Washington appears to be in trouble with its European and Japanese allies. Just months after unveiling a comprehensive set of restrictions on technology exports to China, the US has faced resistance from Japan and the Netherlands, both technology powerhouses that the United States desperately needs.
1. The US launched a wide range of export restrictions on China’s technology industry. Washington restricted the sale of advanced semiconductors and key manufacturing to Chinese enterprises. In addition, US citizens and green card holders were prohibited from working for Chinese high technology firms.
2. Its purpose was to block the development of China’s fast-growing technology sector. For example, the Chinese semiconductor firm SMIC succeeded in creating an advanced 7 nanometer chip. By cutting off access to American technology, Washington hoped to maintain its technological edge over Chinese firms.
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3. National security was also a major concern. The Biden administration argued that advanced semiconductors could be used to fuel China’s rapid military expansion. For Chinese firms, stemming the flow of advanced technology was as much about national security as it was about economic competition.
4. However, US export restrictions also require the support of allies. The Netherlands is home to tool-maker ASML, which has advanced machinery vital to manufacturing cutting-edge semiconductors. Japan’s Tokyo Electron is one of the most prominent players in the chip making equipment market.
5. US Commerce Secretary Gina Raimondo publicly stated that Japan and the Netherlands, given their close ties to the US, would follow the US lead on technology export controls.
6. However, recent developments have rendered that decision ambiguous. The Dutch ministers of economy and foreign trade have called for their country to take an independent path. While his country is negotiating with the US, he has made it clear that the Netherlands will look after its own interests. This is because China remains a major economic partner for the country and accounts for 11% of Dutch imports and 5% of exports.
7. Japan has been more circumspect. While Tokyo bureaucrats are also negotiating with the Americans, Tokyo Electron has not hesitated to express its concerns about US tech export restrictions.
8. Washington has taken a big gamble on its technology export restrictions on China. It has risked billions of dollars in revenue for American businesses on the grounds that it could team up with allies to cripple Chinese technology firms. If those same allies half-heartedly refuse to join or enforce sanctions, these sanctions will cease to have effect.
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