January 04, 2023

The Illusion of Controls

In October, the Biden administration announced a series of new, unilaterally imposed export controls designed to freeze China’s advanced chip production and supercomputing capabilities. The strengthened rules came less than a month after National Security Adviser Jake Sullivan announced a major change in U.S. technology competition strategy. Previously, the United States sought to deny the export of chips or other technologies to China if such items were designed or likely to be used for military purposes, or if the transfer would impair the U.S. ability to maintain an advantage over competitors in cutting-edge commercial technologies that might also have military applications. Now, Sullivan said, “we must maintain as large of a lead as possible” in certain technology areas as a whole, for all intents and purposes erasing the line between civilian and military applications in the advanced chip production and supercomputing sectors.

The case of semiconductors illustrates how countries cannot easily weaponize interdependence, especially when it comes to supply chains.

A narrative quickly took hold that these export controls, and especially the “foreign direct product rule” provisions that allow the United States to apply its controls extraterritorially under certain circumstances—such as preventing companies outside the United States from selling semiconductors to China if they were produced using U.S. equipment—were a sign that the U.S. was “weaponizing” its influential position in the semiconductor supply chain. The United States, this argument went, enjoys market dominance in certain kinds of software and equipment used to design and manufacture semiconductors, as well as certain advanced chips critical for artificial intelligence, and it can use this privileged position to stymie China’s attempts to develop its own microelectronic and supercomputing capabilities. In a similar way, the United States has used the centrality of the U.S. dollar to freeze individuals and governments out of the global financial system.

Read the full article from Foreign Affairs.

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