For months the U.S. Commerce Department has exerted pressure on Japan and the Netherlands to restrict the sale of advanced chipmaking equipment to China. Now that the U.S. has issued its own tough export controls targeting the likes of “bellwether” chip companies YMTC, CXMT, and SMIC, Bloomberg reports that Japan and the Netherlands will join the U.S. in issuing restrictions of their own.
The importance of this move should not be underestimated. Bloomberg’s analysis describes the addition of Japan and the Netherlands as a “significant milestone,” adding that, “the three-country alliance would represent a near-total blockade of China’s ability to buy the equipment necessary to make leading-edge chips.”
China knows these crushing blows spell doom for its domestic production of advanced chips, so it’s fighting back at the World Trade Organization – the premier body in the world for adjudicating trade disputes. China recently filed a dispute there claiming that the new rules constitute unfair trade protectionism – a rich charge coming from a nation which prohibits foreign investment in multiple economic sectors. China has also shoveled some $24 billion in subsidies to YMTC, which may be a violation of WTO subsidy rules given that it will cause “serious prejudice” to the interest of another country – namely, the United States.
According to the Wall Street Journal, China also claims as a grievance the fact that the U.S. has “expanded its concept of national security.” We’ll make no argument there – the U.S. has expanded its concept of national security, and for good reason. China has intended to use homegrown tech champions to supply its military, and create products used to steal, spy, and coerce. There’s also the reality that economic security is national security – and a flourishing YMTC, for example, would put at risk an estimated 24,000 U.S. jobs, as China Tech Threat and the Coalition for a Prosperous America detailed in the Silicon Sellout report earlier this year.
The Netherlands and Japan took the right actions for national security, galvanizing multilateral momentum for the legitimacy of the U.S.-led international export control regime in the process. Other countries should now work within the WTO to uphold America’s right to defend itself and its economy from predatory Chinese companies.