found in everything from mobile phones to smart cards and even some electric toys.

This is due to a heightened focus on export controls for goods that are imported from the U.S. into China. Brake pads and SIM cards, for example, are considered "duel use" goods as they could potentially be converted for military activities: brake pads for military vehicles and SIM cards to program a missile or detonate a bomb.

In 2010, trade between the U.S. and China hit $385 billion, up 30% from the previous year. As it continues to grow, so too will the debate about China’s trade surplus with the U.S., which according to U.S. figures, hit $181 billion in 2010.

One of the prevailing views is that China’s trade imbalance with the U.S. (an imbalance that's significantly higher than with any other country or region) is due to the U.S. over-regulating and restricting the sale of too many technologies. Simply put, large areas of market demand in China are being thwarted. Under this argument, it is U.S. Export Control laws that have undermined the ability of the U.S. to balance its trade flows with China. These laws have allegedly closed off lucrative markets to U.S., Chinese and other multinational corporations (MNC). It is difficult to assess the extent to which this has impeded trade, however, the immediate impact of such restrictions is likely to be a net reduction in trade.

What is new about all the talk of controlled and restricted technologies, is that for the first time, the topic of export controls has been elevated to the same level of the U.S.-Sino trade dialogue as the other usual suspects: antidumping and countervailing duties, intellectual property, government procurement and indigenous innovation programs and currency valuations.

Two things have become apparent: the first is that hyper-sensitivities around strategic technologies are widespread and, for the U.S. leadership, the need to ring-fence these technologies supersedes balancing its trade deficit with China. The second is that MNCs may need to adjust business plans to a world where increased export control regulations and massive penalties (both civil and criminal) may become the norm.