The United States, Taiwan, the Netherlands, Korea, and Japan should consider forming a multilateral supply chain tracing and customs agreement to prevent crucial technology from falling into the wrong hands.
Securing semiconductor chip production has become one of the hottest topics in current economic discourse. As a result, one of the oldest concepts in economic warfare came back to the forefront of the conversation: export controls. Export controls boast a long history in the annals of American statecraft. Unfortunately, the current system used to enforce them is equally antiquated and unable to navigate the complex supply chains of multinational companies.
To save its export control system, the United States must share the load with trusted partners and create an allied supply chain intelligence-sharing and tracing cooperative.
Supply chain tracing is “the process of tracking the provenance and journey of products and their inputs, from the very start of the supply chain through to end-use.” Effective tracing illuminates the supply chain of dual-use (tech with civilian and military applications) and other sensitive technologies that could benefit unfriendly states and non-state actors. U.S. export controls, in theory, are meant to prevent this outcome.
The Bureau of Industry and Security’s Entity List handles export controls. This function was born of the necessity to keep nuclear materials and other dual-use technology out of the hands of adversary nations like Russia, North Korea, Iran, and others.
Despite the Bureau of Industry and Security shouldering heavy supply chain tracing lifts, which have assessed the semiconductor industry in the past, the increased friction between the United States and China has led to an expansion of its mission into a wider, deeper, and overall more comprehensive level of tracing of the highly globalized semiconductor technology supply chain.
It’s easy to see the advantage of effective semiconductor supply chain tracing. If it works, the United States could prevent the production of weapons, weapons systems, and weapon support systems that adversaries could use against the United States and its allies.
However helpful the Entity List is, and there is no doubt that it has had real successes, there are still gaps in its execution that allow sensitive technology into the hands of destabilizing actors. For the most part, this is due to the range and complexity of the technology produced.
For example, the most advanced chips can end up in everything from supercomputers to missile support systems. At the other end of the spectrum, legacy chips in consumer products, from microwaves to automobiles, are even more difficult to control. Furthermore, experts estimate that over sixty-six elements of the 118 elements on the periodic table are used in chip production, expanding the supply web even further.
The failure to effectively execute export controls could put U.S. assets and allies at risk from Chinese weapons systems. At the same time, a general lack of consideration of the shifts in the global technology landscape can end up hurting U.S. production capacity and that of industrial partners in the Netherlands, Japan, Korea, and Taiwan.
The Bureau of Industry and Security is a small office with a wide range of missions. Therefore, it must lean heavily on complementary offices like the Department of Defense’s Defense Technology Security Administration, the International Trade Administration, and the State Department Office of Export Control Cooperation or contracting private firms to support its supply chain tracing capabilities.
Additionally, although cross-pollination does occur, the stove piping of tracing efforts has several offices independently working on similar problem sets instead of pooling their resources and sharing the products of investigations. Despite inter-agency prosecutorial successes, the expansion of the mission has made the job even more extensive.
Rule 87 FR 62186 was the most significant expansion of semiconductor controls since the Trump administration expanded the Bureau’s role. This change employed the Entity List to curtail China’s influence on critical semiconductor supply chains. Further expansion by the Biden administration in October 2022 took the export controls a step further, broadening the definition of chips considered “dual-use technology” and moving focus toward critical technology areas like quantum computing and advanced semiconductor chips. Expanding the Bureau of Industry and Security’s role in supply chain tracing aligns with the objectives of the National Security Strategy and the National Defense Strategy, which seek to curtail the spread of dual-use technology to China.
With the release of the National Defense Science and Technology Strategy in early May 2023, the United States is taking the next step on a four-year mission to secure semiconductor supply chains since the Trump administration kicked off initial sanctions in 2019. Although BIS had been involved in this mission before this surge of importance, the agency has only begun to realize the weight of the lift it faces.
As noted by several authors, industry professionals, and defense community members, the United States does not currently have the industrial base for producing semiconductors in any significant capacity. The attempt to onshore chip production has not reduced the importance of Taiwan in the global semiconductor market. In fact, the challenges facing U.S. semiconductor production capacity are a case for closer US-Taiwan cooperation as China looks to augment its own production capacity. Consequently, our export control policy is more important than ever.
The crux of the issue is both Washington and Beijing are competing to surge each nation’s industrial capacity and onshore semiconductor production. However, the United States will be disadvantaged if mature technology continues reaching companies with ties to China’s military. If the “Davidson Window” (the estimated time in which China is likely to invade Taiwan) is accurate, the US may not have until even 2029 to find a solution.
Well, not just Taiwan. Despite Taiwan’s wealth of experience tracing illegal goods moving to China and through China to North Korea, Iran, and other sanctioned nations. Taiwan still lacks the sovereign status to participate in global trade regulatory agreements. For example, because the international system excludes Taiwan, it often relies on internal intelligence services for end-user verification. This is a key limiting factor.
Effectively limiting the spread of dual-use technology requires acknowledging that information-sharing with allies, though sometimes risky, bolsters our capacity to trace complex supply chains effectively.
Sharing sensitive information with allies could lead to leaks, as partners may have less robust security controls than the landmark Trilateral Security Partnership between the United States, the UK, and Australia. Despite the long history of intelligence-sharing between the three countries, Washington, London, and Canberra still had problems finalizing this pact. Nonetheless, the American defense apparatus is more willing to see differences in information security as challenges to be overcome rather than insurmountable problems.
From the White House to Admiral Paparo, there is an increasing push to reduce unnecessary classification and increase cooperation since there is an advantage in working together towards a common mission. One of America’s greatest strategic assets is its web of international relationships. The same can be said of supply chain tracing.
Fundamentally, supply chain tracing entities and customs enforcement agencies benefit from an extensive intelligence-gathering network to prove dual-use technology shipment's final destination. The Bureau of Industry and Security largely relies on the applicant for an export license to verify the end user of the technology is a trusted source, which is one layer of protection against dual-use technology transfer.
However, the more information gathered, the prosecution of an offending entity becomes stronger. More direct, increased cooperation with Taiwan outside these transnational regulatory agreements will be necessary to expedite the process.
This suggestion is nothing new, and this model has worked before. In previous case studies, like when the Hosada Trading Company Ltd. or Taiwanese national Susan Yip attempted to transport dual-use technology to Iran, information-sharing between U.S., Japanese, and Taiwanese intelligence agencies led to effective tracing and prosecution. Information-sharing not only augments Taiwan’s capability to trace supply chains successfully, but it could also augment our nation’s capabilities as well. This move would also be a natural next step in the process, as the United States has already requested the assistance of allies and partners to prevent valuable dual-use chips from ending up in China’s market.
To that end, Dutch ASML, a firm that provides some of the most advanced semiconductor manufacturing equipment, has respected the American request not to sell advanced lithography technology to China. Despite bringing Dutch ASML on board to prevent the dissemination of sensitive technology, there is more room to grow this initiative. Partners and allies outside of Taiwan and the Netherlands also have an interest in this information and a strategic interest in preventing technology from reaching China.
With new allied partnerships sharing sensitive technology and strategy documents like the Department of Defense National Defense and Technology Strategy, the U.S. priority on involving allied nations in global security has revived. This has grown in tandem with an increased understanding of the threat posed by nascent and mature dual-use technology.
As a solution, the United States, Taiwan, the Netherlands, Korea, and Japan should consider the creation of a multilateral supply chain tracing and customs agreement. Existing export control agreements already exist between some of these nations. Still, a formalized, codified security alliance would go a long way toward creating a growth environment for the semiconductor industry without the influence of bad actors. Additionally, standardization of customs codes for dual-use technology, standard supply chain tracing operating procedures, and clear coordination on technology threatening national security are just some areas ripe for cooperation. Ideally, these controls could cover everything from front-end development through assembly, testing, and packaging (ATP).
No comments:
Post a Comment