China-bound exports of equipment essential for the manufacture of advanced semiconductors are expected to be regulated. At the request of the U.S. government, the Ministry of Economy, Trade and Industry (METI) is considering the matter.
Last year, the U.S. imposed a broad ban on semiconductor trade with China. It also asked Japan and the Netherlands, which are home to leading semiconductor equipment manufacturers, to agree to the ban in order to contain such production in China.
The concerns of Japan, the U.S. and Europe are that China's military technology will become even more advanced through the improvement of artificial intelligence, for example. Under World Trade Organization (WTO) rules, trade restrictions are sometimes allowed if there are security reasons.
However, many advanced technologies are used in digital society without distinction between civilian and military use. If exceptions under the guise of security are expanded without control, the free trade system could collapse.
Government measures to restrict exports are positioned as a defensive move against countries that threaten free trade norms and peace. However, they must be well-founded and taken within the framework of international cooperation.
China has filed a complaint with the WTO, claiming that the restrictions are unfair. It is Japan and the United States that have been preaching the importance of economic activities based on rules. We must not allow ourselves to undermine these values.
The impact on the economy must also be considered. Since approximately 30% of semiconductor manufacturing equipment exported from Japan is destined for China, the impact on companies and investors would be significant.
METI is likely to work out the details of what types of equipment might be regulated. Clear explanations and a high level of transparency are essential to eliminate concerns about protectionism.
If controls were imposed, a backlash from China would be unavoidable. It is a country that has exerted its influence by using its own resources and markets as weapons. Restrictions could trigger countermeasures from China, such as an embargo on exports of rare metals and other important commodities. This could threaten the world economy with turmoil and stagnation.
After the end of the Cold War, major countries established export control frameworks to prevent the proliferation of technologies that could be used for military purposes. However, growing confrontation such as that which has emerged between the U.S., Europe, and Japan on one side and China and Russia on the other is making it difficult to function.
There is a need to strike a balance between security and economic activities so as not to undermine the benefits of the free trade regime. What is required of Japan, which stands between the U.S. and China, is a multilayered strategy to rebuild the trade order.
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