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US-China Bans Can Foster a Climate of Increased Protectionism

The latest initiative by the Biden administration to limit US investments in sensitive technologies with potential military applications may ultimately prove to be a lose-lose tactic as the divide between the United States and China widens.

President Joe Biden's signature on the executive order represents a new development in the ongoing endeavour to safeguard national security by limiting the transfer of sensitive technologies to China. However, these limitations may have unforeseen effects on the economies, technological development, and stability of both countries.

These export restrictions are primarily intended to protect US national security interests by preventing advanced technologies from falling into the hands of the Chinese military. The targeted industries -advanced computing chips and microelectronics, quantum technology, and artificial intelligence - have the potential to be used for both military and civilian purposes. Even while the limits are meant to stop "intangible benefits" like managerial know-how and market access from going to China, they are far from being a perfect solution.

The possibility that these policies may impede the development of global technology and innovation is one of the main worries. Technology advancements that cross international borders have historically benefited from a collaborative approach. The US runs the risk of cutting itself off from the global innovation ecosystem by limiting investments.

Technological advancements are often achieved through a cross-pollination of ideas and expertise from around the world. These restrictions might slow innovation and information transfer, not just in China but across the whole global tech sector.

Additionally, these limitations may have unforeseen economic effects on both nations. While the Biden administration says that the objective is to safeguard national security without harming China's economy, there is a fine line that must be drawn. Export restrictions and China's economic collapse may make the country's problems worse, possibly resulting in instability that ripples through the world economy. Economic hardship might make China's political stability unstable, with unforeseen results that might not be in the interests of the US.

Restricting investments in important markets might have a negative impact on US industries. Because US technology companies frequently rely on international supply chains, restricting their access to certain markets could increase costs and cause production problems. Additionally, if China becomes less open to US investment, it would limit the growth opportunities for US companies looking to tap into one of the biggest consumer markets in the world.

Export restrictions can also increase hostilities between the two countries, possibly setting off a chain reaction of retaliatory actions. Due to its own economic difficulties, China may impose limitations that will have an effect on American companies doing business there. This "tit-for-tat" strategy would exacerbate tensions between the two countries and jeopardise chances for diplomatic cooperation on other urgent global concerns.

A more extensive screening process that includes many different businesses and nations can unintentionally foster a climate of increased protectionism, which would stifle innovation and restrict economic progress for both countries.


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