USA & China: Biden intensifies the technology fight

Brussels, Washington When the Philadelphia-Washington rail tunnel opened, an ex-officer named Ulysses Grant was ruling the United States, the country recovering from the trauma of the Civil War.

150 years have passed since then and countless trains have rattled through the tunnel, the walls are leaking and the ground is giving way in some places. “It makes you wonder how on earth he’s still standing,” Joe Biden said this week.

The US President, who is 80 years old himself, came to praise his program to modernize America’s infrastructure. And he used his performance to warn: “We risk losing our lead as a nation,” he said. “China and the rest of the world are catching up.” Nothing illustrates this more than America’s crumbling infrastructure.

China, the country of high-tech trains, has long since overtaken the USA in rail transport. All the more the Americans want to defend their position where they are still in the lead. It must “never happen again” that America is left behind, Biden cried.

Never being left behind again: Biden wants to keep this promise – and like no president before him, he is taking action against China, even tougher than his predecessor Donald Trump, who imposed punitive tariffs on hundreds of Chinese export goods, but pursued technological decoupling rather erratically.

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Biden wants to consistently strengthen domestic production and stop the transfer of critical technologies to China. Behind this is Washington’s fear that China will use high technology from the USA to further develop its own arms industry. Under state and party leader Xi Jinping, military and civilian companies are increasingly merging.

Since Biden has been in office, not a week has gone by without new restrictions being announced. The government accepts that US companies will also suffer as a result. The damage in the bilateral relationship as well.

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When US Secretary of State Antony Blinken, one of Biden’s closest political associates, arrives in China for talks over the weekend, sanctions are likely to be one of the most important issues.

In Europe, the confrontation of the superpowers is raising fears. On the one hand, the EU also regards China as a strategic rival. On the other hand, Europeans fear being drawn into an economic war by America.

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China is the EU’s second most important trading partner after the USA. German corporations in particular have a lot to lose, companies like VW, BASF and Bosch have invested billions in China. They are bets on the future that have to work out.

But Biden is not letting up. US media reported on Monday that the US wants to expand its sanctions against the Chinese network supplier Huawei. Exemptions, which were previously granted despite strict sanctions, will no longer exist in the future.

Huawei

US media reported on Monday that the US wants to expand its sanctions against the Chinese network supplier Huawei.

(Photo: Bloomberg)

The US President has also initiated a series of blockades, including because of human rights violations in the Xinjiang region. Dozens of Chinese companies, such as those in the solar and semiconductor industries, are on a blacklist that makes it difficult for them to access the US market.

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Last year, the Biden administration passed new export controls aimed at slowing Beijing’s technological and military advances. Washington shocked the chip industry when it banned American companies and citizens from engaging in Chinese semiconductor manufacturing in October. “We must protect the American people from China. Point,” announced Trade Minister Gina Raimondo at the time.

However, the new rules not only affect the USA, but also other countries, such as EU countries such as Germany and the Netherlands. With a novel regulation called the Foreign Direct Product Rule, the Biden administration generally banned companies using American technology from selling certain advanced semiconductors to China.

The US wants to slow down China’s military build-up

The radical step is based on the assumption that China will also use sophisticated US chips for military purposes, such as weapons and military logistics. The US government quickly urged allies to follow suit – apparently with success: Japan and the Netherlands are ready to join US restrictions. This would make it even more difficult for China to access manufacturing facilities and build its chip industry.

Because ASML from the Netherlands and Japan’s Tokyo Electron are among the world’s leading suppliers in this area, after the US manufacturer Applied Materials. German companies such as Trumpf and Carl Zeiss are in turn important suppliers for ASML. The Dutch government has already largely restricted the export of the most modern machines, now there could be further restrictions on the export of the next best machines.

The White House National Security Council confirmed on Monday that the US administration and allies had “agreed on joint action on an important strategic issue”. Brussels pledged its support to the USA, but at the same time insisted on Europe’s independence.

Hamburg harbour

In Europe there is a growing concern of being drawn into an economic war.

(Photo: IMAGO/Chris Emil Janssen)

“We cannot allow China to have access to the most advanced technologies,” said EU Internal Market Commissioner Thierry Breton. However, he emphasized: “We will limit ourselves to what is necessary from a security perspective.”

Anyone who speaks to diplomats in Brussels hears the phrase again and again: “We Europeans need our own China policy. Our interests are not congruent with those of the United States.”

According to China expert Scott Kennedy, the United States is putting pressure on allies with its rigorous approach – including Europe. The researcher at the Center for Strategic and International Studies think tank does not believe that the USA will “explicitly ask Germany to decouple from China”.

But in the high-tech sector, the USA quickly creates facts and “raises high fences”. There is pressure to “fit in”. One thing is clear: in Berlin, too, the Americans are expressing that they want support.

“We would be well advised to further develop our own export control measures for critical technologies,” advises Mikko Huotari, director of the Berlin China think tank Merics. Germany is also faced with the question of the extent to which it wants to promote innovations in China – similar to the USA. “We have to draw our own red lines and not be driven, but we also have some catching up to do in this area.”

Half-hearted attempts at relaxation

At the beginning of his term in office, Biden had actually vowed to want to maintain dialogue with Beijing. To achieve progress in climate protection, for example. In October, Biden and China’s leader Xi met on the sidelines of the G20 summit.

The US State Department recently established a symbolic “China House” to advance a shared “vision of an open, inclusive international system.”

But the hegemonic conflict can hardly be overcome by attempts to detente. The presidential election campaign could turn into a bidding war between Democrats and Republicans for the toughest China policy.

The head of the foreign affairs committee, the Republican Michael McCaul, is already talking about a “US investment blockade for entire sectors of the Chinese technology economy” and cites quantum computers and artificial intelligence as examples.

In Germany, the federal government has become significantly more critical of authoritarian powers, especially China, with the change of power to the traffic light and at the latest with the Ukraine war. But the harshness that Washington is showing is met with criticism in Berlin.

It is said in government circles that one cannot learn much from the actions of the USA. Germany must show toughness towards China where it is a question of reducing economic dependencies and where human rights are violated. However, there is no interest in power-political behavior such as that carried out by the USA.

More: How dependent is the German economy on China?

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