The U.S., the Netherlands and Japan need to prepare for “expanded” Chinese retaliation as a result of their pact to impose new export controls on advanced semiconductor equipment (see 2303310031 and 2303090032), the Center for Strategic and International Studies said in a commentary this week, adding that China has “long put national security goals above those of market efficiency.”
Exports to China
The Biden administration’s October semiconductor chip controls against China (see 2210070049 and 2211010042) are expected in the short term to “constrain” the country’s access to the most advanced chips “used in computationally intensive subfields” of artificial intelligence, the International Institute for Strategic Studies said in an April report. But the controls could spur Chinese AI researchers toward “subfields that are less computationally demanding” and lead them to develop “new competitive advantages” in those areas, the report said.
The U.S. should create an outbound investment screening regime that focuses on capturing “smart money” investments in critical technology industries in China, said Emily Kilcrease, a senior fellow with the Center for a New American Security and former National Security Council official. Smart money investments would include those that are “accompanied by managerial expertise or other intangible benefits” that could advance China’s “indigenous technology capabilities,” she said.
About 10% of critical raw materials, as measured by value, faced export restrictions in the last decade, according to a new report from the Organization for Economic Co-operation and Development -- and the use of restrictions grew five-fold in the 2017-2019 period, compared with the two-year period 10 years earlier. Export taxes are the most frequent restriction, the authors said, adding: "This may be related to the fact that, under WTO rules, quantitative restrictions on exports are generally prohibited while export taxes are not."
The Treasury Department may be prioritizing enforcement of existing Russia sanctions rather than searching for new measures to impose, said Jay Shambaugh, Treasury’s undersecretary for international affairs. Shambaugh, speaking during an April 10 event hosted by the Brookings Institution, also said industry should expect the Biden administration to continue imposing national security-related trade restrictions on China.
The top executive in the EU, European Commission President Ursula von der Leyen, told reporters in China that the trade deficit between the EU and China has more than tripled in a decade, and said she told the Chinese president "this trajectory is not sustainable and the underlying structural issues need to be addressed."
Chinese officials recently have slowed merger reviews of a “number” of proposed acquisitions by U.S. companies, asking the firms to first make available in China products that may be subject to U.S. export controls, The Wall Street Journal reported. China has so far slow-walked merger reviews of Intel’s $5.2 billion purchase of Israel-based Tower Semiconductor and chipmaker MaxLinear’s $3.8 billion purchase of Taiwan-based Silicon Motion Technology, the report said.
The Office of the U.S. Trade Representative released its 2023 National Trade Estimate Report on Foreign Trade Barriers, highlighting the most significant foreign market issues U.S. exporters are facing. The report focuses on foreign import policies, technical barriers to trade, intellectual property protection, competition, and more.
China has asked the World Trade Organization to review semiconductor export controls recently announced by Japan, saying the “harmful” measures violate WTO rules. Beijing also lodged a broader complaint against the reported chip control deal agreed to by the U.S., the Netherlands and Japan, saying it should be made public and scrutinized by WTO members.
Japan last week said it plans to impose new export controls on certain semiconductor manufacturing equipment, a move that could align its restrictions with some of the sweeping China controls released by the U.S. in October. The Japanese restrictions will apply to 23 types of chip items and covering six categories of equipment used in chip manufacturing, including cleaning, deposition, lithography and etching, Reuters reported March 31.