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Are US Allies Falling out of ‘Alignment’ on China?

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Trans-Pacific View | Diplomacy

Are US Allies Falling out of ‘Alignment’ on China?

The Biden administration trumpets its efforts to build consensus on China policy through consultation. Recent legislation challenged that. 

Are US Allies Falling out of ‘Alignment’ on China?
Credit: Official White House photo

U.S. President Joe Biden came to office promising that his administration would “[begin] reforming the habits of cooperation and rebuilding the muscle of democratic alliances that have atrophied over the past few years of neglect and, I would argue, abuse.”

Biden was referring to the four years of President Donald Trump, who disparaged allies as free riders and targeted them with sanctions. For allied governments, it was a relief to hear a U.S. president affirm that “America’s alliances are our greatest asset, and leading with diplomacy means standing shoulder-to-shoulder with our allies and key partners once again.”

As it turned out, partnering with “like-minded” countries is a key part of the Biden’s administration’s strategy for dealing with China from a “position of strength,” as National Security Advisor Jake Sullivan put it in March 2021. In particular, Sullivan named European partners, Japan, South Korea, and the Quad as targets of U.S. “consultations … on a common approach to our concerns with China.”

This would become the second plank of the administration’s three part China strategy: “invest, align, compete.” In his May 2022 address laying out that strategy, U.S. Secretary of State Antony Blinken insisted that the Biden administration was closely aligned with allies and partners in Europe and the Indo-Pacific on the China question.

“We don’t expect every country to have the exact same assessment of China as we do,” Blinken admitted, but he added that “[t]here is growing convergence about the need to approach relations with Beijing with more realism.”

He thus emphasized the joint nature of the U.S. approach to China policy: “At every step, we’re consulting with our partners, listening to them, taking their concerns to heart, building solutions that address their unique challenges and priorities.”

Yet it’s precisely in this area – consultation and coordination that takes into account allies’ concerns – that the Biden administration has been taking criticism. In particular, allies have raised questions about U.S. industrial policy (including subsidies that they argue unfairly privilege U.S. companies) and export controls (which risk jeopardizing allies’ economic interests).

At issue are two massive pieces of legislation seen as major domestic accomplishments in the United States: the CHIPS and Science Act, which provides $280 billion in funding to boost U.S. competitiveness in the semiconductor industry, and the Inflation Reduction Act (IRA), which offers billions of dollars in subsidies to the U.S. clean energy industry, notably electric vehicles. The issue, to many U.S. allied governments, is that these acts incorporate protectionist tendencies – unfairly privileging U.S. firms over foreign counterparts, whether those competitors are located in China, Europe, South Korea, or elsewhere.

In South Korea, the IRA sparked worry about South Korean EVs – seen as the long-term future of the automotive industry – being shut out of the U.S. market, due to the subsidies’ requirement that EVs and their batteries be mostly assembled in the United States. One South Korean official went so far as to call the act a “betrayal,” especially after South Korean companies had pledged to invest billions of dollars in the United States.

France expressed similar concerns about the legislation potentially hurting European firms working on clean energy and EVs. During a state visit to Washington in December, French President Emmanual Macron carried a dire warning that the Biden administration was making “choices that will fragment the West, because they create such differences between the United States of America and Europe.”

The Biden administration has also faced pushback on its attempts to restrict technology exports to China by any firm – American or not – that uses U.S. technology. Stringent new export controls rolled out in October would deny China access to the technology used not only in cutting-edge semiconductors but even in older models. The goal is to curb China’s attempt to catch up and eventually become a global leader in the crucial industry.

The tight controls could jeopardize the economic health of several key U.S. partners, however. Semiconductors are South Korea’s largest export item, and China its largest export market; in November, the first month after Washington launched the new restrictions, South Korea’s exports to China plunged by over 25 percent, the worst drop since 2009.

In the Netherlands, ASML is a key player in the global semiconductor market, as it manufactures the machines used to make advanced chips. The Biden administration has been pressuring the Dutch government to get ASML to fall in line with its export restrictions, leading the Netherlands’ foreign trade minister to assert that “[t]he Netherlands will not copy the American measures one-to-one.”

Even Taiwan, which views China as a existential threat, has concerns about the U.S. attempt to remake the semiconductor industry. Taiwan Semiconductor Manufacturing Company (TSMC) makes the vast majority of the world’s most advanced chips – and while Taiwan’s government has vowed that companies like TSMC will follow the new U.S. rules, it has done so with some trepidation, warning of the economic hit Taiwan will take a result.

The common denominator from all these examples is a sense on allies’ parts that their concerns are not being taken on board, except as an afterthought. Amid the difficult negotiations at home on the CHIPS Act and the IRA, allies and partners were not consulted, resulting in largely unintended negative consequences for these countries. As Biden put it in his press conference with Macron, “when I wrote the legislation – I never intended to exclude folks who were cooperating with us.”

Biden has made promises to both his French and South Korean counterparts to address their concerns, but it’s not clear how he can do so, given the laws in question have already been passed.

It may simply not have occurred to the Biden administration to hold extensive consultations with U.S. partners on what was seen as domestic-focused legislation – the “invest” part of the “invest, align, compete” triad. But the complexity of the China challenge – which spans not only the traditional national security sphere but the new realm of “economic security” – means that any response to China in one area risks having knock-on effects for other countries as well. An administration that came to office extolling its intention to closely consult with partners needs to be especially aware of how its efforts at home will be received in foreign capitals.