US must work closer with allies over semiconductor exports rules

The 7 October 2022 rule imposing tougher controls on exports of advanced computer chips, and to develop and maintain supercomputers and manufacture advanced semiconductors had ‘many positive elements,’ but its release should have been better coordinated with allies.

So said Akin Gump partner and Atlantic Council Fellow Clete Willems, giving testimony to the United States House of Representatives Committee on Financial Services hearing on ‘Combatting the economic threat from China,’ on 7 February.

As a result of that poor coordination, said Willems,

‘[I]n the immediate aftermath of the rule’s release, Dutch and Japanese companies made statements suggesting it would help their business in China, while U.S. companies reported that their business would be substantially harmed.’

He said that recent reports that the Biden Administration had convinced the Netherlands and Japan to impose additional export controls on China ‘are welcome, but…may be a Pyrrhic victory. A key open question is whether these allies will include key features of the U.S. rule in their regulations, including controls on persons, the broad end-use catch-all control on semiconductor technology, and prohibitions on re-exportation for those tools outside of the Netherlands and Japan.’

‘Nothing short of parity with the U.S. rules will level the playing field or meet the Administration’s national security objectives,’ he said, adding, ‘If the Dutch and Japanese actions lack key features of the U.S. rule, China will find ways to exploit the gaps. For example, without Dutch and Japanese person controls, Chinese companies can lure talent away from Dutch and Japanese companies to aid in their advancement. Without a catch-all control, the rule will not keep up with an evolution in the tools used for advanced node manufacturing. And without restrictions on re-exportation, Chinese companies can find ways to obtain foreign tools and technology via third countries.’

https://docs.house.gov/meetings/BA/BA00/20230207/115279/HMTG-118-BA00-Wstate-WillemsC-20230207.pdf