Sunday, February 25, 2024

Germany and the Netherlands signal weakening of Europe’s China tech ties

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Europe is weakening its tech ties with China: A day after it emerged that Germany is considering heavy restrictions on the use of Huawei and ZTE equipment in its 5G networks, the Netherlands confirmed it’s about to ban the export of more advanced chipmaking equipment to China.

First things first: On Tuesday, German media reported that the government was set to tell its big telecommunications providers to rip out the Chinese gear that’s pervasive in their 5G networks. Reuters subsequently confirmed that the government was considering the move, without naming specific manufacturers—though the names “Huawei” and “ZTE” go without saying.

China called the reported plan “hasty” and said it was “very puzzled and strongly dissatisfied.” If the German government really is planning to ban Huawei and ZTE’s 5G equipment, it would be a significant economic and geopolitical step, as China is Germany’s biggest trade partner. 

Several years ago, Angela Merkel’s conservative-led administration rebuffed the U.S.’s insistence on shutting Huawei out of Germany’s 5G infrastructure—the Trump administration even threatened to reduce its intelligence-sharing with Germany over the issue. Now, it seems left-leaning Chancellor Olaf Scholz may make good on his recent promise to gradually reduce Germany’s dependence on Chinese trade.

The Netherlands is also falling in line with the U.S. approach to China’s perceived national security threats. 

As I wrote at the end of January, the Netherlands and Japan agreed in principle to join the U.S. in avoiding the sale of advanced equipment to Chinese chip manufacturers, given the possibility of the Chinese military using those chips in weaponry and A.I. systems. At the time, the crucial Dutch equipment maker ASML—which already stopped exporting its top-grade ultraviolet (EUV) kit to China a few years ago—was uncertain how much of its second-best deep ultraviolet (DUV) technology would be covered by the latest export controls.

ASML warned that an overly broad ban could damage production of the non-cutting-edge chips that feed the world’s tech supply chains, but it got what seems to be good news late yesterday when the Dutch government finally gave details of its new policy—sales of only the “most advanced” DUV systems would be controlled. ASML’s statement yesterday suggested it still didn’t have all the details it wanted from the government, but it expected the new export controls wouldn’t hit its financial outlook or its long-term plans.

Announcing the new controls, Dutch Trade Minister Liesje Schreinemacher didn’t refer to China—again, a major Dutch trading partner—by name. She said the equipment’s export would be limited to “prevent Dutch goods from contributing to undesirable end uses, such as military deployment or weapons of mass destruction,” and also to prevent “unwanted long-term strategic dependencies.”

Schreinemacher also pointed out that the controls would be most effective if implemented by countries around the world. She conceded that Russia will probably block the Dutch submission of the controls to the Wassenaar Arrangement—the 42-country export control regime that deals with “dual-use” technologies that can be used in military contexts—so the Netherlands will try to at least get the rest of the EU to join its enforcement effort. 

Its success in doing so will provide a further gauge of how deep Europe’s technological decoupling from China is likely to go.

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David Meyer

Data Sheet’s daily news section was written and curated by Andrea Guzman. 

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