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Why the Netherlands and Japan Aren’t Easy Sells for the Biden’s China Chip Ban

Cranes and shipping containers at Yantian Port in Shenzhen, in China’s southern Guangdong province.

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About the author: Emily Benson is a senior fellow with the Scholl Chair in International Business at the Center for Strategic and International Studies.

The outlines of a U.S. plan to limit advanced semiconductor exports to China is starting to take shape. 

On Oct. 7 the U.S. announced a new policy to limit key high-tech exports to China. That policy was unilateral, but in late January, the U.S. purportedly reached a deal with the Netherlands and Japan to join the arrangement. The administration’s pursuit of an agreement with the Netherlands, however, far precedes the October controls and highlights some of the complexities that continue to impede concrete outcomes. 

The Netherlands is home to ASML, a provider of tools used to fabricate semiconductors. The company’s essential role in advanced chip manufacturing, including its monopoly on extreme ultraviolet lithography equipment, makes the Netherlands a key part of semiconductor supply chains. In 2019, the Trump administration attempted to persuade the Netherlands to halt sales to China of cutting-edge EUV lithography equipment. The Netherlands ultimately agreed to that. Under the Biden administration, the United States has attempted to convince the Netherlands to also halt sales of deep ultraviolet lithography tooling, which would represent a far more expansive application of controls on more mature (“mainstream”) technology. 

The Netherlands is concerned that withdrawing from the Chinese market would allow competitors to gain market share and also accelerate Chinese indigenization of the technology. Furthermore, reduced revenues for firms over time could impact their ability to maintain a technological edge over competitors, thereby weakening long-term national security. Another question in asking the Dutch to halt sales of DUV equipment to China is whether the loss of sales in the Chinese market means a loss of demand for companies like ASML or whether it simply represents a relocation of demand to other markets. The latter assumes, however, that there are other, immediately available alternatives. In reality, a relocation outside of China would likely result in stimulating the development of new markets. 

Perhaps the most fundamental roadblock in building greater export control convergence is that export controls in the Netherlands are tied to the Wassenaar Arrangement. The arrangement is a post-Cold War international regime to manage dual-use exports among members and nonmembers. The U.S., Japan, and the Netherlands are members, while China is not. Crucially, the arrangement does not cover DUV equipment. The Wassenaar Arrangement does list lithography equipment featuring a light source wavelength shorter than 193 nanometers, but DUV uses production between 248 and 193 nanometers and is therefore just over the control line. Because DUV machines are not listed under the Wassenaar Arrangement, the Dutch government has more leeway to allow their export.

These issues have also surfaced in the U.S. bid to entice the Dutch and Japanese to join the Oct. 7 controls, which many experts believe will not be effective without foreign buy-in since the U.S. does not monopolize semiconductor supply chains. The Dutch and Japanese continue to worry about foreign availability of like products and the potential loss of market share from increased restrictions on commercial ties with China. The negotiations and a deal are also legally labyrinthine since the parties each maintain unique export control structures. In the case of the Dutch and Japanese, full compliance with U.S. demands would likely require statutory change since the United States is asking to halt sales of items to China that are not currently on their control list. At a minimum, this means that there will be a timing issue because, if the parties succeed in determining the details of a deal, it will take time for the Dutch and Japanese to conform their legal systems to the U.S. rules.

In addition to the commercial and legal considerations that have surfaced in this negotiation, the U.S. bid to erect additional barriers on technology transfers to China represents a more direct effort to degrade, rather than delay, Chinese capabilities, particularly if the U.S. asks Japan and the Netherlands to stop servicing machines already operating in China. Furthermore, because investment and national security are member state competencies in the European Union, stances on geopolitical competition with China vary throughout the bloc. However, international trade policy remains the remit of the European Commission, which is tasked with coordinating a coherent policy stance on China. The Dutch decision to join the United States risks potentially undermining an emergent European strategy. 

These commercial, legal, and geopolitical issues mean that work on an agreement is far from finished. Concluding and implementing a deal will require months and potentially years of work to reach conformity across three different export control structures. Due to the complexities of the negotiations and a deal, the governments involved have been tight-lipped. The next reveal of information is likely to occur when ASML updates its quarterly financial results in April. If the parties succeed in agreeing on details of the deal and if they also achieve the legal authority to promulgate and enforce these controls, this negotiation could ultimately produce a new, “mini” export control regime.  

Guest commentaries like this one are written by authors outside the Barron’s and MarketWatch newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to


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