Editor’s Note
This article focuses on the theory and practice of Chinese export controls, decoding the logic of global trade games.
The rise of techno-geopolitical uncertainty: Implications of the United States CHIPS and Science Act
Abstract
Abstract
Growing techno-geopolitical uncertainty affects international business in many ways, calling for more scholarly attention to its causes and multinational enterprise (MNE) responses. The United States CHIPS and Science Act epitomizes the country’s recent embrace of techno-nationalism in its economic rivalry with China, which has major implications for IB scholarship and management practice. The Act exhibits two features that fly against America’s traditional liberal policy stance of championing an open and rules-based multilateral system. First, its reliance on subsidies, export control, and investment screening signifies departure from free trade and from market-based industrial policies. Second, its use of guardrail provisions pursues the weaponization of global value chains for geopolitical and geo-economic purposes. We view the Act as a showcase of a paradigm shift from market-oriented liberalism to intervention-oriented techno-nationalism, heralding a new era of zero-sum thinking and geopolitical prioritization. By examining the broader trend of techno-nationalism, we explore the distinct features of the Act and analyze the geo-strategies that MNEs need to adopt in response to the resulting techno-geopolitical uncertainty. Our analysis highlights the paradigm shift in policymaking, identifies the root causes of this shift, and examines the potential pitfalls it may create. To navigate this uncertain landscape, we suggest four strategic responses for MNEs: geo-strategies, reconfiguration, resilience, and corporate diplomacy.
Translation
Increasingly severe techno-geopolitical uncertainty is affecting international business activities in various ways, necessitating deeper academic exploration of its causes and the responses of multinational enterprises. The United States CHIPS and Science Act is a typical embodiment of the country’s embrace of techno-nationalism in its economic competition with China, which has significant implications for international business research and management practice. The Act demonstrates two characteristics that contradict America’s traditional liberal policy stance: first, its reliance on subsidies, export controls, and investment reviews marks a departure from free trade and market-based industrial policies; second, by establishing guardrail provisions, it seeks to weaponize global value chains to serve geopolitical and geo-economic objectives. We believe this Act signifies a paradigm shift from market-oriented liberalism to intervention-oriented techno-nationalism, heralding a new era of zero-sum thinking and geopolitical prioritization. By analyzing the macro trend of techno-nationalism, this article will explore the unique features of the Act and analyze the geo-strategies that multinational enterprises need to adopt in response to the resulting techno-geopolitical uncertainty. Our analysis reveals the shift in policymaking paradigms, identifies the root causes of this shift, and discusses the potential risks it may entail. To cope with this uncertain environment, we recommend that multinational enterprises adopt four strategic measures: geo-strategies, business restructuring, resilience building, and corporate diplomacy.
Main Points
1. Introduction
1. Core Background: Global business has entered an era of techno-geopolitical uncertainty, with the United States CHIPS and Science Act as a typical symbol. Many countries have abandoned the open multilateral system due to national security considerations, shifting towards protectionist policies.
2. Key Concept: Techno-geopolitical uncertainty refers to the adjustments in policies by major powers to gain techno-nationalist and geopolitical benefits, leading to turmoil in the global business environment.
3. Research Motivation: The intensifying economic competition between the U.S. and China and the highlighted technological decoupling reveal a lack of attention in existing international business research to such uncertainties and corporate response strategies, necessitating a theoretical and practical gap to be filled.
2. The United States CHIPS and Science Act
1. Core Content of the Act: Signed into law in August 2022, it allocates $280 billion to enhance U.S. competitiveness, including $52 billion specifically for semiconductor manufacturing, research, and equipment upgrades, prohibiting funded companies from expanding advanced chip production capacity in China for ten years and restricting U.S. citizens’ participation in advanced chip research and production in China.
2. Industry Background: The U.S. once led the semiconductor industry and still maintains a lead in high-end areas such as design and equipment, but its global manufacturing share has dropped from 40% in 1990 to less than 15% in 2021, relying on East Asian foundries.
3. Uniqueness: Unlike previous industrial policies, it explicitly targets geopolitical objectives, restricting corporate cooperation with China through “guardrail provisions” in an attempt to curb the development of China’s semiconductor industry.
3. Does the Act Constitute a Paradigm Shift?
1. Three Characteristics of Paradigm Shift: First, it abandons free trade rules, deviating from the open multilateral system long advocated by the U.S.; second, it strengthens market-distorting industrial policies, relying on subsidies, export controls, and other non-market means; third, it weaponizes global value chains, using industrial layout as a tool for geopolitical competition.
2. Evolution of Policy Logic: The U.S. previously maintained the multilateral order through WTO litigation and trade agreements, but now shifts to direct intervention in industrial layout, confronting China’s “state capitalism” policies.
3. Potential Risks: It may trigger a global subsidy race, exacerbate U.S.-China geopolitical conflicts, weaken the authority of multilateral mechanisms, and face challenges such as regulatory enforcement difficulties and the U.S.’s own incomplete supply chain.
4. Is Realism Making a Comeback?
1. Core Viewpoint: The Act reflects a return to political realism in U.S. policymaking, adhering to zero-sum thinking, prioritizing national interests over multilateral cooperation, and pursuing absolute technological superiority over China.
2. Realist Logic: The global system is in a state of anarchy, and states may use any means to compete for power. The U.S. maintains the multilateral order only when it aligns with its own interests; the rise of China has made this order unfavorable to the U.S., prompting a strategic adjustment.
3. Long-term Impact: It may lead to a split in the global technological ecosystem, hinder technology sharing and talent mobility, weaken the competitiveness of the U.S. and the global economy, and intensify U.S.-China confrontation.
5. How Should Multinational Enterprises Respond?
Four Strategic Responses:
1. Geo-strategies: Establish a global geopolitical risk monitoring mechanism, quantify the impact of risks on business, and develop multi-scenario response plans.
2. Restructuring: Adjust the global value chain structure, concentrate on “friend-shoring” regions, avoid excessive reliance on a single country, and strengthen regional operations.
3. Resilience Building: Diversify supplier sources, shift strategic investments to neutral countries, empower frontline subsidiaries to make quick decisions, and adjust business portfolios to focus on low-risk areas.
4. Corporate Diplomacy: Influence policy formulation through industry associations or independent actions, strengthen communication with governments and stakeholders, and practice responsible globalization.
6. What Implications Does This Have for International Business Research?
1. Theoretical Reflection: Existing international business theories are based on liberal assumptions (open markets, interconnected value chains) and need to be revised to incorporate a realist perspective, integrating political risk, transaction costs, and the dimension of geo-strategy.
2. Research Direction Expansion: Focus on new phenomena arising from the globalization split caused by techno-geopolitics, dual-track strategies of enterprises, and restrictions on global talent mobility, exploring the co-evolution mechanisms between multinational enterprises and their environments and ecosystems.
3. Research Method Innovation: It is necessary to integrate international political science with international business theory, using systems thinking to analyze complex issues such as the weaponization of global value chains, and strengthen research on the geo-strategic capabilities of enterprises.
7. Conclusion
1. Core Judgment: The Act marks a significant shift for the U.S. from neoliberal globalization to techno-nationalism, with geopolitical techno-nationalism coexisting with traditional developmental techno-nationalism, increasing the adaptation difficulty for multinational enterprises.
2. Future Outlook: The likelihood of complete decoupling between the U.S. and China is low, but techno-geopolitical uncertainty will persist in the long term. There remains space for the multilateral system to survive, necessitating a balance between national security and open cooperation.
3. Research Call: International business scholars need to explore the broad implications of this paradigm shift, providing theoretical support for multinational enterprises to respond to changes in the global business environment.
Content highlights processed with AI assistance
References
Luo Y, Van Assche A. The rise of techno-geopolitical uncertainty: Implications of the United States CHIPS and Science Act. J Int Bus Stud. 2023 Apr 1:1-18. doi: 10.1057/s41267-023-00620-3. Epub ahead of print. PMID: 37359753; PMCID: PMC10066984.