Here are some of the major issues I expect to be following in 2023, with the caveat that surprises are always in the offing in the trade and technology arena.

1. Digital Trade. The Biden administration has consistently touted digital economy policy as a first-order priority for the United States—while shying away from specifics to build on top of the digital trade elements of the US-Mexico-Canada Agreement. For 2023, the key negotiation to watch is the administration’s Indo-Pacific Economic Framework (IPEF) initiative, which the administration launched in May 2022. During recent IPEF talks in Australia, the Biden administration failed to advance a digital trade proposal, despite pressure from Japan, Malaysia, and South Korea. The problem, as noted in earlier blogs, is that there is division among democratic interest groups and Congress regarding digital trade rules, with progressives deeply antagonistic to Big Tech. How this works out in future IPEF meetings will be a focus of future blogs.
2. US-EU Trade and Technology Relations. While Europe was happy to be rid of Donald Trump’s belligerency, US-EU relations under President Joe Biden have been unstable. On the positive side, the creation of the US-EU Trade and Technology Council (TTC) has provided a potential venue to mediate difficult issues, though, to date, the TTC has served largely as a discussion forum rather than a focal point for decision-making. As noted previously, the council’s structural impediments are at least partially at fault. Though headed by top political officials on both sides, the TTC meets only twice a year and is actually staffed by bureaucrats from multiple agencies. Meeting for the third time in Australia in December 2022, the council did make advances in technology standard setting (in particular, by providing a road map for common standards on artificial intelligence). Still, as will be discussed in the next bullet, the TTC is not viewed as the best avenue for finding solutions to the most sensitive economic and technological questions. However, one issue that will be a test in coming months will be the pledge, through the TTC, to coordinate large US and EU subsidies for semiconductor manufacturing plants. The year 2023 will be a crucial test in seeing whether concrete results ensue.
3. The Inflation Reduction Act (IRA). Working out some accommodation on the IRA represents one of the most challenging—and possibly intractable—technology and trade issues on the US-EU negotiating table. As chronicled earlier, the $369 billion subsidy and local content provisions of the IRA have confounded Europe, which fears it will not be able to match American resources and deeply resents the legislation’s alleged calculated discrimination as a violation of multilateral trading rules and a blatant disregard of US pledges of “friendshoring.” President Biden has pledged to fix the problem, but given the bill’s explicit language, this will be difficult. (This past week, the US Treasury in effect put off making a decision until this March.) Stay tuned.
4. 5G. The year 2022, like 2021 and 2020, was touted as the year 5G technology would come strongly into focus. This didn’t happen, but it is time to check in with key government and industry officials: Where is 5G, and what is happening with the movement and debate over open radio access networks (known as O-RAN) and radio access networks (known as RAN)?
5. Huawei (and ZTE). Certainly, there is solid evidence that the Biden administration’s export controls in the semiconductor sector—advanced chips and equipment—have exacted a strong toll on Chinese telecommunications equipment companies. Recent studies, however, find Huawei is still in a strong position in some European countries and developing nations. What’s going on and what can we expect in 2023?
6. Export Controls. In October 2022, the Biden administration announced sweeping new export controls (and other legal restrictions) on Chinese firms working in the semiconductor, artificial intelligence, biotechnology, and quantum computing industries. With regard to semiconductors, the controls cover not only chips but also related high-end manufacturing equipment and personal contractual arrangements. The administration also announced a new policy of trying to keep Chinese technology far behind US technology, rather than just one or two generations. Moreover, the Biden administration is attempting to leverage export control policies multilaterally. How will this fare with allies? How will China react? And how will these export restrictions affect US technology firms with long-standing ties to China, entailing both exports and vital parts and components? Finally, will the new Congress force the president’s hand in this area by imposing harsher sanctions on China?

The post Looking Ahead to 2023 with Claude Barfield appeared first on American Enterprise Institute – AEI.