INSS Insight No. 1691, Feb. 15, 2023
“The chip industry is based on global supply chains. The chip crisis, developing as a result of geostrategic impetus, and exacerbated by the pandemic highlighted the risk to the United States when a sector that is so essential to its national security is sensitive to shocks that are not necessarily within US control.”
The global technology war has entered its third year, and it appears that the struggle between the United States and China has reached a new peak. A few months ago, President Biden signed the CHIPS and Science Act of 2022, which allocates $52 billion to encourage the construction of semiconductor fabrication plants in the United States, and more than $200 billion over the next decade to ensure the continued research and development that is an essential condition for success in the field of artificial intelligence and super and quantom computing abilities. At the same time, it unveiled a comprehensive list of restrictions on the export of chips and technology to China, aimed at preventing Beijing from developing advanced technologies. On the face of it, this is an economic move intended to secure the technological superiority of the US, but it is in fact part of a larger struggle over the nature of the global order, in which the United States is determined to change the course of global trade in an unprecedented way, inter alia, with the aim of preventing attacks on the values of democracy.
First, a brief review of the development of global trade as we know it today, which was driven by the United States. At the peace talks after World War II, the US led the moves to establish international institutions such as the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade (GATT), and pushed for a free global market in which every country could trade its surplus production. These institutions reflected US global ambitions, and enabled countries to recover from the ravages of war. Over the years, the trade agreements gave rise to a series of strong economies, including China, which joined the World Trade Organization in November 2001, and within a few years became the second largest economy in the world.
It was a United States interest to include China in global trade, in spite of its suppression of human rights and its violations of WTO regulations. President Bill Clinton identified China’s economic power, arguing that the country was essential for world trade and would be prepared to make concessions in return for the removal of barriers. After joining the WTO and until recently, China was the main exporter of cheap goods, but at the same time it managed to persuade global technology giants to set up facilities within its borders, and to import advanced technologies in the fields of chips and quantum computing that have enabled it to break into other industries, including in the military and security fields. … [To read the full article, click here]