US suggests EU consider using export controls to target China

The US has raised with European allies the idea of drawing upon lessons from the export control regime they’re using to punish Russia to target China, according to people familiar with the matter. 

The conversations came up as European Union and US officials are negotiating the agenda for their next high-level trade forum in early December. The allies have cooperated on restricting exports to Moscow since President Vladimir Putin invaded Ukraine, and the Biden administration is exploring using some of the same information sharing and enforcement coordination to reinforce its own bilateral restrictions on exports to China, said the people, who asked for anonymity to address sensitive topics.

So far, the people added, the EU isn’t inclined to consider following the same approach to China as with Russia because the circumstances are different, but one of the people said there may be room to look at goods that could be used by Beijing to bolster its military capability. It’s unclear whether the topic will come up when US Trade Representative Katherine Tai meets EU trade ministers who are in Prague for an informal meeting on Monday. 

“The US is not considering extending the Russia export controls to China nor have we raised doing so with the Europeans,” Saloni Sharma, a spokeswoman for the US National Security Council, said in response to questions.

Export controls have been one of the more effective tools to cripple Russia’s arsenal and are seen as potentially useful to slow down China in the global tech race. Earlier this month, the Biden administration restricted US companies from selling some chips used for supercomputing and artificial intelligence to Chinese firms.

Senior EU and US officials are set to meet Dec. 5 near Washington to agree on a list of economic plans in the third meeting of the Trade and Technology Council. The European Commission, the EU’s executive arm, is considering six priorities, including the joint development of digital infrastructure projects, an artificial intelligence roadmap or megawatt electric vehicle charging, the people said. 

Some member states have been wary of the US efforts to turn the forum into an anti-China body and instead have preferred to focus on a positive bilateral agenda.

But European countries are increasingly worried about what they see as the confrontational stance of the Chinese government, in particular following the recent party congress that cemented President Xi Jinping’s leadership. Some member states including Germany have suggested that the bloc should revise its approach toward China, as Beijing is becoming less a partner or a competitor and more a rival, the people said.

EU leaders held a strategic discussion on China this month, where there was consensus on the need to reduce critical dependences on Beijing, a senior EU diplomat summarized.

Some European capitals are in favor of using the TTC to bolster coordination with the US to develop effective anti-coercion and trade defense tools against non-market economies, including China, a second senior EU official said.

Commission spokesperson Miriam Garcia Ferrer said that contacts with the US administration are ongoing as the EU analyzes the implications of the latest US restrictive measures on China.

Last year, the US and EU agreed on a joint statement after a TTC meeting which said that “a multilateral approach to export controls is most effective for protecting international security and supporting a global level-playing field,” and restrictions should not unduly disrupt strategic supply chains.

The Netherlands has expressed concerns about the impact of the US export controls, especially in the field of semiconductors, the people said. The country is home to ASML Holding NV, a Dutch maker of semiconductor manufacturing gear.

Negotiations ahead of the next TTC meeting have been hampered by the recently passed US Inflation Reduction Act, which provides subsidies to support green technologies in the US and is seen as discriminatory by the EU and other countries. Officials from both sides are scheduled to meet this week to address the European concerns, and the EU executive’s arm hoped to solve these irritants before the high-level meeting takes place in early December.

Tai said the US and EU have overcome other trade disputes under the Biden administration, including fights over subsidies to civilian aircraft makers and the aluminum trade. 

“I feel like we have every right to feel confidence about our ability to navigate these conversations around the EU’s concerns on the Inflation Reduction Act also,” she said in an interview at Bloomberg’s Washington office Friday. “In terms of our actual work with the EU, it is an important and additional item that we have to take on now. But it is not in my view, overshadowing.”

A large majority of member states expressed serious concerns about the US law during a meeting of EU ambassadors last week, the people said, noting that the law could hurt the bloc’s green transition and its competitiveness in general. France said that it could lose 8 billion euros ($8 billion) in green investments, the people said.

Countries including Germany and France believe that the best solution would be to obtain the same treatment Mexico and Canada get under the IRA and the bloc should use all the tools available to that end, the people said. With assistance from Jenny Leonard and Alberto Nardelli / Bloomberg.

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