From "Trade War" to "Tech War" and Back Again

Last week, the U.S. Department of Commerce announced it added 7 Chinese companies in the supercomputer space to its Entity List. As per the April 8th press release from Commerce, these entities were noted for their “support to China’s military modernization and other destabilizing efforts.” As computer processing power is getting faster, so are tensions between the U.S. and China in the struggle for technological dominance. 

What does this step in the U.S.-China “tech war” mean and how might this affect companies dealing in international trade? 

With the addition of the Chinese supercomputing enterprises on the Entity List, export licenses will now be required for the export, re-export or transfer of goods or technologies to these companies and the bar for license approval is likely significantly higher. Tianjin Phytium Information Technology Co. Ltd. and the National Supercomputing Center Wuxi, and others are among the 2021 additions and each plays an important role in the development of China’s supercomputing capacity. This move notably expands the several supercomputer makers listed by the Trump Administration in 2019 and is the first move of this sort under the Biden Administration.

The reasons for placing export controls on specific sectors are multifaceted, but this is a sign that trade controls are becoming an increasingly important arrow in the quiver of geopolitics. In November 2018, the Commerce Department began its efforts in crafting controls around “emerging and foundational technologies” and these controls on supercomputers indicate the importance of such tactics in national and economic security policy. Taken together, this means that both companies and financial institutions will have to do their part to keep a finger on the pulse of these dynamic and fast-moving developments in the export control space. Both military and industrial competitiveness overlap with scientific and technological progress, so these new and exciting industries also provide new risks for players in international trade. 

While perhaps not quite exascale-supercomputer fast, the teams at Sigma pride themselves on being quick in incorporating these developments into our risk management infrastructure. As noted above, keeping a pulse is critical and we seek to improve companies’ speed and efficiency in their ability to do so.

 

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