Technology restrictions: a strategic move that's falling short

 

Joseph Assad explains the conundrum.

There is a moment from my time living in Abu Dhabi that I have never forgotten. During a tense negotiation over a defense technology sale, talks had stalled — not over price, not over capability, but over American export control regulations that prevented us from delivering the full system the UAE needed. During a coffee break, a UAE Brigadier General pulled me aside and spoke to me in Arabic. Holding up a phone charging cable, he said quietly: "The U.S. wants to sell us this wire for $100. China will sell it to us for $20. We said we will pay the $100, but now your delegation says we must wait two years. We can have the Chinese wire tomorrow." 

He paused, then added with a resignation that still stings: "And when we say we will buy from China, the U.S. accuses us of betraying our friendship. What are we to do?"

That question deserves an honest answer from Washington. So far, it hasn't gotten one.

American export controls on semiconductors and related technologies were designed with a single adversary in mind: China. The logic was sound — deny Beijing access to advanced chips powering artificial intelligence, and you slow its military modernization and geopolitical ambitions ... [but] Overzealous and inflexible application of these controls has swept up trusted allies and strategic partners — particularly in the Gulf — leaving them locked out of American technology they are willing and able to buy.

. . .

China is responding to U.S. and allied export controls with a whole-of-nation effort to make itself independent of Western semiconductor technology. In 2019, the first Trump administration cut off Huawei's access to U.S. technology, a move that appeared to consign the company to irreversible decline. Instead, Huawei launched an effort to wean itself from reliance on U.S. technology — and by 2024, it had launched new products featuring advanced semiconductors and was developing 5G mobile network infrastructure.

There's more at the link.

It's a very real problem.  Mr. Assad suggests that the USA is moving in the right direction, trying to free up access to its latest technology in return for verified commitment from customer nations.  However, there will always be the problem of supplies filtering through from third parties.

I saw this at first hand in South Africa during the years of the mandatory UN arms embargo.  South Africa couldn't obtain major items, such as warships or fighters, from major powers, but still bought or made almost everything it needed.  Sophisticated nations such as Israel and Taiwan, and political allies such as Chile or Paraguay, could act as third party channels through whom much could be obtained.  Other nations such as West Germany and Portugal simply ordered more of some materials than they needed for their own armed forces and manufacturers, and sold the surplus to South African agents.  Romania, at the time behind Warsaw Pact lines, nevertheless defied its Communist principles (?) to sell carbon-fiber helicopter fuselage components through third parties to South Africa, which was able to obtain elsewhere (or make itself) the engines and avionics needed to build them into fully operational aircraft.  Thus, even though the whole world was technically obliged to restrict South Africa's access to high technology, it really wasn't that hard to bypass most of those restrictions.

(It helped that at the time, South Africa was the single largest producer of gold in the world.  Gold coins and bars make an untraceable and very acceptable medium of exchange when wanting to disguise the origin and/or destination of a shipment of high-tech gear.  Paperwork?  What paperwork?)

America's trade and technology war with China is simply running headlong into the same conundrum.  Despite restrictions, China was able to buy enough advanced US chips to study their design, and are now building their own equivalents - and apparently refusing to buy more from the USA, despite the lifting of the US technology embargo.  As for preventing other nations from buying Chinese technology, it all boils down to economics.  Charge too much, delay delivery enough, impose enough restrictions, and the customer will look somewhere else.  If someone's prepared to pay enough, or wants independence of supply strongly enough, there are always ways to get around restrictions.  Low-balling an opponent's price is another very popular way of gaining access to a market:  and, once gained, it can be maintained in all sorts of ways.

Peter