Escalating the China Trade War
Biden is following Trump's lead but doing it more competently.
Bulwark editor Jonathan V. Last contends “Joe Biden Just Crushed China’s Semiconductor Industry.”
There was some big, important news on Friday and no one really noticed: The Biden administration hit China, hard, with a series of export controls that are going to hurt.
I noticed and suspect most OTB readers did, too. But I didn’t think all that much of it.
Here’s how the policy works: Making computer chips requires a lot of advanced equipment. Much of that advanced equipment is made by American companies. The new rules from the Biden administration make it so that any company, anywhere in the world, using certain advanced American equipment to make chips can’t sell those chips to Chinese-controlled companies.
Which means that, at the stroke of a pen, China is getting cut off from the kind of advanced chips it can’t manufacture on its own. Which will cripple both military progress and tech-sector progress, too.
I’m a little skeptical that China, with its enormous human capital and other resources, isn’t capable of figuring out how to make chips but I’m no expert. Then again, neither is Last.
He cites NYT international economics reporter Ana Swanson:
Technology experts said the rules appeared to impose the broadest export controls issued in a decade. While similar to the Trump administration’s crackdown on the telecom giant Huawei, the new rules are far wider in scope, affecting dozens of Chinese firms. And unlike the Trump administration’s approach — which was viewed as aggressive but scattershot — the rules appear to establish a more comprehensive policy that will stop cutting-edge exports to a range of Chinese technology companies and cut off China’s nascent ability to produce advanced chips itself.
That sounds pretty significant.
First, in case there was any question, it is clear that China is being viewed as an adversary, and that that view is a bipartisan one. Any tech company with business in China would do well to note that any further investments are fraught with risk, and previous investments need to be diversified sooner rather than later.
Second is the point I started with: while Trump deserves credit for upsetting the apple cart in terms of conventional wisdom with regards to China relations, the Biden administration is correct to pursue those previous actions to their logical conclusion. . . .
[W]hat is significant about this move is not simply that it bans chips but it also bans equipment as well (and, given the restrictions it places on U.S.-persons, also bans the service of existing equipment). That certainly increases the motivation for China to build alternatives, but it is tough to get strong legs when you have to first figure out how to make weights (but the weights involve the most complex tools ever invented by humans).
The original is paywalled but, again, that’s interesting. (That China is viewed as an adversary is the cornerstone of all of our published strategy documents, so that’s rather a given.)
What Thompson is talking about with the “weights” here is the fact that this policy doesn’t just hurt China’s ability to get chips now—thus hurting its economy and military. It also hobbles China’s ability to build its own advanced semiconductor industry because now the Chinese have to reinvent every wheel in the process just to get to par as it exists in the West circa 2022.
It strikes me as a prudent step for all sorts of reasons, not least is Chinese propensity to steal our intellectual property. Still, I remain skeptical this will be a long-term impediment.