Biden’s trade war is bad news for working people


Chris Miller, the author of the Financial Times Business Book of the Year Chip War and a professor of international history at Tufts University Fletcher School of Law and Diplomacy, was recently asked by FT journalist Andrew Hill about the outcome of the unprecedented export controls regime that Washington announced against China. “It is possible, says Miller, that the risks of economic self-immolation will keep peace between China and Taiwan and between the U.S. and China, but ‘if you asked me how confident I am in that, I don’t see a lot of reason for great confidence’” (“The Great Chip War,” Financial Times, Dec. 27, 2022).

Miller is an unabashed supporter of U.S. global dominance in semiconductors. However, he clearly did not anticipate that Washington would adopt policies so extreme and unprecedented that they would not only bring to a peak tensions between U.S. and Chinese imperialism, but also spark disputes between Washington and its historic Cold War allies in Europe, South Korea, and Japan—all of whose tech industries reap serious profits from the giant Chinese market, which absorbs 50% of all chips produced.

In October, the Biden administration announced far-reaching export controls aimed at crippling the ability of Chinese firms to become self-sufficient in advanced technology. The controls focus on restricting the import by China of tools that would allow the manufacture of leading-edge graphics processing units (GPUs) that are important for the deep learning processes behind current advances in artificial intelligence (AI). They also try to prohibit the sale to China of the semiconductor manufacturing equipment (SME) necessary for advanced logic chips, a category that includes central processing units and application-specific integrated circuits below 10 nanometers (nm), with the lowest nanometer size referring to the chips densest with transistors and theoretically able to run at faster speeds using less power than “mature’ or “legacy” semiconductors.

In 2020, China announced that their Semiconductor Manufacturing International Corporation (SMIC) had made breakthroughs in a 7nm chip-making process, reportedly developing tools, photo-resist technique, and other know-how that would allow them to reduce reliance on foreign equipment and material vendors and compete with the 7nm process at the world’s largest semi-conductor manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC). If this new process reached the production stage, China would reportedly have been able to develop and produce advanced chips without highly specialized extreme ultraviolet (EUV) lithography machines from the Netherlands that the U.S. had been previously able to block under world trade rules related to military production. Instead, they could proceed with what is called “multi-patterning DUV,” using deep ultraviolet lithography (DUV) equipment produced in the Netherlands and Japan.

To block any further advancement by China, the U.S. has been trying to persuade the Dutch firm Advanced Semiconductor Materials Lithography (ASML) to quit selling China this legacy equipment as well. In addition, the current U.S. actions force scientists and engineers currently working in the field in China to either leave the country or forfeit their U.S. passport or residency credentials. This measure is deeply impacting not only Chinese firms but also European or East Asian firms with deep investments in China and with employees working there who want to hold onto the ability to return to the U.S.

The U.S. actions are being described as a “sea-change” in China trade policy.  In the past, formal export controls were limited to military or dual use technologies (Gavin Bade, Special Report, Politico, Dec. 26, 2022). For the U.S., the distinction is soon to be lost. The current round of controls is necessarily combined with increased preparation for war. This combined approach was outlined in a “national security” document that proclaimed that during the next 10 years, the guardians of the U.S. system must defeat China, which “is the only competitor with the intent to challenge the international order and increasingly, the economic, diplomatic, military, and technological power to do it. Beijing has ambitions to create an enhanced sphere of influence in the Indo-Pacific and to become the world’s leading power” (“National Security Strategy,” Oct. 2022, p. 23).

In Washington’s view, this requires dismantling the norms of the recent period of capitalist globalization that could present obstacles to the U.S. effort to regain the global hegemony it enjoyed when it was still the world’s leading manufacturer and victorious military power. However, not all of Washington’s Cold War allies are certain that they have the same project. In the current period of deep global capitalist crises that include a looming recession, falling rates of profit, the Russian invasion of Ukraine, and a deepening loss of public confidence in their rule, the geopolitical rivalries and economic competition between the U.S., imperialist powers in Europe, and Japan are deepening. Washington’s export controls aimed at China are being examined in this light.

As Antonia Hmaidi and Rebecca Arcesati note in a Dec. 17, 2022, article in The Diplomat, “Some of these controls won’t be effective unless the other major semi-conductor-producing nations get on board—which they have been reluctant to do so far.” While the U.S. demands that traditional allies collaborate in these extreme export controls are posed as issues of “security” for “democracies” against a Chinese autocracy, European, South Korean, and Japanese firms are showing reluctance to fully acquiesce. For example, the CEO of the Dutch firm ASML famously told reporters that his company has “given up enough” by complying with previous export controls demanded by the U.S. That restriction on sales to China of their EUV chip-making equipment has already resulted, he said, in U.S. chip-gear makers gaining 25% of the Chinese market to the ASML 17% (Cagan Koc, Bloomberg, Dec. 14, 2022). In fact, the whole “decoupling” project of the U.S. is dependent on “friend-shoring” or setting up a new global supply chain with “friends.”

European reluctance to fully sign onto the U.S. project has been exacerbated by the expected impact of Biden’s Inflation Reduction Act on European and East Asian allies. The IRA legislates massive subsidies via tax breaks to companies producing electric vehicles, batteries for electric vehicles, and other dubiously “green” technology. European leaders have protested that the U.S. tax breaks will lead to European companies decamping to the U.S., forcing European nations to compete in what the World Trade Organization Director-General called a “subsidy race to the bottom.”

The Chips Act similarly is handing out $52.7 billion to some of the most profitable semiconductor companies in the world to build plants in the U.S. It is here that the anti-worker thrust of the Chips Act and the IRA come into focus. While the bureaucratized U.S. labor movement has heralded the Chips Act as a “worker-centric” trade policy, and the IRA as part of an industrial policy that will provide jobs and security to working people, the impact of this gigantic distribution of tax dollars to those who profit mainly off of the planned obsolescence of commercial electronic gadgets surely will not increase the security of working people.

Instead, it portends the continuation—at the expense of social spending for public housing, universal health care, education, and a real just energy transition—of massive handouts to corporate America so they can better crush their Chinese competition, leading to an ever more economic measures that are replicating irrational production on three continents, with each group of national or regional elites hoping to achieve a slim margin of profit that will allow them to drive the others out of business. With each plant closing, corporate consolidation, and new cycle of manic investment, there will be a disruption of jobs and a scramble to compete by lowering wages. As the current rise in inter-imperialist rivalry shows, working people in the U.S. need to find their way to actual collaboration with Chinese and European workers against the bosses and their governments. This combined force is, ultimately, the only power that can prevent contemporary imperialist rivals from finally settling their fight over profits with weapons and working-class blood.

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