Western sanctions led Russia to greatly increase trade with Asia, while devastating Europe’s economy. The US tech war against China is damaging its own industry.
by Renate Bridenthal
Part 7 - US sanctions on China risk global trade war, hurting Western industries
One important, contradictory result of the measures taken so far has been the growing closeness of Russia and China, who now hold joint military exercises.
In terms of Beijing, whose spectacular growth presents a clear challenge to U.S. global dominance, Washington has begun a stronger form of economic coercion: export controls.
Here the danger of blowback is even greater, possibly leading to a long-lasting trade war over semiconductors or microchips, the key to advanced civilian and military technology.
In October 2022, the U.S. Commerce Department barred Chinese chip, biomedical, and chemical companies from importing highly advanced American chip design and manufacturing tools. The goal is to prevent Chinese companies from developing their own ability to manufacture comparable technology.
In terms of Beijing, whose spectacular growth presents a clear challenge to U.S. global dominance, Washington has begun a stronger form of economic coercion: export controls.
Here the danger of blowback is even greater, possibly leading to a long-lasting trade war over semiconductors or microchips, the key to advanced civilian and military technology.
In October 2022, the U.S. Commerce Department barred Chinese chip, biomedical, and chemical companies from importing highly advanced American chip design and manufacturing tools. The goal is to prevent Chinese companies from developing their own ability to manufacture comparable technology.
Should secondary sanctions be applied in this case, other technology companies may be affected – like Samsung and Taiwan Semiconductor Manufacturing Company (TSMC), which trade with China’s large market.
However, a considerable illicit trade of chip smuggling is going on. An amusing, miniature version of this was the attempt to bring in chips in a fake baby bump.
One possible blowback to U.S export controls could be China potentially retaliating by denying the U.S. rare earth minerals that are needed for the batteries used in most modern technological products. China oversees 60% of rare earth production.
U.S. business interests have expressed concern about the consequences, especially given that Washington has failed to persuade its allies to adopt similar export controls.
Moreover, the loss of the China market would be a “death warrant” for some U.S. semiconductor firms, whose decline in revenue could lead them to reduce their investment in research and development, and thus decline.
Hence, the semiconductor industry prefers a narrower target on China’s defense and security industry.
However, a considerable illicit trade of chip smuggling is going on. An amusing, miniature version of this was the attempt to bring in chips in a fake baby bump.
One possible blowback to U.S export controls could be China potentially retaliating by denying the U.S. rare earth minerals that are needed for the batteries used in most modern technological products. China oversees 60% of rare earth production.
U.S. business interests have expressed concern about the consequences, especially given that Washington has failed to persuade its allies to adopt similar export controls.
Moreover, the loss of the China market would be a “death warrant” for some U.S. semiconductor firms, whose decline in revenue could lead them to reduce their investment in research and development, and thus decline.
Hence, the semiconductor industry prefers a narrower target on China’s defense and security industry.
Finally, who sets the standards for microchips also holds considerable power. Chinese engineers are increasingly influential in the International Organization for Standardization and International Electrotechnical Commission, which gives Beijing a presence in help setting the rules.
China has even set up a competitor to WiFi on its Digital Silk Road. And its global positioning system, Beidou, is three times more accurate than GPS.
Decoupling into two world systems of technology would probably backfire on many levels. Semiconductor production consists of a highly integrated global network of resource extraction, design and manufacture.
At present, Taiwan’s TSMC has the largest concentration of production, amounting to 92% of the most advanced chips. That makes Taiwan a key factor in the U.S.-China competition. And, for now, it provides the island with a “silicon shield” from military operations.
China has even set up a competitor to WiFi on its Digital Silk Road. And its global positioning system, Beidou, is three times more accurate than GPS.
Decoupling into two world systems of technology would probably backfire on many levels. Semiconductor production consists of a highly integrated global network of resource extraction, design and manufacture.
At present, Taiwan’s TSMC has the largest concentration of production, amounting to 92% of the most advanced chips. That makes Taiwan a key factor in the U.S.-China competition. And, for now, it provides the island with a “silicon shield” from military operations.
It is becoming increasingly clear that the U.S. sanctions policies to maintain global dominance, although harmful and escalating, may have passed the peak of their effectiveness.
Export controls could be more effectively destructive, but even their outcome is likely to fall short of the ultimate goal.
Most observers consider that, in two or three decades, the U.S. will have come to terms with being only one of several important powers. The dollar will become one part of a basket of reserve currencies.
The question is if Washington can commit itself to cooperation rather than competition, in matters of concern to humanity at large.
The benefits could be enormous.
Export controls could be more effectively destructive, but even their outcome is likely to fall short of the ultimate goal.
Most observers consider that, in two or three decades, the U.S. will have come to terms with being only one of several important powers. The dollar will become one part of a basket of reserve currencies.
The question is if Washington can commit itself to cooperation rather than competition, in matters of concern to humanity at large.
The benefits could be enormous.
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