The Biden administration’s move to block exports of advanced computer chips to China signals a new phase in relations between the world’s two largest economies – one in which trade matters less than the increasingly fierce competition for the world’s leading technological and military power.

The aggressive move announced last month will help set the tone for President Joe Biden upcoming meeting with Chinese President Xi Jinping on Monday on the sidelines of the Group 20 Asia Summit. This demonstrates Biden’s determination to “manage” US competition with China, whose officials were quick to denounce the export ban.

After more than two decades of trade expansion and global growth, both countries are openly putting their national interests first as the global economy struggles with high inflation and the risk of recession. The US and China have identified the development and production of computer chips as critical to economic growth and their own security interests.

“We will do everything we can to protect Americans from the Chinese threat,” Trade Secretary Gina Raimondo said in an interview. “China is crystal clear. They will use this technology for surveillance. They will use this technology for cyber att*cks. They will use this technology to harm us and our allies or our ability to defend ourselves in many ways. “

Xi responded to the export ban in his statement at last month’s Chinese Communist Party congress, where he secured his third term as country leader. He promised China would act more aggressively to become self-sufficient in the production of semiconductors and other technologies.

“To increase China’s innovation capacity, we will move faster to launch a series of major national projects that are of strategic, holistic and long-term importance,” said Xi.

The Chinese government has named the development of advanced computer chips that could handle anything from artificial intelligence to hypersonic missiles as one of its top priorities. To fill the gap until it can get there, China relies on imports of advanced chips and manufacturing equipment from the US, which was imposed by a string of export controls last month that blocked the world’s most advanced chips, factory equipment and industry from being shipped to China by experts related to America.

The United States and its allies, after the February invasion of Ukraine, were famous for introducing export controls against Russia, which made it difficult to provide Russian forces with weapons, ammunition, tanks and planes. As a result of these restrictions, Russia relied on Iranian drones, and the US accused North Korea of ​​supplying them with artillery.

Until recently, the United States operated on the assumption that strong trade relations would bring countries closer together in a way that would make the world safer and richer, in a post-Cold War order. Global supply chains were supposed to lower costs, increase profits and allow the penetration of democratic values ​​into the territory of oligarchy, dictatorships and autocracy.

However, after the global pandemic, the war in Ukraine and China’s own ambitions, the Biden administration and many European and Asian allies decided to prioritize national security and industrial strategies. Both the United States and the European Union have provided tens of billions of dollars in incentives to increase domestic production of computer chips.

In last month’s speech at IBMBiden said China was lobbying in particular against a law that provides $ 52 billion for the production and development of advanced semiconductors in the US, an incentive package followed by a series of statements from Intel, Micron, Wolfspeed and others about building computer chip factories in the United States.

Some GOP legislators who opposed the measure had bought China’s arguments, he said.

“The Chinese Communist Party has lobbied the US Congress against this legislation,” Biden said. “And unfortunately some of our friends on the other team bought it.”

During his presidency, Donald Trump had fiery rhetoric about China, imposing tariffs that the Biden administration has yet to lift. But in every qualitative way, the computer chip export bans are far stricter than anything imposed by Trump, said Gregory Allen, a senior associate in the strategic technology program at the Center for Strategic and International Studies.

Allen said tariffs from the Trump era were high in dollar terms, but had almost no effect on the trade balance. Import taxes were also not of strategic importance. Export controls imposed by the Biden administration would be an obstacle to Chinese technology, which is decades behind the US

“Basically, we’re committed to saying: China, you won’t achieve your number one target,” Allen said.

The era of China, Russia and other competitors with relatively unfettered access to the US and European markets appears to be coming to an end, said Christopher Miller, a professor at Tufts University and author of Chip Wars.

“The risk posed by these countries has increased, so Western leaders have reconsidered the wisdom of giving opponents open access to their markets,” said Miller.

Rather than trying to work together as a single global economy, new alliances such as Quad (Australia, India, Japan, and US) are formed and existing partnerships such as NATO are expanded. Economic integration between these partners has become essential as US export control of advanced chips requires support from other manufacturers in Japan and the Netherlands.

“All the great powers are restructuring international economic relations in a way they hope will improve their geopolitical position,” said Miller. “Semiconductors are just one of many areas where trade, technology and capital flows are being re-politicized due to competition between the great powers.”

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