Sunday, April 2, 2023

The Sullivan Doctrine.

Storck Harbour scene.jpg
"Harbour Scene"
Dutch marine painter Abraham Storck (1644-1708).
Image source: Wikimedia Commons, Public Domain.
This week's briefing from The Economist concerns the ongoing US-China trade war, focusing on the US ban on certain semiconductor sales, that severely impacted Chinese chipmakers like Yangtze Memory Technologies Corp (YMTC), causing delays in business plans and construction of new facilities. The resulting shortage has disrupted supply chains and forced Chinese firms to become more reliant on domestic production, lowering the forecast of Chinese companies producing over half of the country's needed chips by 2030 to just 33%. The US government's "Sullivan doctrine," named after National Security Advisor Jake Sullivan, aims to maintain an American edge in foundational technologies like AI, biotech, and clean energy by restricting China's access to advanced chips involved in these areas through export controls using "foreign direct product rules" (FDPRs).

This escalating tech war has the potential to reorganize global supply chains and spill into other industries like clean technology, biotech, and agriculture. The conflict may create two mutually exclusive blocs for many products, undoing gains from globalization and harming companies and countries caught between the two rivals. The US may target additional industries with FDPRs, further intensifying the situation and prompting China to retaliate.

Despite the adverse consequences of the tech war, the international rules-based order aims to establish a free world by promoting free trade as a public good. By fostering a cooperative environment for innovation and ensuring access to resources, this encourages global economic growth and benefits all nations involved. In the long run, the rules-based order is designed to promote stability, prevent conflicts, and create a more prosperous and interconnected world. I cannot see how that system can continue without a US willingness to defend it, as today's international trade is a legacy of America's position at the conclusion of the Second World War, and its continuing and enduring commitment to the same.