© Reuters. FILE PHOTO: Don Graves, U.S. President-elect Joe Biden’s nominee for deputy Commerce secretary, speaks during an event to announce members of Biden’s economics and jobs team at his transition headquarters in Wilmington, Delaware, U.S., January 8, 2021. Pi
By Alexandra Alper and David Shepardson
WASHINGTON (Reuters) – An American official on Tuesday made the most direct comments by a U.S. authority to date acknowledging the existence of a deal with Japan and the Netherlands for those countries to impose new restrictions on exports of chipmaking tools to China.
“We can’t talk about the deal right now,” Deputy Commerce Department Secretary Don Graves said on the sidelines of an event in Washington. “But you can certainly talk to our friends in Japan and the Netherlands.”
Bloomberg reported on Friday an agreement had been finalized and two people familiar with the matter later confirmed the news to Reuters.
The United States in October imposed sweeping export restrictions on shipments of chipmaking tools to China, seeking to hobble Beijing’s ability to supercharge its chip industry and enhance its military capabilities.
For the restrictions to be effective, though, Washington needed to bring on board the Netherlands and Japan, home to chipmaking powerhouses ASML and Tokyo Electron, among others.
The Commerce Department said in an email it will continue to coordinate on export controls with allies.
“We recognize that multilateral controls are more effective than unilateral controls, and foreign engagement on these controls is a … priority,” the agency said.
Officials from the Netherlands and Japan were in Washington discussing a wide range of issues in talks led by White House national security adviser Jake Sullivan on Friday.
When asked on Friday if an agreement on semiconductors had been discussed, U.S. President Joe Biden said: “Yes, we talked about a lot of things, but a lot of it is private.”
Recently, a U.S. official acknowledged a deal between Japan and the Netherlands, which seeks to limit the export of technology used in semiconductor manufacturing to countries such as China, at a Washington think-tank. The move is seen as a way to contain China’s ambitions to expand its chip production without the threat of potential foreign state subsidies flooding the market from neighbouring Japan.
The senior State Department official, Assistant Secretary of State for Economic and Business Affairs Manisha Singh, said during a panel that the U.S. had been “in contact” with Tokyo and the Hague over the agreement and had “worked to encourage and promote it.”
The agreement, which can still be amended, puts in place an arrangement that would require the Japanese government to inform the Dutch government if Japanese companies export specialised equipment to a country like China. This would then allow the Netherlands to enforce limits on such exports.
The official praised the move which she said demonstrates Japan’s “commitment to addressing the semiconductor subsidy and technology security challenge posed by the Chinese Communist Party (CCP).” Japan, which is the world’s largest producer of semiconductors and has often been a target of criticism by the U.S. over its lax export controls, is said to have agreed to the deal in part to avoid being subject to American legislation regarding semiconductor and other tech exports.
This development follows previous comments made by U.S. Commerce Secretary Gina Raimondo, who warned Tokyo and The Hague in an earlier speech that the U.S. would act if they didn’t agree to the arrangement.
The U.S. clearly hopes that the agreement between the two countries will help mitigate the risk posed by Chinese acquisitions of semiconductor technologies, and the lack of effective effort by other countries to address the issue.
The matter has been of international concern for some time with prominent voices from the U.S., Europe and Australia speaking out against potential Chinese abuses. The details of how the deal works, including how it would be enforced, is yet to be officially revealed by either government.
It is expected that the agreement between Japan and The Netherlands could be the first of many deals between different countries, as efforts to contain China’s ambitions to expand its chip production without subsidies from other countries, has become a priority for many international governments.