Date of this Version
Yeutter Institute International Trade Policy Review, September 19, 2023
U.S. Commerce Secretary Raimondo’s recent visit to China resulted in the announcement of a new “export control enforcement information exchange” between the United States and China. The laudable goal is to prevent China from using U.S. technology for military purposes against the United States or our allies. An information exchange may be a way to explain things to each other, but the fact remains that the export controls are indeed in place. China represents large revenue streams for three of the largest US chip producers—about 20% for Nvidia, 60% for Qualcomm, and 20-30% for Intel. If these U.S. companies cannot license or export to China, then their revenue streams will decrease, and that can translate into smaller margins, less hiring, and less spending on research and development. U.S. officials have been coordinating with other countries to ensure they participate actively in the strategy. Without coordination among key suppliers, China will circumvent U.S. export controls and access the U.S. technologies from another source.
Export controls do not guarantee China won’t advance on its own. Last week Huawei released a smartphone that reportedly comes with 5G capabilities. Time will tell if these chips can be produced in high volume and at reasonable cost. The technology is still generations behind market leaders like Taiwan Semiconductor Manufacturing, but it would still represent a big step forward for China’s chipmakers.
Last year Nicholas Burns, the U.S. ambassador to China, said that U.S.-China ties are at their lowest moment since 1972. Several U.S. officials have visited China in an effort to ease tensions. Secretary of Commerce Gina Raimondo is the fourth U.S. cabinet-level official to visit since June. Secretary of State Anthony Blinken, Secretary of Treasury Janet Yellen, and Climate Envoy John Kerry visited earlier this year. Efforts to ease tensions are welcome. Many U.S. businesses and agricultural producers that do business with China are worried that one of their largest markets is at risk.