Guerre froide, unfinished business?

Citation :

How the United States Can Compete with Chinese Influence in Southeast Asia

Editor’s Note: China is rising and U.S. influence is declining. Going beyond that vague description is difficult, however, because influence is so hard to measure. Collin Meisel, Jonathan Moyer, Austin Matthews and David Bohl of the University of Denver and Mathew Burrows of the Atlantic Council try to meet this challenge and, in so doing, map how U.S. and Chinese influence has changed over time. Their approach suggests ways the United States can arrest this decline.

Daniel Byman

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Is China winning the competition for global influence? Answering such a question is difficult, and articles and in-depth studies often focus on a particular country or issue area rather than broader trends.

In a recent report authored by the Atlantic Council’s Foresight, Strategy, and Risks Initiative and the University of Denver’s Frederick S. Pardee Center for International Futures, we analyzed China-U.S. competition using the Formal Bilateral Influence Capacity (FBIC) Index, a quantitative measure of multidimensional influence between pairs of states from 1960 through 2020. As detailed in the report, the FBIC Index attempts to capture the size of interactions, as well as the reliance that one country has on others across economic, political, and security dimensions, in order to gauge the ability of a state to influence other countries in the international system.

Influence capacity is built from two primary components: bandwidth, or the size of the interaction between states, and dependence, or how reliant one state is on the other. As an example, the United States and China have a great deal of bandwidth between one another, particularly given their extensive trade volume, but neither is uniquely dependent on the other as a share of their total economy or security relationships. In contrast, it is common for many smaller Oceanic countries, such as Tuvalu, which often have low-bandwidth relationships due to their size, to be highly dependent on major regional and global powers for their aid, trade, and security relationships.

Trade wars and tariffs are an example of how dependence can be used to exercise influence. In 2020, China had twice the influence capacity over Australia that Australia did over China, as measured by the FBIC Index. So, when Australia restricted foreign investment and banned Huawei from building a broadband network, China imposed sanctions. What followed was a series of Chinese actions aimed to reduce imports of various Australian traded goods, leading to a reduction in exports of $2.3 billion from Australia to China in 2020.  

As U.S. policymakers consider how to check China’s growing influence capacity in Southeast Asia, they can avoid being stymied by similar asymmetries in interdependence by leveraging American influence across a broader spectrum of economic, diplomatic and security issues. This approach includes working through close partners that have substantial influence in the region. It also involves reinforcing interdependencies within the region, which will afford countries greater independence and resilience to foreign influence—both from the United States and China, the latter of which will be less able to rely on favorable influence by proxy. If successful, a similar approach could be applied beyond Southeast Asia, balancing Chinese influence through multilateral rather than militaristic and unilateral means.

China-U.S. Competition in Southeast Asia

Globally, China’s rising influence capacity has eaten into long-standing U.S. positions of regional preeminence. In Southeast Asia, where previous bastions of American influence are now characterized by contestation, the transition over the past several decades has been dramatic. As the maps below illustrate, Chinese influence capacity has passed that of the United States in Indonesia and Malaysia—countries where American influence was roughly ten times that of China in 1992, according to the FBIC Index. Collectively, the sum of Chinese influence among member states of the Association of Southeast Asian Nations (ASEAN) now exceeds that of the United States across the entire region.


Eroding American influence: Net U.S. influence, where China’s FBIC Index score in each country was subtracted from that of the United States.

The United States should respond to this growth by leveraging the collective influence of U.S. allies and partners. In Vietnam, for example, South Korea’s influence capacity far outstrips that of either the United States or China and even eclipses Hanoi’s considerable ties with Russia. Washington should count on its partners in Seoul and Tokyo, which also possess considerable influence in Vietnam, to pursue relationships that are ultimately favorable for both states. Should a “Quad Plus” partnership (consisting of the United States, Australia, India, Japan, and South Korea) or “Semi-Quad” partnership (the United States, Japan, Taiwan, and South Korea) come to fruition, the situation is likely to become all the more favorable for American interests.

Additionally, U.S. policymakers should consider influence gains that could be achieved through further integration into multilateral trade partnerships, such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). Though imperfect on labor and environmental issues, the CPTPP or a similar agreement would substantially boost U.S. trade bandwidth with key partners in the Asia-Pacific region. With respect to ASEAN, it would further expand the already substantial U.S. advantage in Singapore and potentially give the United States an economic edge in Vietnam. The U.S.-Japan relationship would be further deepened as well—an important gain given Tokyo’s influence in Southeast Asia and neighboring regions

The United States could further embrace multilateralism and bolster its relationship with Japan by encouraging and sponsoring the expansion of the United States-Australia-Canada-New Zealand-UK “Five Eyes” intelligence-sharing partnership (which presently includes the United States, Australia, New Zealand, Canada and the United Kingdom) to include Japan as a “sixth eye.” This would ensure that the China challenge is being met with a diverse array of tools. Indeed, rather than focusing primarily on securitizing the relationship of the United States and its partners in Southeast Asia and elsewhere, the goal should be to create a balanced network of influence capacity comprised of a diverse set of actors and their economic, political and security-related tools of statecraft.

Increasing regional power through support for regional organizations, such as ASEAN, and their member states could be another key policy priority. Strengthening intra-regional interdependence could allow groups of neighboring countries to gather, identify common interests, resolve disputes and work in a more unified way to counter external influence.  While working through an international organization such as ASEAN is not required (though the FBIC Index does posit that shared membership in international organizations itself modestly boosts influence capacity between countries), the formal affiliation of an organization that already “wields real influence” provides a forum to gather and develop further internally coherent policies and responses to external partnerships.

As evidence of this regional organization strategy, measured collectively, the sum of influence capacity that ASEAN member states have between one another vastly exceeds that which the United States or China possess individually across these states. If ASEAN can improve its ability to facilitate collective action, it could more effectively resist efforts by external powers to achieve dominance over their regional security and economic linkages, becoming more regionally autonomous and assertive of member interests.

Stronger together: The sum of ASEAN member-nation influence within ASEAN far exceeds that of China or the United States, though average ASEAN member-nation influence remains low.

While a more interdependent ASEAN could also counter U.S. influence efforts in the region, it could be a more significant hurdle to China’s influence efforts in its immediate neighborhood. Rather than seeking to directly compete for influence with China one-on-one, which would probably be a losing endeavor in most of ASEAN, the United States should aim to collaborate with influential allies—most notably Japan and South Korea—and help the region develop its own strong internal interdependencies. Although a gamble, this strategy would work within the bounds of U.S. capabilities and counterbalance China, all while helping strategic partners to grow their own independent strengths.

To be sure, this approach comes with a unique set of challenges, namely those that involve bridging the divide between states’ varying perceptions of the extent and severity of the challenge that China poses to their respective national interests and its associated costs. The costs of opposing China for South Korea, for example, have the potential to be much higher and the threat of retaliation much closer to home than for the United States. This fact was recently evidenced by China’s retaliation against South Korea’s hosting of an American Terminal High-Altitude Area Defense (THAAD) battery. According to one estimate, THAAD-related Chinese sanctions cost Seoul roughly $7.5 billion, including trade and tourism losses, as of November 2020.

With heavy reliance on China for both imports and exports, Japanese leaders must also carefully weigh the costs of a tougher stance against China. The onus is on the Biden administration to demonstrate to Tokyo that the long-term benefits of collective action to counterbalance Chinese influence are greater. So too must the administration make clear to ASEAN leaders that its goal is not to have member states choose sides but to diversify dependencies within the region and empower them to act more independently.

Beyond Southeast Asia

Although our recommendations focus on one region, Southeast Asia, our work indicates that the story is the same in virtually every region in the world: China’s rapid and substantial rise translates into a relative, though not necessarily absolute, decline in U.S. influence capacity.

U.S. policymakers can manage these changing dynamics by tailoring foreign policy to leverage specific elements of influence where the United States maintains an advantage. At the core of this strategy is leveraging, or perhaps simply relying upon, the influence of partners.

By contrast, a unilateral approach is likely to fail. In the Middle East and North Africa, where unilateralism has been the standard U.S. strategy for decades, public opinion has tilted heavily in China’s favor. Combined with the effects of resurgent Russian and expanding Iranian influence, the “American era” in the Middle East has ended. If the United States chooses unilateralism in Southeast Asia, it could be next.

Citation :

Does America Really Support Democracy—or Just Other Rich Democracies?

By Jake WernerJuly 9, 2021
17 - 22 minutes

In a speech he delivered in February, U.S. President Joe Biden painted a portrait of a world fundamentally divided between democracy and autocracy. “We’re at an inflection point,” he said, “between those who argue that, given all the challenges we face . . . that autocracy is the best way forward, . . . and those who understand that democracy is essential . . . to meeting those challenges.” Biden has insisted that both his domestic and foreign agendas put the United States in the best possible position to win this epochal conflict.

But this fixation on a clash between autocracy and democracy obscures a deeper divide in geopolitics: the conflict between rich and poor. The United States asserts leadership of the world’s democracies, but it actually stands opposed to most democracies on many of the most significant global issues. From the COVID-19 pandemic to global trade rules, from climate change to economic development, the United States is actively frustrating the priorities of most of the world’s democracies. In the process, U.S. foreign policy is—in the name of democracy—compounding the global crisis of democracy and delegitimizing U.S. power.

Rich and poor democracies share many problems. Forty years of increasingly concentrated wealth, deteriorating public goods, eroding stability for workers, and a disintegrating sense of collective belonging have provided raw material for nationalism, racism, and authoritarianism in democracies of all levels of wealth. The Biden administration understands this. In speech after speech, Biden has made an essential point: people are losing faith in democracy because democracy is not meeting their needs. In his domestic agenda, Biden recognizes that investing in the common good, providing greater power and security to labor, and mobilizing people to confront the climate crisis are all crucial to the project of fending off illiberal politics and reviving democracy in the United States.
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Yet Biden’s foreign policy suffers from a strange disconnect. Rather than pursuing a global strategy to revive faith in the common good, Biden focuses on outcompeting China—as if people outside the United States value democracy not because it empowers them but because it is synonymous with U.S. power. Biden argues that for the sake of democracy, Americans must “develop and dominate the products and technologies of the future.” That might help U.S. investors, but is not a vision of a global economy in which all democracies can deliver for their people.

A different approach is possible, one capable of reversing the global antidemocratic tide by opening new opportunities for people around the world. It will require a better framework for understanding today’s conflicts, one more capacious than a myopic binary that pits liberal democracy against its authoritarian other.
INVISIBLE DEMOCRACIES

The claim that the United States is at odds with most democracies may feel jarring, but that is only because U.S. leaders and media so often conflate the “world’s democracies” with the handful of rich countries, including former colonial powers in Europe (and Japan) and states that began as settler colonies, such as Australia and Canada. A 2020 New York Times article, for example, headlined the findings of a Pew Research Center poll this way: “Distrust of China Jumps to New Highs in Democratic Nations.” The poll was not, however, about “democratic nations.” Most of the world’s largest democracies—countries such as Brazil, India, Indonesia, Mexico, and South Africa—were not included, nor were many smaller democracies such as Botswana, Papua New Guinea, and Sri Lanka. It was instead a poll of people in (as Pew itself put it) “advanced economies.”

According to the Economist Intelligence Unit’s Democracy Index, democratic developing countries are home to twice as many people as rich democracies—three times as many, if one counts semidemocratic “hybrid regimes” such as those in Bangladesh, Nigeria, and Turkey. Yet the world’s many poor democracies remain largely peripheral to the worldview of U.S. policymakers. They enter into Beltway conversations only when they threaten regional stability or become useful in wider geopolitical conflicts.

This invisibility is understandable. Precisely because they are poor, the democracies of the global South exert far less influence over world politics and the global economy than their wealthy counterparts. The rich democracies account for about 15 percent of world population but enjoy 43 percent of global GDP as measured by purchasing power (59 percent in dollar terms), and their military budgets amount to nearly two-thirds of the world’s war spending. Many Americans also share a feeling of cultural or ethnic affinity with the rich democracies that does not extend to the poor democracies.

Confusing democracy with wealth fundamentally distorts strategic thinking about what U.S. leaders so often proclaim to be a top priority: ensuring that democracy flourishes around the world. Poor and rich democracies alike have been moving in an illiberal direction in recent years. But a foreign policy aimed at renewing and supporting democracy will fail if it is based solely on the preferences of rich countries. That’s because the democracies of the global South, more often than not, have interests that are very different from those of the rich democracies—interests that frequently align with more authoritarian developing countries. In other words, one effect of framing the major struggle in the world today as a fight between democrats and authoritarians is to render invisible the inequality that characterizes the global economy, which is often the more consequential division.
THE REAL FAULT LINES

Perhaps the most urgent issue where U.S. policy diverges from the desires of most democracies is ending the COVID-19 pandemic. An international order responsive to the needs of the global South would have begun organizing a system for global vaccine production and distribution in May 2020, when the first promising vaccine candidates emerged. Instead, although billions of dollars of public funds enabled vaccine development, the production of vaccines (and their enormous profits) was left entirely to private pharmaceutical companies, creating devastating shortages. As for distribution, although the COVAX initiative promised a minimal level of global vaccine equality, it was hobbled when the rich democracies bought up most of the vaccine supply.

Under considerable pressure from a transnational coalition of public health, fair-trade, and global justice groups, the Biden administration has finally begun to act. In May, Biden agreed to support a waiver of World Trade Organization’s intellectual property restrictions on COVID-19 vaccines. The rich democracies of the G-7 recently announced they intend to donate 870 million vaccine doses over the next year. These efforts, although welcome, fall far short of the eight billion doses needed to end the pandemic in developing countries. Even incorporating the new measures, Biden expects the pandemic in the global South to continue into 2023.

Focusing on donations is neither the fastest nor the best way to bring the pandemic under control. Far more effective would be expanding production in the global South itself and helping to establish a permanent public health infrastructure to prevent future disasters. The G-7 issued a vague promise to support such a program, but even if the intellectual property waiver eventually goes through (despite the emergency, discussions are expected to take many months, and Germany continues to block it), the rich democracies’ refusal to share technology and know-how with the rest of the world casts doubt on their intentions.

U.S. foreign policy is—in the name of democracy—delegitimizing U.S. power.

The disastrous delay in formulating a global pandemic strategy and the deep flaws in what is now emerging also presage a grim future as the climate crisis deepens. Here, too, the United States is at odds with most democracies. The small fraction of the world’s population that lives in today’s rich democracies or their predecessor states has produced around half of all greenhouse-gas emissions since 1751. In recognition of this historical responsibility and the disproportionate wealth the rich countries gained from all that resource usage, developing countries have demanded that wealthy countries bear most of the burden of resolving the climate crisis. The rich countries say they will support poor countries in their transitions to sustainable energy, but few significant investments have materialized.

Disputes over the pandemic and climate change are connected to a third constellation of issues splitting the rich and developing countries: industrial policy and intellectual property. Because the one poor country that has successfully defied the rich democracies on these issues is authoritarian China, analysts in Washington regularly exploit the “democracy versus autocracy” framework to legitimize their grievances. For example, an Atlantic Council report titled “Countering China’s Challenge to the Free World” asserts: “China engages in unfair economic practices that violate international standards, including: intellectual-property theft, subsidizing state-owned companies to pursue geopolitical goals, and restricting market access to foreign firms.”

Such practices certainly do challenge the power of the rich countries, but most of the “free world” would very much like to emulate them. The rules in question were set in the negotiations that established the World Trade Organization in 1995, when rich countries, at the behest of some of the world’s most powerful corporations, strong-armed poor countries into prohibiting development practices that previously were widely accepted. The refusal of democracies such as Brazil and India to make further concessions was a central reason the subsequent Doha Round of negotiations broke down in 2008, but the rich countries have pushed these principles further through bilateral trade and investment agreements.

The new rules banned practices that all the rich democracies employed in the past. The wealth of rich countries owes much to the theft of intellectual property—the industrialization of the United States, for example, would have been impossible if Americans had not stolen advanced British production techniques—not to mention more violent forms of theft, such as mass enslavement or the plunder of colonies. As for industrial policy, all the rich democracies employ its techniques. China’s much-vilified Made in China 2025 plan was modeled on Germany’s Industrie 4.0 strategy and the U.S. National Network for Manufacturing Innovation (also known as Manufacturing USA). Biden’s economic agenda aims to use the power of the state to secure U.S. control over high-value sectors. China’s success in vaccinating its people and grappling with the climate transition is founded not on Beijing’s hostility to democracy but on its ability to emulate the rich countries by breaking rules when convenient.

The democracies of the global South have struggled to upgrade their economies, remaining stuck between Washington consensus restrictions on effective development techniques and China’s highly successful program of evading such restrictions. In this context, Washington’s call for ideological solidarity among the world’s democracies rings somewhat hollow.
A FOREIGN POLICY FOR ALL

Several barriers stand between U.S. policymakers and a better pro-democracy agenda. First, U.S. economic growth has become highly dependent on the concentrated profits of corporations in the technology, pharmaceutical, entertainment, consumer brand, and financial sectors—the same businesses that present the biggest obstacles to raising global labor standards and liberalizing intellectual property rules. Investment in the United States and around the world is flowing toward opportunities to extract economic rents rather than to creating jobs, building infrastructure, and raising productivity.

The problem is also philosophical. Is the role of democracy merely to provide a neutral framework within which individuals can freely exchange goods and ideas by reducing threats to liberty and property—that is, by providing “negative” public goods? Or should democracy also ensure the substantive provision of “positive” public goods such as health care, education, high-quality jobs, and capital investment? U.S. foreign policy has energetically acted in favor of negative public goods and dismissed positive ones, with American officials and experts of both parties frequently warning of the risks posed by state intervention in the economy. Washington has focused on market liberalization, individual rights, the rule of law, and defending the security of property and the freedom of navigation against a procession of villains: transnational criminals, “rogue states,” terrorists, and now China.

Yet negative public goods lose efficacy and legitimacy when they are divorced from positive public ones. U.S. aid efforts often fail for this reason. Consider, for example, a $31 million program in Guatemala that the U.S. Agency for International Development funded in recent years to create a smartphone app that would allow residents to track local government spending. The impoverished residents, more concerned about jobs than good governance, could not afford smartphones in the first place.

Foreign policy aimed at supporting democracy will fail if it is based solely on preferences of rich countries.

In domestic policy, the Biden administration recognizes the need to break with free-market orthodoxy. What would a foreign policy that incorporates that insight look like? For one, it would focus on the global provision of positive public goods. Each country will need to reinvigorate public investment in its own way, but the process should be undergirded by transnational programs to secure public health, close the huge infrastructure gap between rich and poor countries, and achieve a just transition away from carbon-intensive energy sources. Rather than one-way charity, these truly universal initiatives to resolve problems that threaten everyone should draw contributions from all countries in line with their capacities.

The United States remains best positioned to lead these efforts, and there are some indications that the Biden administration might be open to playing such a role. For example, its Build Back Better World initiative, though not yet well defined, endorses the goal of global infrastructure development. Yet Washington’s preoccupation with great-power competition risks excluding China’s essential contributions from the project and is already being used by hawks to channel the United States’ enormous talent and resources toward militarization rather than the real threats to humanity. Ironically, Beijing’s justification for authoritarianism—the growing insecurity and suffering caused by pandemic disease, climate devastation, and destabilizing inequality—will grow ever more compelling if anti-China animus in Washington prevents effective measures against these existential dangers.

Another equally important public good is an enforceable regime of global labor rights, which would help reduce the desperate competition among workers that drives so much racism and nationalism and to boost consumer demand and popular support. Nearly every country aside from the United States has already committed to protect essential labor rights under the fundamental conventions of the International Labor Organization. What remains is to build the same kind of institutional architecture to protect the rights of workers that the United States has spent the last 40 years building to protect the rights of asset holders.

Finally, Washington should embrace the principle of development as a human right, an idea that has won strong support at the UN since 1986, despite opposition from the United States and other rich democracies. In addition to liberalizing restrictions over intellectual property and industrial policy, this would require a significant increase in U.S. development funds for places long starved of capital. The recently concluded agreement for a global minimum corporate income tax, largely decided among the rich democracies, shows that it is possible for multilateral coordination to pave the way for a more equitable global economy. It also reinforces the division between rich and poor, however, by ignoring the desire of developing countries to raise revenue. The next step for reform could be an increase in the global corporate tax rate to establish a stable source of funding for development in the global South. Private foreign investment in developing countries has been piecemeal and volatile. What such places need are not quick returns but long-term, transformative investment to permanently increase their capacity to generate wealth—something that would not only put an end to the appalling poverty afflicting billions but also create enormous new opportunities for U.S. businesses and workers.

Each of these measures would reinforce the others, forming a new structure of global growth similar in many ways to the New Deal economy that created the American middle class—but without the horrors of Jim Crow and the Cold War. By helping to revive global growth and distribute its benefits more broadly, these measures would promote prosperity for rich and poor countries alike, restoring the legitimacy of globalization and U.S. leadership by basing them on a far more inclusive foundation. That would reduce the extraordinarily dangerous zero-sum tensions in the U.S.-Chinese relationship, because stronger growth in the global economy would make room for both countries to succeed at the same time. Perhaps most important, inclusive growth in the global economy would create the conditions for a new wave of democratization. Democracy would prevail not by deepening counterproductive conflicts with authoritarian states but by depriving them of the inequalities, exclusions, and resentments that make them powerful.

Citation :

The Tech Cold War’s ‘Most Complicated Machine’ That’s Out of China’s Reach

Don Clark
9 - 11 minutes
A machine made by a Dutch company, ASML, produces much tinier circuitry on computer chips. This one is in an IBM facility in Albany, N.Y.
Credit...Bryan Derballa for The New York Times

A $150 million chip-making tool from a Dutch company has become a lever in the U.S.-Chinese struggle. It also shows how entrenched the global supply chain is.

A machine made by a Dutch company, ASML, produces much tinier circuitry on computer chips. This one is in an IBM facility in Albany, N.Y.Credit...Bryan Derballa for The New York Times

Published July 4, 2021Updated July 6, 2021

SAN FRANCISCO — President Biden and many lawmakers in Washington are worried these days about computer chips and China’s ambitions with the foundational technology.

But a massive machine sold by a Dutch company has emerged as a key lever for policymakers — and illustrates how any country’s hopes of building a completely self-sufficient supply chain in semiconductor technology are unrealistic.

The machine is made by ASML Holding, based in Veldhoven. Its system uses a different kind of light to define ultrasmall circuitry on chips, packing more performance into the small slices of silicon. The tool, which took decades to develop and was introduced for high-volume manufacturing in 2017, costs more than $150 million. Shipping it to customers requires 40 shipping containers, 20 trucks and three Boeing 747s.

The complex machine is widely acknowledged as necessary for making the most advanced chips, an ability with geopolitical implications. The Trump administration successfully lobbied the Dutch government to block shipments of such a machine to China in 2019, and the Biden administration has shown no signs of reversing that stance.

Manufacturers can’t produce leading-edge chips without the system, and “it is only made by the Dutch firm ASML,” said Will Hunt, a research analyst at Georgetown University’s Center for Security and Emerging Technology, which has concluded that it would take China at least a decade to build its own similar equipment. “From China’s perspective, that is a frustrating thing.”

Image
A silicon wafer at IBM full of microchips made with the machine, which costs more than $150 million.
Credit...Bryan Derballa for The New York Times

ASML’s machine has effectively turned into a choke point in the supply chain for chips, which act as the brains of computers and other digital devices. The tool’s three-continent development and production — using expertise and parts from Japan, the United States and Germany — is also a reminder of just how global that supply chain is, providing a reality check for any country that wants to leap ahead in semiconductors by itself.

That includes not only China but the United States, where Congress is debating plans to spend more than $50 billion to reduce reliance on foreign chip manufacturers. Many branches of the federal government, particularly the Pentagon, have been worried about the U.S. dependence on Taiwan’s leading chip manufacturer and the island’s proximity to China.

A study this spring by Boston Consulting Group and the Semiconductor Industry Association estimated that creating a self-sufficient chip supply chain would take at least $1 trillion and sharply increase prices for chips and products made with them.

That goal is “completely unrealistic” for anybody, said Willy Shih, a management professor at Harvard Business School who studies supply chains. ASML’s technology “is a great example of why you have global trade.”

The situation underscores the crucial role played by ASML, a once obscure company whose market value now exceeds $285 billion. It is “the most important company you never heard of,” said C.J. Muse, an analyst at Evercore ISI.

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The machine requires 40 shipping containers, 20 trucks and three Boeing 747s to be shipped.
Credit...Bryan Derballa for The New York Times

Created in 1984 by the electronics giant Philips and another toolmaker, Advanced Semiconductor Materials International, ASML became an independent company and by far the biggest supplier of chip-manufacturing equipment that involves a process called lithography.

Using lithography, manufacturers repeatedly project patterns of chip circuitry onto silicon wafers. The more tiny transistors and other components that can be added to an individual chip, the more powerful it becomes and the more data it can store. The pace of that miniaturization is known as Moore’s Law, named after Gordon Moore, a co-founder of the chip giant Intel.

In 1997, ASML began studying a shift to using extreme ultraviolet, or EUV, light. Such light has ultrasmall wavelengths that can create much tinier circuitry than is possible with conventional lithography. The company later decided to make machines based on the technology, an effort that has cost $8 billion since the late 1990s.

The development process quickly went global. ASML now assembles the advanced machines using mirrors from Germany and hardware developed in San Diego that generates light by blasting tin droplets with a laser. Key chemicals and components come from Japan.

Peter Wennink, ASML’s chief executive, said a lack of money in the company’s early years had led it to integrate inventions from specialty suppliers, creating what he calls a “collaborative knowledge network” that innovates quickly.

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EUV stands for extreme ultraviolet light, which produces the circuitry.
Credit...Bryan Derballa for The New York Times

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A rack carrying silicon wafers that run through the machine.
Credit...Bryan Derballa for The New York Times

“We were forced to not do ourselves what other people do better,” he said.

ASML built on other international cooperation. In the early 1980s, researchers in the United States, Japan and Europe began considering the radical shift in light sources. The concept was taken up by a consortium that included Intel and two other U.S. chip makers, as well as Department of Energy labs.

ASML joined in 1999 after more than a year of negotiations, said Martin van den Brink, ASML’s president and chief technology officer. Other partners of the company included the Imec research center in Belgium and another U.S. consortium, Sematech. ASML later attracted big investments from Intel, Samsung Electronics and Taiwan Semiconductor Manufacturing Company to help fund development.

That development was made trickier by the quirks of extreme ultraviolet light. Lithography machines usually focus light through lenses to project circuit patterns on wafers. But the small EUV wavelengths are absorbed by glass, so lenses won’t work. Mirrors, another common tool to direct light, have the same problem. That meant the new lithography required mirrors with complex coatings that combined to better reflect the small wavelengths.

So ASML turned to Zeiss Group, a 175-year-old German optics company and longtime partner. Its contributions included a two-ton projection system to handle extreme ultraviolet light, with six specially shaped mirrors that are ground, polished and coated over several months in an elaborate robotic process that uses ion beams to remove defects.

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“It’s definitely the most complicated machine humans have built,” an IBM executive said.
Credit...Bryan Derballa for The New York Times

Generating sufficient light to project images quickly also caused delays, Mr. van den Brink said. But Cymer, a San Diego company that ASML bought in 2013, eventually improved a system that directs pulses from a high-powered laser to hit droplets of tin 50,000 times a second — once to flatten them and a second time to vaporize them — to create intense light.

The new system also required redesigned components called photomasks, which act like stencils in projecting circuit designs, as well as new chemicals deposited on wafers that generate those images when exposed to light. Japanese companies now supply most of those products.

Since ASML introduced its commercial EUV model in 2017, customers have bought about 100 of them. Buyers include Samsung and TSMC, the biggest service producing chips designed by other companies. TSMC uses the tool to make the processors designed by Apple for its latest iPhones. Intel and IBM have said EUV is crucial to their plans.

“It’s definitely the most complicated machine humans have built,” said Darío Gil, a senior vice president at IBM.

Dutch restrictions on exporting such machines to China, which have been enforced since 2019, haven’t had much financial impact on ASML since it has a backlog of orders from other countries. But about 15 percent of the company’s sales come from selling older systems in China.

In a final report to Congress and Mr. Biden in March, the National Security Commission on Artificial Intelligence proposed extending export controls to some other advanced ASML machines as well. The group, funded by Congress, seeks to limit artificial intelligence advances with military applications.

Mr. Hunt and other policy experts argued that since China was already using those machines, blocking additional sales would hurt ASML without much strategic benefit. So does the company.

“I hope common sense will prevail,” Mr. van den Brink said.

Citation :

USAID Advances the Prosper Africa Build Together Campaign

|
Press Release | U.S. Agency for International Development
3 minutes

This week, U.S. Agency for International Development (USAID) Administrator Samantha Power helped to kick off the Prosper Africa Build Together Campaign at the Corporate Council on Africa’s U.S.-Africa Business Summit. As announced by Special Assistant to the President and National Security Council Senior Director for Africa Dana L. Banks and reinforced by Department of Commerce Secretary Gina M. Raimondo, the campaign is a targeted effort to elevate and energize the United States’ commitment to trade and investment with countries across the African continent under the Biden-Harris Administration.

USAID will play a leading role in the Prosper Africa Build Together Campaign, joining 17 U.S. Government agencies—and working hand-in-hand with the private sector, African governments, and multilateral organizations—to bolster trade and investment in key sectors such as clean energy and climate smart solutions, health, and digital technology. Through this next chapter of the Prosper Africa initiative, USAID is committed to driving billions of dollars of investment in Africa and supporting thousands of jobs for both African and American workers.

The U.S. will accomplish these goals by promoting new opportunities for African and American businesses, investors, and workers; working with African governments and the private sector to strengthen business enabling environments and investment climates; modernizing and synchronizing U.S. Government services to provide businesses with a coordinated support package; and fostering the conditions that will mobilize investment in Africa’s infrastructure, consistent with President Biden’s Build Back Better World partnership.

Through the Prosper Africa Build Together Campaign, the U.S. relationship with African nations is evolving from one based mostly on aid, to one increasingly based on trade and investment. USAID is committed to strengthening private sector ties between African nations and the United States, spurring investment at a scale that could never be matched by foreign aid alone, and partnering with people across the African continent to realize the shared vision for a better future.

For the latest updates on Prosper Africa, visit: prosperafrica.gov

Citation :

China’s Sputnik Moment?

By Dan WangJuly 29, 2021
22 - 28 minutes

In 2016, AlphaGo, a computer program developed by machine learning experts in London, beat the world’s top players of the classical Chinese board game Go. It was a revolutionary breakthrough in artificial intelligence: AlphaGo had demonstrated an unprecedented capacity for intuition and pattern recognition. That a Western program had been the first to achieve this AI feat prompted some commentators to declare that China had experienced a “Sputnik moment,” an event that would trigger widespread unease in the country about its perceived technological lag. Indeed, China has had a Sputnik moment in recent years—but it wasn’t prompted by AlphaGo’s victory. Rather, since 2018, tightening U.S. trade restrictions have threatened the viability of some of China’s biggest firms, fueling anxiety in Beijing and forcing Chinese companies to reinvent the U.S. technologies they can no longer access.

The Chinese government has long had twin ambitions for industrial policy: to be more economically self-sufficient and to achieve technological greatness. For the most part, it has relied on government ministries and state-owned enterprises to pursue these goals, and for the most part, it has come up short. In semiconductor production, for example, China has barely crossed the starting line. Rather, China’s private entrepreneurial firms have driven the bulk of the country’s technological success, even though their interests have not always aligned with the state’s goal of strengthening domestic technology. Beijing has, for example, recently begun cracking down on certain consumer Internet companies and online education firms, in part to redirect the country's efforts towards other strategic technologies such as computer chips. This has meant that China’s most impressive technological achievements—building state-of-the-art capabilities in renewable energy, consumer Internet services, electronics, and industrial equipment—have as often been driven in spite of state interference as they have because of it.

Then came U.S. President Donald Trump. By sanctioning entrepreneurial Chinese companies, he forced them to stop relying on U.S. technologies such as semiconductors. Now, most of them are trying to source domestic alternatives or design the necessary technologies themselves. In other words, Trump’s gambit accomplished what the Chinese government never could: aligning private companies’ incentives with the state’s goal of economic self-sufficiency.
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A MIXED BAG

The Chinese state has intervened in the economy since the early days of the People’s Republic. In addition to its famous five-year plans, the first of which was implemented in 1953, the government developed several discrete plans explicitly focused on advancing its technological capability. For decades, industrial policy mostly consisted of empty statements. The 1990s, in particular, saw the government issuing a series of industrial policies that functioned as aspirational goals rather than binding targets and, unsurprisingly, achieved little.

As the economist Barry Naughton has noted, the turning point came with the implementation of the government’s “medium- and long-term plan for science and technology” in 2006. In stark contrast to its lackluster execution of previous industrial policies, Beijing devoted substantial financial and administrative resources to the plan. The State Council, China’s highest administrative authority, outlined the development of 16 “megaprojects,” each under the mandate of a designated ministry, and directed $5 billion to $6 billion to these efforts every year—something that had not occurred under any previous policy. Although a few of these megaprojects did make small inroads, the program as a whole spent large sums without appreciably improving the country’s technological capabilities.

As it happened, however, the medium- and long-term plan turned out to be a warm-up exercise for China’s evolving industrial policy. In 2010, the State Council unveiled another initiative, which designated emerging technologies, such as electric vehicles and next-generation computing, as the drivers of economic growth. By then, the global financial crisis had shaken Beijing’s purse loose, and the government began lavishing resources on favored projects. In addition to direct financial support, the Chinese government has helped domestic technology companies through other means—by using government buying power, for example, to increase demand for solar panels.

But the centerpiece of the Chinese state’s industrial planning apparatus is the “Made in China 2025” plan. Announced in 2015, the plan highlights ten high-tech industry segments in which Chinese firms should make breakthroughs, and it sets self-sufficiency targets in striking detail. One advisory document, for example, specifies that Chinese semiconductor production ought to reach between 49.10 and 75.13 percent of the domestic market size in 2030, that domestic industry should master extreme ultraviolet lithography by 2025, and that the country should be producing multicore central processing units for computer servers by 2030. Such specific targets bring to mind the days of China’s planned economy, when the state micromanaged all industrial output.

Made in China 2025 triggered a fierce backlash among many industrialized countries, which were wary of China’s efforts to dominate advanced technology. Having failed to anticipate this reaction, Chinese leaders subsequently tried to dismiss Made in China 2025 as an aspirational planning exercise developed by overly confident academics. But by then, the state had already released a stream of plans focused on advancing select technologies—such as semiconductors and artificial intelligence—as well as enormous proposals for direct subsidies, cheaper access to capital, and investments from public-private funds. Beijing had already showed that it was keen not only to catch up on the technologies of the past but also to dominate the industries of the future—and that it was willing to spend vast sums to get there.

China is now undertaking a whole-of-society effort to improve domestic technology.

What has China really accomplished with these plans? If the country’s recent industrial policy programs had reached fruition, the country would be a technological giant today—but it is not. Chinese tech firms have mastered the production of certain goods, including renewable power technologies, electric vehicles, high-speed rail supplies, heavy machinery, and automotive parts. China is at the fore of 5G network deployment, boosted by Huawei’s strength in mobile networking equipment.

But on bigger-ticket items that are explicit government targets, such as semiconductors and aviation technologies, China’s industrial policy has failed. Long-term programs devoted to semiconductor development have yielded a few modest successes but have mostly resulted in floundering companies that are nowhere near the cutting edge. The Commercial Aircraft Corporation of China (COMAC), China’s answer to Airbus and Boeing, is years behind schedule in its development of a new fleet of planes. China has worked for decades to develop a car brand that can rank among the world’s top automakers—but its car companies have had difficulty producing anything that consumers in developed countries actually want to buy.

Even the success stories require caveats. When Chinese companies master a product, they often end up turning it into a commodity, tanking profits across the board—including for themselves. Chinese companies may dominate the solar panel industry, but the market is so fiercely competitive that few companies make much profit. China may be at the fore of high-speed rail, too, but it has accomplished this by requiring foreign companies to turn over sensitive technologies to potential competitors, embittering many foreign partners. And many of China’s leading companies are still critically dependent on U.S. technologies.

In other words, Chinese central planning has not defied economic gravity and proved that the government knows better than the market. There is a meaningful difference in China between companies that are formally designated as part of the state system and those with entrepreneurial founders: state-owned enterprises, such as COMAC, China Telecom, and China Petroleum and Chemical Corporation, or Sinopec, are not the country’s most globally competitive firms. Successful Chinese firms, such as ByteDance (the company behind TikTok) and DJI (a top consumer drone manufacturer), have grown around the state sector rather than out of it. State-owned companies are insulated from real market competition and treat their private counterparts with jealousy, sometimes wielding state power to squeeze them out of existence. More often than not, reliance on government spending results in lazy firms surviving on subsidies rather than private firms capitalizing on state assistance.

It is true that Chinese industrial policies have had some success. China today is a huge market featuring a growing number of dynamic firms. A large manufacturing base trains many workers to produce sophisticated technologies. China’s enormous size has facilitated competitive state procurement infrastructure, which has hastened some strong technological advancements, as it has, for example, in solar power. But these policies have not propelled China to the lead in foundational technologies such as semiconductors—and the government has had little to do with the direct achievements of China’s largest technology firms. The private Internet giants ByteDance, Alibaba, and Tencent are the only companies that can look upon their Silicon Valley counterparts as peers. In hardware, the entrepreneurial firms DJI, Huawei, and Lenovo are the only Chinese companies developing cutting-edge consumer products.
TOO FAR?

The limitations of Chinese central planning did not stop Made in China 2025 from setting off alarm bells in Washington. In the final week of Barack Obama’s presidency, the White House released a plan to defend U.S. primacy on semiconductors. By the time Trump took office, there was a broad bipartisan appetite to confront predatory Chinese business practices.

Many of the Trump administration’s early actions to that effect made sense. China requires domestic firms to invest in overseas businesses to acquire the technologies they lack at home, a policy that has stoked fears that China could end up owning large chunks of the U.S. technology sector. After the state-owned Tsinghua Unigroup, a semiconductor company, made a brazen bid in 2015 to acquire Micron Technology, the last American memory-chip maker, the Trump administration responded in 2018 by stiffening the process by which it reviews foreign investment in domestic companies. Congress and the White House granted the Committee on Foreign Investment in the United States new authority to block foreign investments in sensitive technology companies. The Department of Justice also channeled more resources into prosecuting the theft of trade secrets. And the Office of the United States Trade Representative detailed China’s unfair economic practices and created the legal basis for tariffs on certain Chinese products outlined in Made in China 2025.

Had the Trump administration stopped there, the response would have constituted an appropriate plan to protect U.S. firms from predatory Chinese practices. But it went much further, putting in place an extensive export-control regime that weaponized U.S. dominance of technologies such as semiconductors to cripple Chinese firms. Because these sanctions deprived Chinese companies of access to American-made components, they threatened the viability of Chinese firms even in their domestic market.

China’s state and its leading firms are working together so that no Chinese firm is at the mercy of U.S. trade policies.

When the Trump administration banned the sale of critical U.S.-made parts to the Chinese telecommunications company ZTE, for example, its operations collapsed as a result. It did the same to Fujian Jinhua, then China’s leading memory-chip maker, which subsequently failed, too. The bloodletting reached its peak in the final days of Trump’s presidency. The U.S. Department of Commerce had by then added the Chinese firms DJI, Hikvision (a video security company), Huawei, and Semiconductor Manufacturing International Corporation (SMIC) to its list of entities that, for national security or foreign policy reasons, have restricted access to U.S. technology. The White House also issued executive orders intended to ban TikTok and WeChat in the United States, but the language was so broad that it might have prevented any American person or firm from interacting with each of their parent companies.

The White House reserved its most intense firepower for Huawei. The Commerce Department wrote a highly complex rule for Huawei alone, asserting extraterritoriality on all items sold to the company that are based on U.S. technologies, even if they were produced by foreign firms overseas. This restriction has prevented Huawei from working not just with U.S. companies but also with many of its Chinese, Taiwanese, and European vendors, leaving it in a precarious position. Today, the company is unable to procure new components and has been forced to rely on its dwindling stockpiles to sustain operations. Huawei’s smartphone sales are collapsing, and in response, the company has pivoted to far less lucrative low-tech endeavors, such as automotive parts and fish farming technologies.
AN UNLIKELY UNION

Beijing watched with anger as the Trump administration successively labeled its companies national security threats and imposed severe restrictions on them. China’s foreign ministry repeatedly pledged to take “all necessary countermeasures,” while the nationalist news outlet The Global Times promised retaliation against Apple, Boeing, Cisco, and Qualcomm.

But Beijing’s actions have not matched its fierce rhetoric. Far from doing unto Apple what the U.S. government has done unto Huawei, the Chinese government has, for the most part, continued to roll out the red carpet for foreign firms. Tesla, for example, was granted an unprecedented license to establish a wholly owned auto production plant in Shanghai. It is clear why Beijing wants to maintain good relations with U.S. firms: they are major employers in China, continue to provide critical technology, and act as a moderating force against the hawkishness of the U.S. government.

At the same time, Beijing is pushing hard for technological self-sufficiency. Top officials including President Xi Jinping have discussed the importance of improving “indigenous innovation” and gaining control over “chokepoint technologies.” The 2020 Central Economic Work Conference, an annual meeting that sets the national agenda for the Chinese economy, identified advancements in science and technology as the top two economic priorities of 2021—neither of which had ever been discussed independently in this forum before, let alone taken the top spots. Greater state funding will almost certainly follow—far more than the $5 billion to $6 billion spent on Made in China 2025. And for the first time, China’s drive for technological self-sufficiency is being matched by private-sector efforts, thanks to U.S. trade restrictions.

The ripple effects of Chinese technological success will be felt beyond China.

China’s entrepreneurial companies have sometimes benefited from the state’s largess and protection, but they have also worked to keep the state at arm’s length. In order to be truly competitive globally, firms such as Huawei and Alibaba have decided that they need to use the best components on the market, many of which are American made. China’s leading tech companies rely on U.S. technologies to sell some of the best smartphones, computers, and Internet services in the world. A Huawei phone, for example, has a Chinese-designed processor but otherwise uses American hardware in quantities comparable to the iPhone. If Huawei had followed the government’s directives to buy domestic, it would not have become the behemoth it is today, nor would it be suffering so deeply from U.S. trade restrictions.

Leading entrepreneurial firms can no longer ignore the state’s commands to source products domestically, however. Enhanced U.S. export-control measures have made that decision for them and united China’s government and its leading firms in a shared goal: to pursue technological and industrial self-sufficiency so that no Chinese firm is at the mercy of U.S. trade policies. By imposing restrictions on American products, the U.S. government has inadvertently done more than any party directive to incentivize private investment in China’s domestic technology ecosystem.

Washington is right to target Chinese firms that are obvious military actors or complicit in human rights abuses. But the sweeping nature of the Trump administration’s sanctions did not suggest a careful selection process. Rather, they gave the impression that the United States would punish any Chinese company that achieved success. Chinese firms are no longer sure if they can depend on U.S. products—or if they will be added to another opaque government blacklist and face potential collapse. U.S. export controls have already encouraged other foreign firms to exploit anxieties around U.S. sanctions by marketing themselves as more reliable vendors. And they have created a perverse incentive for some American firms to move production overseas in order to maintain access to China’s enormous market.

U.S. sanctions against Chinese technology companies have deeply offended many in China, especially given their perceived arbitrary criteria and severe effects. Many engineers at top companies such as ByteDance, DJI, and Huawei have studied and worked in the United States and were bewildered by claims that their work constituted a threat to U.S. national security. Chinese officials scratched their heads when the Pentagon declared that the Chinese electronics firm Xiaomi had ties to the military; some joked that Xiaomi was in American crosshairs because the company’s founder, Lei Jun, contained the character for “soldier” in his name. Now that Huawei’s phones are difficult to find in stock, every consumer in China knows that U.S. restrictions have started to bite. It is not unusual, these days, to see people on the Beijing subway watching video explanations of the semiconductor supply chain.
Square with Apple and Huawei stores in Shanghai, China, May 2020.

Square in Shanghai, China, May 2020
Aly Song / Reuters
THIS TIME IS DIFFERENT

China’s true Sputnik moment has been its realization that it cannot count on the United States to supply its technology—and that it must cultivate domestic alternatives. Washington bristled at Beijing’s ambitions for semiconductor self-sufficiency and then proceeded to punish Chinese companies naive enough to depend on American technologies. U.S. companies are now facing uncomfortable questions on whether they can be counted on to be reliable suppliers. For all the complaints about Xi’s efforts to drive “offensive decoupling,” it is the United States, not China, that is forcing Chinese firms to abandon American products—and now these companies are pursuing domestic self-sufficiency with a vengeance.

The combined efforts of China’s state drive and its innovative industry will accelerate the country’s technological advancement. In the 1960s, integrated circuits were developed when the National Aeronautics and Space Administration was willing to pay any price for technology that could send astronauts to the moon and bring them safely back. Today, the U.S. government is putting Huawei in NASA’s position: a cash-rich organization willing to pay for critical components on the basis of performance rather than cost. Smaller Chinese companies that previously never stood a chance of selling to Huawei are now sought after as vendors, and they receive infusions of cash and technical expertise that will accelerate their growth. Private and state-owned chip manufacturers are ramping up their operations. Once siloed industries now collaborate in the service of tech innovation: the Chinese Academy of Sciences, for example, has begun coordinating regular sessions that bring together math professors and private companies. China is now undertaking a whole-of-society effort to improve domestic technology, specifically around what Chinese leaders think will drive not only economic growth but also geopolitical power.

Is all of this enough to make Chinese industrial policy work this time around? It is likely that in a decade, China will have made greater technological advancements under the U.S. export-control regime than it would have had the United States not forced China’s leading companies to buy from weak domestic firms. Had the United States implemented necessary but measured reforms—strengthening the Committee on Foreign Investment in the United States and prosecuting intellectual property theft—and stopped there, Made in China 2025 would have likely played out in the usual way, with inefficient state-owned enterprises and government ministries taking the lead rather than innovative tech firms.

But this time is different. True, China has big technological hurdles to overcome, including weak basic research, ambiguous intellectual property protections, and excessive bureaucratic meddling. Yet the United States cannot assume that China’s leading firms will stay down forever: companies are rushing to fill the demand that U.S. firms can no longer supply. Chinese firms have to reinvent only certain wheels, with many simply working to recreate technologies that already exist. And no U.S. restriction can change the fact that China is an enormous market loaded with entrepreneurial talent and technical expertise.

The ripple effects of Chinese technological success will be felt beyond China. For one thing, they will shape American politics. A Beijing less dependent on U.S. products will feel less apprehensive about retaliating against American firms, giving it license to respond to perceived affronts. For another thing, technological dominance will shift the Chinese leadership’s calculations on Taiwan. Beijing knows that any armed invasion of the island would prompt U.S. sanctions that could inflict great pain on the Chinese economy. Greater self-reliance would deflate the threat of those sanctions and remove a deterrent against military action.

The economic consequences of Chinese technological dominance on the United States would be no less significant. For the most part, U.S. technology firms have stayed a few steps ahead of their Chinese competition. But they might fall back as their sales dip and as Beijing launches a more powerful drive to replace them. If China comes to dominate semiconductor production in the way it has dominated solar panels, then the United States will have lost its last crown jewel in manufacturing as the products become commoditized and profits disappear.

At this point, no effort on behalf of the U.S. government can deter China’s state from its end goal of industrial self-sufficiency. But Washington can still change the calculations of private Chinese tech companies. Many of these businesses would rather not have to reinvent their tools and find new suppliers and would likely stick with U.S. technologies if given the chance. The United States should therefore roll back its most punitive restrictions on the Chinese technology sector, lest it force some of the most innovative companies in the world to work within their domestic tech ecosystem. At stake is the future global center of technological innovation: Washington should know better than to fuel its greatest competitor.

NEWS: @POTUS announced that he will convene a virtual Summit for Democracy in Dec 2021 that will galvanize commitments and initiatives across three themes:
defending against authoritarianism
fighting corruption
promoting respect for human rights.https://t.co/Rq0vWZUaz4

— USAID (@USAID) August 11, 2021

Anthony Ippoliti - Small Wars Journal a écrit:

THE BATTLE OF THE WORLD’S MOST ADVANCED MICROCHIPS

Introduction

Geopolitics determines the type of cell phone you carry, the car you drive, and the computer you use. The all-consuming power of nation-state actor rivalries in the international arena shapes the structural paradigm that drives trade and politics. This is the invisible hand of the global economy. And so it goes with China, microprocessors, and American national security.

The island nation of Taiwan has a historically fraught relationship with China, and a geopolitical miscalculation here could spell trouble. Much of China’s foreign policy is based on economic and resource security, and China is particularly weak in one area: advanced microprocessors. These are the chips that power smart phones, desktops, laptops, and other devices. Microprocessors are a key component in the world’s infrastructure, and China has been working to develop a domestic capability to produce the most advanced types of these chips. Those efforts have so far been unsuccessful.

Production of these advanced chips is a highly technical endeavor, and none of the companies in the world that can do it are located in mainland China. A subsidiary of China’s Huawei developed a design for an advanced chip called the HiSilicon Kirin 9000, then outsourced the production of the chip to the Taiwan Semiconductor Manufacturing Company (TSMC), which counts itself among a very small number of companies able to actually build a chip based on the Kirin 9000 design. However, TSMC is located in Taiwan, and recent U.S. sanctions effectively ended Huawei’s ability to actually produce the chip that it designed. This is a double-edged sword with China’s national security on one side, and American national security on the other.

China and Taiwan: Positioning for Turbulence

China’s current posture toward Taiwan and its escalating military activities near the island have drawn increasing attention from the rest of the world. China recently sanctioned several U.S. defense contractors for selling arms to Taiwan and has expressed its discomfort with America’s more-or-less open diplomatic recognition of the country, which Beijing claims as part of its territory under its “One China” policy. The Chinese Navy also repositioned its forces in the South China Sea and, in mid-2020, sank a Vietnamese fishing vessel in disputed waters, which served as a harbinger of a more aggressive Chinese military posture in the rest of the region. Following that, the Chinese Navy sent a battle group to Taiwan’s east coast and later held combat exercises near the Taiwan Strait. Then, in September of 2020, China’s military dispatched 18 warplanes over the Taiwan Strait as a show of force, followed by a similar incursion of 28 warplanes into Taiwan’s Air Defense Identification Zone in mid-June 2021. Taiwan’s Minister of Foreign Affairs, Joseph Wu, noted in June 2021 that Taiwan “needs to prepare” for a possible military conflict The threat of military confrontation with the United States will likely continue to deter direct Chinese military action against Taiwan; similarly, Taiwan’s status as an island nation with an autonomous political apparatus will prevent a Chinese territorial fait accompli. However, China is certainly capable of influencing political outcomes in Taiwan over the longer term, and China may be able to affect change in Taiwan from the inside out. This, combined with China’s overt military repositioning, creates a threat to Taiwanese autonomy. This is a critical point that should be well-understood by those with interests in the region or, more specifically, interests in what is produced in the region. The U.S. has already seen the global impact of microchip shortages caused by COVID-19-related supply chain and trade disruptions, which has underscored the vulnerability of America’s economy to such a concentrated market.

In the same regard, China may be using Hong Kong as a practice run for a future move on Taiwan. In mid-2020, China passed a new security law that effectively ended Hong Kong’s autonomy. China arrested protestors and major media figures and installed a new national security office in the city, prompting the UK Government to declare a breach of the Sino-British Joint Declaration which was supposed to guarantee the independence of Hong Kong’s political and economic system until 2047. All of this occurred at a rather rapid rate in a city that had been operating autonomously for decades and is a warning of future possibilities. While China lacks a political mechanism in Taiwan to replicate this same strategy, its activities in Hong Kong are indicative of Chinese ambitions.

This is a critical issue for many reasons, not the least of which is the fact that much of the worldwide manufacturing capability for the most advanced types of microchips is tied up in Taiwan, specifically with the same Taiwan Semiconductor Manufacturing Company (TSMC) that Huawei once sought to use to produce its HiSilicon Kirin 9000 chip. Like most other advanced technologies, access to production capacity for these chips is a political, economic, and national security issue, and TSMC is one of the only companies in the world capable of producing these types of microchips. California-based Intel, which is one of the other companies capable of producing the smallest and most advanced chips, recently exposed a potential loss of market leadership when it revealed that its own production of 7 nanometer equivalent chips (what Intel characterizes as 10 nanometer chips) was behind schedule and that it would likely begin outsourcing its production to TSMC. Intel later reversed this decision and opted to increase its own production capacity instead when it announced its intention to invest $20 billion to construct two new chip plants in Arizona. Shortly after Intel’s announcement, TSMC revealed its own plans to invest $12 billion to build a chip fabrication facility, also in Arizona. One of the only other large-scale producers of the most advanced types of microchips is South Korea-based Samsung.

With just a few major players in the advanced microprocessor and semiconductor industry, a rapid geopolitical development between Taiwan and China would send shockwaves around the world. China’s long-standing interest in bringing Taiwan under Chinese Communist Party (CCP) domestic political control will only be exacerbated by its loss of access to TSMC and its corresponding microprocessor production capabilities. Organizations with interests in Hong Kong or Taiwan would be wise to consider seeking additional capability in other regions as a hedge against aggressive Chinese action; similarly, the U.S. government should continue incentivizing companies to establish production capacity outside of China’s sphere of influence, ideally within the United States itself. Otherwise, firms with semiconductor or microprocessor interests and correlating concerns about Chinese aggression in Taiwan or Intel’s manufacturing capability will find few places of refuge, given the very limited number of companies with this advanced production capacity. This also presents a major national security concern for the U.S. and many other nations. The microprocessor shortage that much of the world is currently experiencing may become a way of life if this situation is not effectively addressed.

Conclusion:

The political, economic, military, and diplomatic relationship between the U.S., China, and Taiwan is a multi-layered onion, and this is just one piece of one layer. In the coming months and years, a keen observer will surely see many other layers surface, and those future developments will determine which nation and political system maintains technological and economic supremacy within the global economic and military complex. The intersection of things like geopolitics, logistics, and international supply chains will move from the realm of think tanks and diplomats into the aperture of the American public, and the increasingly complex relationships between these seemingly disparate issues will influence the quality of everyday life as we understand it. An interesting time lies ahead.

Citation :

Secret Chinese Port Project in Persian Gulf Rattles U.S. Relations With U.A.E.

WASHINGTON—U. S. intelligence agencies learned this spring that China was secretly building what they suspected was a military facility at a port in the United Arab Emirates, one of the U.S.’s closest Mideast allies, according to people familiar with the matter.
Alarmed, the Biden administration warned the Emirati government that a Chinese military presence in its country could threaten ties between the two nations. After rounds of meetings and visits by U.S. officials, construction was recently halted, according to people familiar with the matter.
The intelligence findings and U.S. warnings concerned a site at a port near the Emirati capital of Abu Dhabi. People familiar with the matter said it appeared the Emirati government, which hosts U.S. military forces and is seeking to buy advanced American jet fighters and drones, was unaware of the military nature of China’s activity.
China’s effort to establish what U.S. officials believe would be a military foothold in the U. A. E.—and the Biden administration’s push to persuade the Emiratis to stop the base from being built—reflect the challenges the administration faces in attempting to compete with Beijing globally.
The Middle East increasingly appears to be a primary ground for U.S.-Chinese competition. The U.S. played a central role in the region for decades, supporting the creation of the state of Israel, basing troops in the region, and recently brokering the Abraham Accords that normalized relations between Israel and some Gulf states, including the U.A.E. Beijing has countered with trade deals and vaccine diplomacy—and now appears to be trying to expand its military presence.

The trajectory of Chinese activity at the port in the U.A.E. began as have other attempts by the Chinese, with Beijing leveraging commercial ties to establish an anchor for its military. China opened its first military outpost abroad in the East African nation of Djibouti in 2017 to facilitate operations around the Indian Ocean and Africa. In Cambodia in 2019, China signed a secret agreement to allow its armed forces to use a navy base. Elsewhere, China has built commercial port facilities in Pakistan and Sri Lanka that could be used by its rapidly expanding navy.

In recent years, China has strengthened its economic ties with the U.A.E. and is now one of its largest trading partners as well as the biggest consumer of Gulf oil. The U.A.E., meanwhile, has embraced China’s Huawei Technologies Co.’s telecom infrastructure, which senior Western officials warn leaves it vulnerable to Chinese espionage. Beijing has denied the allegation.

About a year ago, intelligence reports started trickling in to U.S. officials indicating suspicious Chinese activity at Khalifa port, about 50 miles north of Abu Dhabi, where China’s giant COSCO shipping conglomerate had built and now operates a commercial container terminal, people familiar with matter said.

The initial information was inconclusive, the people said. But this spring, classified satellite imagery led U.S. officials to conclude that the Chinese were building some sort of military installation at the port. The Biden administration was alarmed and launched an intense diplomatic effort to persuade the Emiratis that the site had a military purpose and that it should stop the construction, the people familiar with the matter said.

“The U.A.E. has never had an agreement plan, talks or intention to host a Chinese military base or outpost of any kind,” a U.A.E. Embassy spokesman in Washington said.

A spokesman for China’s Embassy in Washington didn’t immediately respond to a request for comment.

Among other clues, U.S. intelligence agencies this spring detected the excavation of a huge hole to accommodate a multistory building and the erection of girders, a person familiar with the matter said. At some point, the construction site was covered over to prevent scrutiny. People familiar with the matter declined to provide more detail about the nature of the suspected military site.

The U.A.E. is one of the U.S.’s closest Middle East allies, and the two countries have longstanding trade and security ties, making China’s incursion there even more potentially menacing to U.S. interests.

The Gulf nation is a major oil and gas producer, hosts U.S. military forces, cooperated with Washington on counterterrorism matters, and was the first Arab country to send troops to Afghanistan following the U.S. invasion in late 2001. More recently, it has temporarily hosted Afghan refugees evacuated from Kabul following the collapse of the Afghan government over the summer.
President Biden expressed concern about China’s growing presence in the country directly with its de facto leader, Abu Dhabi Crown Prince Mohammed bin Zayed al Nahyan, officials said, in May and again in August. In one talk, he told MBZ, as the crown prince is known, that the U.S. feared China’s activity could have a detrimental impact on the partnership. MBZ replied he had heard Mr. Biden “loud and clear,” according to the officials.

That conversation left U.S. officials unsure whether the Emiratis were committed to keeping China out of the country.

American and Emirati officials held numerous discussions about the Khalifa port issue earlier this year, people familiar with the matter said. Then in late September, during a visit to Abu Dhabi, White House national security adviser Jake Sullivan and top Mideast aide Brett McGurk made a detailed presentation on the U.S. intelligence about the Chinese site, a person familiar with the matter said. Mr. McGurk returned this week to meet with the crown prince. and U.S. officials also recently carried out an inspection of the site, the person said, adding that officials believe that for now construction has ceased.
Concerns over nascent security cooperation between China and the U.A.E. have potentially threatened a planned $23 billion sale of as many as 50 U.S. F-35 fifth-generation fighter aircraft, 18 Reaper drones and other advanced munitions.

For its part, the U.A.E. is seeking a strategic pact with Washington that would secure the U.S.’s commitment to come to its defense if it is attacked, a person familiar with the matter. In recent years, Gulf Arab countries, who see a threat from Iran, have questioned the strength of the American commitment. They have watched the U.S. shift its focus to Asia, and the concerns grew, Gulf officials say, following the chaotic U.S. withdrawal from Afghanistan.

The halt in construction appeared to put Washington’s relationship with Abu Dhabi back on track. On Tuesday, Mira Resnick, deputy assistant secretary of state for regional security, said in Dubai, a U.A.E. commercial center, that the F-35 and MQ-9 Reaper drone deal with the U.A.E. would move forward following “a robust and sustained dialogue” with the Emiratis. Defense Secretary Lloyd Austin is expected to visit Abu Dhabi this weekend.

Meanwhile, a top U.A.E. official last month lamented that the U.A.E. is stuck in the middle of the showdown between the U.S. and China.

“We’re all worried, very much, by a looming Cold War,” Anwar Gargash, a U.A.E. presidential adviser, said at an Oct. 2 conference in the capital. “That is bad news for all of us because the idea of choosing is problematic in the international system.”

Citation :

Israel ponders a Pax Sinica
11 - 14 minutes

NEW YORK – Efraim Halevy, the former head of Israel’s foreign intelligence service Mossad, said on December 14 that China has played a critical role in nuclear negotiations with Iran now underway in Vienna.

According to Israel’s Channel 7, Halevy said, “The only player who can be effective and bring about progress in the Vienna debates is the only player we do not hear his position on the Iranian issue, and that is China.”

The former Mossad director added, “China’s influence on Iran’s policy is probably the biggest influence a foreign power has over Iran. At no point in history did China make such crucial contribution to world stability as it has today in Vienna.”

Halevy spoke at the annual conference of SIGNAL (Sino-Israel Global Network and Academic Leadership), an Israeli think tank. Two months ago Halevi told the Israeli newspaper Haaretz, “The Chinese have taken steps in recent months that they have never taken before. The way China has been treating Israel on these issues has undergone a change in recent months on various issues.”

He didn’t specify what sort of change had occurred.

The 87-year-old Halevy has not served in an official capacity since 2003, and spoke as a senior statesman rather than as an active policy-maker. Nonetheless, his view of China as a stabilizing force in the region is noteworthy, especially at a time of high tension between Beijing and Israel’s ally Washington.

Israel is and will remain an American ally. Apart from a few European helicopters and some trainers, it flies American airframes. Its armaments and R&D are tightly integrated with the American military and defense contractors. That will not change in the foreseeable future.
Efraim Halevy in a file photo. Image: Screengrab

America’s withdrawal in disorder from Afghanistan made a deep impression on many Asian powers. America left behind the detritus of its failed intervention in Iraq and Afghanistan for the Asians to clean up. China and Russia worry with good reason that the Taliban will support separatists in Xinjiang Province and the Russian Caucasus, respectively.

China worries that chaos in Afghanistan will play into the hands of Pakistani radicals, the opposition to Islamabad’s China-backed military. Iran’s new stridency is an added complication for Moscow and Beijing. All of this makes Israel, the region’s strongest military power, figure prominently in their considerations.

Eight years ago I argued that China had both the interest and the influence to play a stabilizing role in Western Asia—if it chose to do so (“A Pax Sinica in the Middle East?,” October 28, 2013).

I wrote at the time: “China’s capacity to exert pressure on the Iranian regime is considerable. Apart from its interest in avoiding nuclear proliferation in the Persian Gulf, China has a number of points of conflict with Iran…It is worth considering a radically different view of China’s interests in the lands between the Himalayas and the Mediterranean: no world power has more to lose from instability than does China…Without attributing any geopolitical intention to Beijing, the visible facts make clear that China has the capacity to exercise strategic influence in the Middle East, and it has an unambiguous interest in maintaining stability.”

China keeps its friends close and its enemies closer. Last year it announced a US$400 billion investment deal with Iran, but with no real specifics on the avowed outlays. It has been Iran’s main trading partner for more than a decade, taking advantage of Western sanctions on Iran to dictate usurious terms of trade. But China needs Saudi Arabia, Iran’s strategic rival, more than it needs Iran.

China imported over 8 million tons of oil from Saudi Arabia in September 2021, a 50% increase over the previous year. Imports from Russia that month stood at 6.5 million barrels. Iranian-backed Houthi rebels attacked Saudi oil processing plants at Abqaiq and Khurais in September 2019, and have fired missiles at Saudi cities.

China may use its ties to Iran to exercise pressure on the United States, but it does not want Tehran to dominate the Gulf. Some years ago in Beijing, I heard a presentation under the auspices of SIGNAL by a Chinese scholar explaining how China carefully calibrates its missile sales to Iran and Saudi Arabia to maintain the regional balance of power.

Iran gets more missiles, but the Saudis get more sophisticated ones including the CSS-6, CSS-5 and CSS-2 IRBM’s and ICBM’s.
An Iranian seaman holds Iranian and Chinese flags during a ceremony at Chabahar on the Gulf of Oman during Iran-Russia-China joint naval drills in 2019. Photo: AFP / Iranian Army Office

Apart from Iran, Israel’s main worry in Western Asia is Turkey, the main sponsor of the Muslim Brotherhood. Israel and China to my knowledge have done nothing to coordinate their policies toward Turkey, but their interests overlap.

After the Brotherhood regime in Egypt fell to a military coup in 2013, its leadership took up exile in Turkey. A rapprochement between Egypt and Turkey, though, puts the Islamist exiles at risk. The Gulf States fear the Brotherhood, because it is the only political force that might replace the monarchies. Erdogan’s government, meanwhile, has accused the United Arab Emirates of financing the 2016 attempted military coup in Turkey.

Turkey’s influence has diminished drastically during the past year, however. The collapse of the Turkish lira leaves it dependent on the Gulf States. Its diplomatic isolation forced it to mend fences with Egypt as well as the UAE.

Worst of all, Erdogan’s recent rhetoric in defense of China’s beleaguered Turkic minority, the Uighurs of Xinjiang province, has enraged China, which believed it had a deal with the mercurial Turkish leader.

On November 12, Erdogan posed in front of a map of the “Turkic world” that included Xinjiang. Erdogan habitually referred to Xinjiang as “East Turkistan” until Chinese pressure and incentives kept him quiet—until recently.

Ethnic separatism, though, is a game that two can play. Turkey’s greatest weakness is a fast-growing Kurdish minority that will comprise half the country’s young people by the 2040s. I first heard Chinese strategists muse about the “Kurdish card” as a lever against Erdogan in 2015.

Now China has made the threat publicly. On October 29, Chinese diplomat Geng Shuang denounced Turkey’s operations in northeast Syria—that is, against Syria’s Kurdish minority—as illegal.

Ambassador Geng declared, “China urges Turkey to abide by the international law, including international humanitarian law, protect civilians, maintain infrastructure operations, and guarantee humanitarian access for the UN.” Turkey’s UN Ambassador Feridun Sinirlioğlu replied, “We will not learn from those who violate international human rights law and humanitarian law.”

China has been a major source of investment as well as financial support for Turkey, including a $4.1 billion swap line between the two countries’ central banks. With its currency in free fall and inflation out of control, Turkey does not need a fight with China—but it appears to have backed into one.
A demonstrator wearing a mask painted with the colors of the flag of East Turkestan supported by the ETIM takes part in a protest by supporters of the Uighur minority at Beyazid square in Istanbul, Turkey. Photo: AFP / Getty

Earlier, Chinese strategists envisioned a Pakistan-Iran-Turkey bloc of non-Arab Muslim states under Chinese influence and united by Chinese infrastructure. After the collapse of Afghanistan, Beijing has learned that the fractious region cannot easily be cemented by economic incentives.

China left the Middle East to America for decades, “free riding” on the American Navy’s protection of sea lanes. It will have to learn how to maneuver in the region like imperial powers of the past.

In the rare situations in which China has gone toe-to-toe with the United States in the region, it has mostly come out ahead. A noteworthy shift in Western Asia this year is the UAE’s open pivot towards China.

The UAE rejected American demands that it remove 5G broadband equipment bought from China’s Huawei Technologies as a condition for the purchase of the F-35 stealth fighter by suspending negotiations on the American plane and buying 80 French Rafale fighters instead.

The UAE was the first Gulf state to establish diplomatic relations with Israel under the Trump-sponsored “Abraham Accords,” and its relationship with Israel is strong across a wide range of fields. The UAE also has excellent relations with China, although it acceded to American demands to stop Chinese construction on a port that the US claimed had a military purpose—while denying the American allegation.

“The United States’ anti-China high-pressure tactics are ineffective, and China has won – is this the new global trend?,” wrote Chen Feng in the influential Chinese news site “Observer” (guancha.cn).

“All F-35s in the sky and on the ground are members of a huge automated logistics support system. The serial number, offline time, use time, upgrade and maintenance status of all parts of each aircraft are in Lockheed’s database. Lockheed can put the required spare parts into the supply chain before the user knows they are needed…greatly reducing the maintenance cycle and waiting for spare parts,” Chen wrote, adding:

“Of course, Lockheed can not only provide remote technical support, but also remotely monitor the use of any aircraft, including mechanical status, route, mounting, and maneuvering overload….It is no exaggeration to say that Lockheed can remotely lock any F-35 in the world with one key…The U.S. maintains full-time and full-time monitoring of any country that uses F-35s.”

The Rafale lacks the F-35’s stealth capability, but it comes with no strings attached from the French. The UAE may decide to engage Iran, and it doesn’t want an American veto over its military options.
America’s high-tech F-35 Lightning stealth fighter has often been referred to as a flying computer, because of its AI capabilities. Credit: Lockheed Martin.

More broadly, the Gulf States have a broad divergence of interests with the US. American strategists reserve the option of blockading oil deliveries to the Persian Gulf in the event of a Chinese attack on Taiwan or similar event. The Gulf monarchies do not care what happens to Taiwan and want to sell their oil to China.

Unlike the UAE, Israel accepted American demands to exclude Huawei from its 5G buildout. Then-secretary of state Mike Pompeo extracted a memorandum of understanding to that effect from then-prime minister Benyamin Netanyahu in May 2020, eliciting a bitter protest from China.

Israel is the world’s leader in cybersecurity with a fifth of the world’s total investment in the field, and it is noteworthy that it took Pompeo to explain to them that it was risky to use Chinese equipment. In any case, Israel accepted Washington’s demands, whether it liked them or not.

How, then, does America’s ally Israel deal with America’s strategic competitor China? The answer, as I argued in a recent interview with Israeli journalist Caroline Glick, is suggested by Israel’s remarkably good relationship with Russia during times of aggravated tension between Washington and Moscow.

After Russia entered the Syrian civil war in 2015, Israel developed efficient (if not cordial) working relations with the Russian military. Russia stood aside while Israel conducted thousands of raids on Iranian assets in Syria. Netanyahu and Putin had a good personal rapport by all accounts.

Israeli-Russian relations blossomed while the United States enforced sanctions on the Russian economy, and while a large portion of the American body politic claimed (speciously in my view) that Russia had tried to hack an American presidential election. I expect something similar will emerge with China.