US is enlisting allies to counter China’s technological push

Preliminary talks with US allies have begun, although the effort is expected to take months, senior officials said.

The strategy has both attacking and defensive components. By pooling their efforts, the US and its allies can significantly outperform China, whose research and development budget now nearly matches the US. The alliances can also coordinate policies to deny China the technologies it needs to try to become a global leader.

“We have a great interest in ensuring that the techno democracies come together more effectively, so we are the ones shaping those norms and rules,” State Secretary Antony Blinken said at his hearing.

The US plans to organize different alliances depending on the issue, said a senior official, calling the effort a modular approach. The various groups would generally comprise most of the industrial powers of the Group of Seven nations, plus some others. (The idea is sometimes referred to as the Democracy 10 or the Tech 10.)

For example, an alliance focusing on artificial intelligence could include Israel, whose researchers are considered leaders in the field. One of these involving export controls would likely involve India, to stop China from importing certain technologies. In order to encourage countries that do not insult China to join the alliances, the government should not announce their participation, the senior government official said.

According to those who worked on the concept, it is crucial that the alliances are flexible and avoid bureaucracy. “The creation of a new international institution lends itself to big announcements without doing anything,” said Anja Manuel, a former Bush State Department official. “With technology you have to be flexible.”

Among the areas considered ripe for alliances are export controls, technical standards, quantum computing, artificial intelligence, biotechnology, 5G telecommunications, and surveillance technology rules. The list needs to be narrowed down, technology experts say. Too much effort would take too long to organize and overburden government officials.

Semiconductor technology tops the administration’s list because computer chips power the modern economy. China is the world’s largest semiconductor market, but more than 80% of chips – especially advanced ones – are imported or produced by foreign companies in China.

Beijing has spent tens of billions of dollars over the past few decades trying to build a world-class domestic industry, but is still lagging behind Western rivals. Biden’s administration wants to keep it that way.

During the Trump administration, the US partnered with the Netherlands to promote the sale of Netherlands-made semiconductor manufacturing equipment to China’s largest chip maker, Semiconductor Manufacturing International Corp.

which could have helped produce industry-leading chips. The Trump Commerce Department also restricted sales of chip-making equipment to SMIC.

Biden’s administration is following up the curbs. In February, national security adviser Jake Sullivan spoke with his Dutch colleague, Geoffrey van Leeuwen, about China and advanced technology, among other things, according to a statement from the White House.

Technologists describe semiconductor manufacturing equipment as a ‘choke point technology’ because it is dominated by only three countries – the US, Japan and the Netherlands – making it relatively easy to limit. A semiconductor alliance would likely include major chip makers in Europe as well as South Korea and Taiwan.

In addition to limiting technology to China, members could pool their work on advanced R&D, including funding billions of dollars in semiconductor manufacturing facilities outside of China.

A high-profile effort will no doubt raise concerns – and possible retaliation – at Beijing, which is working to reduce dependence on foreign technology. Beijing has used its economic power to try to appease US allies, including halting imports of wine and coal from Australia after Canberra pushed for an investigation into the origins of the coronavirus pandemic.

Adding Taiwan, a major semiconductor maker that Beijing considers a renegade province, would add to China’s concern.

A US-led semiconductor alliance “violates the principles of market economy and fair competition, and will only artificially separate the world and destroy international trade rules,” China’s Foreign Ministry said in a statement.

Beijing has many levers to win over. China is the world’s largest supplier of so-called rare earth minerals that are indispensable for the production of mobile phones, electronics and military equipment. In 2010, China restricted shipments of rare earths to Japan in a battle for ownership of islands in the East China Sea, though China denied involvement in coercion.

China has recently begun a new set of rare earth regulations and has questioned foreign companies about their reliance on Chinese manufacturing, which is seen as a warning by some technology experts. China’s Foreign Ministry said Beijing is “ready to meet the legitimate needs of all countries in the world as much as possible in accordance with the actual capacity and level of China’s rare earths”.

Mr. Sullivan praised the past Allied opposition to the Chinese restrictions on rare earths and Mr. Biden appointed the Obama administration permanent, Katherine Tai, as the US Trade Representative.

Mr. Biden also recently commissioned an investigation into the US’s reliance on foreign supplies of rare earths. US officials are working with Australia and other countries to boost production and create synthetic substitutes for the minerals.

Cutting off rare earth exports would backfire by undermining China’s commercial reputation and encouraging mineral production elsewhere, said Martijn Rasser, a technology analyst at the Center for a New American Security, a Washington, DC think tank.

Technology alliances are worth the risk of backlash, he said. “Ultimately, the US wants to reduce or eliminate Beijing’s ability to use coercion.”

Write to Bob Davis at [email protected]