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Corporate Counsel, February 14, 2023
Anthony Rapa and Justin A. Chiarodo ●
Last year marked an inflection point in the geopolitics of the 21st century, with the Biden administration declaring the post-Cold War era “definitively over” against the backdrop of Russia’s invasion of Ukraine and the U.S.-China strategic competition. That dynamic drove a range of national security and economic statecraft policies in 2022—notably including broad sanctions against Russia and semiconductor export controls regarding China—that will create heightened legal and business risks for companies with international supply and distribution chains. These risks will be particularly acute for companies and investors operating in highly regulated industries, including aerospace, defense, manufacturing, technology, and financial services. We highlight below five key geopolitical and international trade issues to watch in 2023.
1. Trade war becomes tech war.
The U.S. strategic competition with China will continue in 2023 and beyond, with a continued focus on limiting the flow of advanced and emerging technologies. U.S. authorities are expected to build on key China-related measures implemented in 2022, which included sweeping semiconductor export controls, designations of Chinese companies on restricted lists, and FCC equipment bans.
Perhaps counterintuitively, total U.S.-China trade in 2022 reportedly was at or around an all-time high, and the Biden administration has stated that “[w]e do not seek conflict or a new Cold War.” U.S. Secretary of State Antony Blinken’s planned visit to China in 2023, postponed after the U.S. shot down a Chinese high-altitude balloon drifting through U.S. airspace, had been intended to build on dialogue between President Biden and Chinese president Xi Jinping on the sidelines of the G20 summit in Indonesia last November.
Key takeaway: Expect stronger enforcement measures to weigh on China trade for the foreseeable future. Companies should revisit the risk profile of their international supply chains—including whether any of their technology is subject to the new export controls or could be the subject of future controls—and consider enhancements in their supplier diligence and risk management practices.
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