In the era of 'America First,' allies are last

Tom Fowdy
The United States only supports globalization to the extent it can have full and unparalleled dominance over the world itself and remake it in its own image.
Tom Fowdy

In a recent report by Bloomberg, anonymous sources claimed in mid-December that the Netherlands and Japan have finally agreed to join the United States' proposed embargo on the export of chipmaking equipment to China, a bid by Washington to try and hobble and slow down Beijing's advances in high-end technology.

Previously this year, the US unleashed a sweeping embargo on the export of all advanced chipmaking equipment to China itself, and prohibited its own citizens or residents from working in China's chipmaking industry, the move had gone further and deeper than anything the Trump administration had utilized.

However, allied states, at least on the rhetorical level, had balked about joining the US on these sanctions. South Korea has meted strong resistance, while according to a report in the Japan Times, the Netherlands perceived such behaviour as "bullying." Similarly, Japanese companies also strongly lobbied against the measures. In both instances, China is a critical and lucrative export market which constitutes one of the world's fastest-growing chip consumers. But if it wasn't clear already, the United States doesn't care about that.

America sees the export of semiconductors to China as a strategic Achilles hill in which it can curtail its economic, military and strategic ambitions. As a developing country seeking to move into high-end technologies, China has sought to place maximum emphasis on developing its own domestic industry to be self-sufficient. But this is no easy task, as it involves a comprehensive amount of investment in not only talent, but also a wide range of technologies and niches in order to be able to successfully produce them. It is long, expensive and cumbersome.

Beginning with the Trump administration in 2019, the United States has sought to place a growing embargo on the export of high-end node semiconductors and chips to China. At first, individual companies were targeted, but that scope has considerably grown to the point of encompassing the whole country. In conjunction with this, the US has aggressively lobbied allies to veto the Chinese acquisition of semiconductor firms overseas, the latest example being Britain's U-turn on the low-end semiconductor producer the Newport Wafer Fab. In addition, the US has also aggressively strongarmed companies to build semiconductor manufacturing capacity in its own territory.

When viewed as a whole, the United States is utilizing a comprehensive strategy to realign global semiconductor supply chains in its favor, and in turn isolate China from it. In doing so, America strives to sustain its economic, technological and military hegemony against the would-be competitor. This is a process of "deglobalization" ― the US is actively tearing up a global industry to rewrite it around itself, and could not make it clearer that it does not care about the subsequent costs or disadvantages of which it deals to allies in the process. If ASML's most lucrative business is destroyed at the hands of US extraterritorial meddling, then that's an acceptable price to pay for hegemony.

This of course means all allies of the United States ultimately stand to be the biggest losers of such a strategy, especially those whose economies are dependent upon producing semiconductors themselves. If the US is endeavoring to "on-shore" its own semiconductor supply chain, where does that leave chip producers such as South Korea, Japan and China's Taiwan?

Taipei, in particular, who is obsessed with obtaining US support, might want to consider the long-term ramifications of these readjustments. They may see America as their most critical partner in pushing for formalized independence, but their most successful and strategically essential industry risks being hollowed out by the sheer fact the US is absorbing it as their own.

In South Korea, observers have noted that the country's trade balance is falling rapidly. There is a reason for this. China's advances in the lower-end node of chips, a product of US coercion against its own semiconductor industry, have reduced the need for imports from this country. Global supply chains are being forcefully rewritten, in a way which ultimately places everyone is not the US at a disadvantage accordingly.

We can see from Europe, in the fields of energy (as opposed to technology) how US-led policies regarding Ukraine are destroying the continent's industrial competitiveness and ushering in blistering inflation.

The bottom line is, in the era of "America First," allies are last. The United States only supports globalization to the extent it can have full and unparalleled dominance over the world itself and remake it in its own image. In turn, Washington does not support forms of globalization which herald economic and power shifts that are unfavorable to the US. In such circumstances, the US has sought to aggressively destroy globalization as it sees fit. This makes the countries who depend upon the US, and prefer open economic and trade ties, the biggest losers.

(The author, a postgraduate student of Chinese studies at Oxford University, is a South Korea-based English analyst on international relations. The views are his own.)

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