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.
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.
But the U.S. role in the semiconductor supply chain cannot be compared with the primacy of its currency in global finance. Technology supply chains can be adapted and reorganized more easily than the dollar-based financial system. Worse, this argument is dangerous because it lulls policymakers into a false sense of security about the effectiveness of unilateral approaches, leading them to discount the importance of building multilateral alliances to ensure the effectiveness of export controls. It may also undermine the critical signaling of Western unity in confronting the systemic challenges presented by China. Although U.S. officials are committed to convincing key allies and partners to jointly impose similar controls, the U.S. actions were announced alone and the prospect of a deal with other allies and partners remains uncertain.
Understanding how export controls or other …….