Chip ban signals new era before Biden, Xi meeting

Relations appearing to focus on power rather than on trade

WASHINGTON — The Biden administration’s move to block exports of advanced computer chips to China is signaling a new phase in relations between the globe’s two largest economies — one in which trade matters less than an increasingly heated competition to be the world’s leading technological and military power.

The aggressive move, announced in October, will help set the tone for President Joe Biden’s meeting with Chinese President Xi Jinping on Monday on the sidelines of the Group of 20 summit in Indonesia. It’s evidence of Biden’s determination to “manage” the U.S. competition with China, whose officials were quick to condemn the export ban.

After more than two decades in which the focus was on expansion of trade and global growth, both countries are openly prioritizing their national interests as the world economy struggles with high inflation and the risk of recessions. The U.S. and China have each identified the development and production of computer chips as vital for economic growth and their own security interests.

“We’re going to do whatever it takes to protect Americans from the threat of China,” Commerce Secretary Gina Raimondo said. “China is crystal clear. They will use this technology for surveillance. They will use this technology for cyber attacks. They will use this technology to, in any number of ways, harm us and our allies, or our ability to protect ourselves.”

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

“In order to enhance China’s innovation capacity, we will move faster to launch a number of major national projects that are of strategic, big-picture and long-term importance,” Xi said.

The Chinese government has named the development of advanced computer chips as one of its top priorities. To bridge the gap until it can get there, China has been relying on imports of advanced chips and manufacturing equipment from the U.S., which imposed a series of export controls last month that block sending to China the world’s most advanced chips, factory equipment and industry experts tied to America.

The U.S. had until recently operated from the premise that strong trade relationships would bring countries closer together in ways that made the world safer and wealthier. Global supply chains were supposed to lower costs, boost profits and enable democratic values to seep into the terrain of oligarchies, dictatorships and autocracies.

But after a pandemic, Russia’s war with Ukraine and China’s own ambitions, the Biden administration and many European and Asian allies have chosen to prioritize national security and industrial strategies. Both the U.S. and European Union have provided tens of billions of dollars in incentives to spur more domestic production of computer chips.

Biden said in October that China specifically lobbied against a law that provides $52 billion to produce and develop advanced semiconductors in the U.S., an incentive package that has been followed by announcements from Intel, Micron, Wolf-speed and others about the construction of computer chip plants in the U.S..

He said that some GOP lawmakers who opposed the measure had bought into China’s arguments.

“The Communist Party of China was lobbying in the United States Congress against passing this legislation,” Biden said. “And unfortunately, some of our friends on the other team bought it.”

Donald Trump had fiery rhetoric on China during his presidency, imposing tariffs that the Biden administration has yet to lift. But by any qualitative measure, the bans on computer chips are much tougher than anything imposed by Trump, said Gregory Allen, a senior fellow in the strategic technologies program at the Center for Strategic and International Studies.

Allen said the Trump-era tariffs were large in terms of dollars, but they had almost no effect on the balance of trade. Nor were the import taxes strategic. The export controls imposed by the Biden administration would be a setback for Chinese technology that is decades behind the U.S.

“We have essentially committed ourselves to saying: China, you will not achieve your number-one goal,” Allen said.

PATRICK SEMANSKY/AP President Biden, seen at a March 9 event to support legislation involving computer chips, is scheduled to meet with Chinese President Xi Jinping on Monday.