WWhether the topic of the day is Chinese spy balloons or American AI advances, Washington other Beijing they are increasingly viewing world events through the lens of a “tech war.” This escalating rivalry is usually framed as “United States vs. China”, but that misses a key point: America is not alone.
The United States’ biggest competitive advantage over China is not wealth or weapons, but the fact that the United States has many close friends and China has none. In fact, the only country that has signed a treaty to support China in the event of war is North Korea, an impoverished pariah state that deliberately program nuclear tests and missile launches to embarrass China during high-profile diplomatic summits. Treated or not, few would describe China and North Korea as friends.
It’s good to have friends, especially since so many Americans are world leaders in technologies of great strategic and geopolitical importance, including semiconductors. Most Americans are at least vaguely aware that Saudi Arabia is a key player in the world economy because produces more than 10% of the world’s oil, but far fewer know that Taiwan produces more than 90% of the world’s most advanced semiconductor computer chips or that a single company ASML, based in the Netherlands, produces 100% of the most advanced lithography machines that are irreplaceable equipment for computer chip factories. Today, computer chips are vital inputs not just for data centers and smartphones, but also for cars, critical infrastructure, and even home appliances like washing machines. As the world economy becomes increasingly digitized, it is also increasingly dependent on chips. It is for good reason that national security experts routinely to declare semiconductors to be “the new oil” when it comes to geopolitics and international security.
Which brings us to the Biden Administration’s remarkable string of tech diplomacy accomplishments in recent months. On October 7, 2022, the Biden Administration unilaterally imposed a set of export controls that restrict sales to China of advanced computer chips designed to run artificial intelligence applications and military supercomputers, as well as the manufacturing equipment to make those chips. Since US companies design more than 95% of AI chips used in China, and also produce manufacturing equipment used in all Chinese chip factories, these export controls pose a extraordinary obstacles to China’s ambitions lead the world in AI technology and achieve self-sufficiency in semiconductors.
Read more: The only way the US can win the tech war with China
However, export controls were also a big diplomatic gamble. If the US forced US industry to stop selling advanced chips and chip-making equipment to China, only for other countries to step in and replace the US, the policy would have dealt a huge blow to US industry. The US would suffer a huge loss of market share and revenue in China and, in return, gain only a fleeting national security benefit, perhaps setting China back in just a matter of months. The success of the policy depended entirely on persuading US allies, particularly Taiwan, the Netherlands, and Japan, to follow the US lead and adopt similar export control regulations.
Taiwan was the first to signal its agreement to the new restrictions, announcing on October 8 that it would no longer allow Chinese chip design firms to contract with Taiwanese chip factories to produce chips that could replace those the United States no longer allows to be sold to China. China has world-class chip designers, but its chip factories lag significantly behind the state of the art in Taiwan. Taiwan has ample reason to support Washington, both because Joe Biden has been more outspoken than any US president in decades about defending taiwan of a possible Chinese invasion and also because Taiwan’s semiconductor industry has also been a serious victim of the Chinese government-industrial espionage backed other illegal headhunting campaigns. The Taiwan government knows that China’s goal is to end its strategic dependence on Taiwan for semiconductors, which Taiwan refers to as its “silicone shield”—as close as possible. Of course, Taiwan is on board with US policies that aim to prevent that, though they generally prefer to be as quiet as possible on the matter to minimize any pushback from China.
Like Taiwan, Japan and the Netherlands are also global giants in the semiconductor industry. They, along with the United States, dominate the market for the staggeringly complicated equipment that is a vital component of every chip factory on Earth. While there are Chinese companies that produce semiconductor manufacturing equipment, they only produce a fraction of the different types of equipment that are required to produce chips, and the equipment that Chinese companies produce is far behind the state of the art in the US, the Netherlands and Japan. The most advanced Dutch lithography machines, for example, contain more than 100,000 parts, cost more than $340 million eachand rival the James Webb Space Telescope or the Large Hadron Collider in terms of technological complexity.
With the export controls on October 7, the US cut China off from America’s most advanced semiconductor manufacturing equipment, but this would be a fleeting and hollow victory if Japan and the Netherlands did not do the same again. immediate. There are some types of equipment that only American companies can currently make, but Dutch and Japanese companies produce equally advanced machines in closely related technical disciplines. In other words, they could develop new products to replace American technology relatively quickly, at least a decade faster than China itself, if the reward were guaranteed monopoly access to a large Chinese customer base.
Unfortunately for China, Japan and the Netherlands they are not going to do that. In late January, the Biden Administration scored a remarkable diplomatic victory: a deal with the Netherlands and Japan to establish multilateral export controls on semiconductor technology in China. Although the specific details of the agreement will take months of ongoing negotiations to finalize and will likely not be known until the Netherlands and Japan publish their updated export control regulations, two essential details are now known: Japan and the Netherlands will not allow their equipment companies to replace US industry for sales to China, and countries will expand the set of export control restricted equipment to include items that US industry does not make, including equipment of advanced lithography. Yeah properly appliedthe deal will likely add a decade or two to the timeline of China’s plans for semiconductor self-sufficiency, and now China may never reach it at all.
like Taiwan, Japanese other Dutch companies have been victims of China’s government-backed industrial espionage for semiconductor technology. And while they have historically feared Chinese retaliation for any steps taken to stop such provocations, they have also had to reassess their previous foreign policy positions after Russia’s invasion of Ukraine. Chinese support for the Russian government has had disastrous consequences for China’s global image.
Just as important, however, Taiwan, Japan, and the Netherlands share America’s democratic values and interest in a peaceful, rules-based international order. For the most part, the US did not come to this export control agreement through diplomatic carrots and sticks, but through genuine persuasion on the merits of the policy, as well as a genuine willingness to be persuaded when the allies made good points. During the months before and after October 7, US diplomats have been engaging with their foreign counterparts, listening carefully to concerns, and working diligently and collaboratively to address those concerns.
This is a hallmark of the Biden Administration’s approach to negotiation, not only on foreign policy, but on the domestic level as well. After the 2021 passage of the bipartisan infrastructure bill in Congress, Senator Mitt Romney praised the Biden Administration’s no-nonsense collaborative approach: “You can tell the difference between an adversarial negotiation and a collaborative negotiation.” he said. “In this case, when one side had a problem, the other side would try to solve it, instead of walking away from the table.”
Obviously, that’s not the right negotiation style for every situation. But nothing works better when the goal requires earning and keeping the trust of friends, and it’s good to have friends.
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