[News] What Will Decide the Effectiveness of U.S. Export Controls on China?

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According to a column by Ming-fang Tsai, a professor from Tamkang University, published in TechNews, while the U.S. continues to promote the CHIPS and Science Act and tighten export controls on China, U.S. Secretary of Commerce Gina Raimondo recently stated in an interview with The Wall Street Journal that attempting to block China is futile. She highlighted that the CHIPS and Science Act is a more effective tool than export controls, emphasizing that maintaining technological leadership is the only way for the U.S. to outcompete China.

However, the parallel implementation of the CHIPS Act and export controls might actually be the most effective strategy to ensure U.S. technological leadership. The CHIPS Act is designed to bolster U.S. economic security, while export controls aim to protect intellectual property and critical technological advancements, thereby slowing China’s technological progress. Together, these policies are complementary and reinforce the U.S.’s ability to maintain its technological edge.

Furthermore, for export controls to be effective, a careful selection of supply chain partners is crucial.

The Cost of the Export Controls for the U.S.

When the U.S. imposes export controls on China, all countries and companies involved in the same supply chain must comply with U.S. regulations to ensure the effectiveness of the controls. If any country or company fails to cooperate or disregards the regulations, the effectiveness of the controls will be significantly diminished. Therefore, the U.S. must negotiate with supply chain partner countries to effectively implement comprehensive export controls.

The challenge becomes particularly significant in the context of mature node processes. While enforcing export controls on advanced process technology is relatively simple due to the limited number of companies with such capabilities, expanding these controls to include mature processes is far more complex, as it would involve a larger number of companies and countries, substantially increasing the cost and complexity for the U.S. to implement effective export controls.

How Can the U.S. Ensure the Effectiveness of the Export Controls: Partnering with Countries with Aligned Interests

To ensure the effectiveness of export controls, the U.S. should collaborate with countries whose economic interests closely align with its own. If U.S. companies prioritize reducing production costs and partner with low-cost countries whose interests diverge from those of the U.S., the effectiveness of export controls could be weakened.

Also, if the U.S. requires Taiwanese manufacturers to relocate production out of Taiwan due to concerns about instability in the Taiwan Strait, export control costs could rise, as intermediaries in certain regions might facilitate China’s interests, thereby undermining the effectiveness of U.S. export controls.

By partnering with countries with high production complementarity and aligned economic interests, the U.S. can significantly reduce the cost of implementing export controls. In such a scenario, export controls on China would be effective and sustainable.

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