Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the US Election Countdown newsletter for freeThe stories that matter on money and politics in the race for the White HouseThe US and Japan are close to a deal to curb tech exports to China’s chip industry despite alarm in Tokyo about Beijing’s threat to retaliate against Japanese companies. The White House wants to unveil new export controls before November’s presidential election, including a measure forcing non-US companies to get licences to sell products to China that would help its tech sector.Biden administration officials have spent months in intense talks with their counterparts in Japan — and the Netherlands — to establish complementary export control regimes that would mean Japanese and Dutch companies are not targeted by the US “foreign direct product rule”.People in Washington and Tokyo familiar with the talks said the US and Japan were now close to a breakthrough, although a Japanese official cautioned the situation remained “quite fragile” because of fears of Chinese retaliation.The Japanese government is particularly concerned China could block exports of critical minerals — particularly gallium and graphite — if Tokyo adopts the export controls being pushed by the US. Beijing has made threats to Tokyo and Japanese companies, said people familiar with the situation.Japan and the US have discussed how to limit the impact of any Chinese retaliation — something Washington and its allies are grappling with as they seek to counter China.The US export controls are designed to close loopholes in existing rules and add restrictions that reflect Huawei’s and other Chinese groups’ fast progress in chip production over the past two years.Washington wants to make it harder for China to obtain critical chipmaking tools — restrictions that would have the biggest impact on ASML in the Netherlands and Tokyo Electron in Japan. The US also wants them to restrict servicing, including software updates, and maintenance of the tools, in a move that would significantly hurt China. The controls would have a similar impact to those already on US companies and citizens.Negotiations have centred on aligning the three countries’ export control rules so Japanese and Dutch companies will not be subject to the FDPR, which one person in the Netherlands describe as a “diplomatic bomb”.While the US and Japan have made progress, Biden administration officials are conscious Tokyo is irritated that the US is putting pressure on Japan as President Joe Biden prepares to block Nippon Steel’s $15bn takeover of US Steel.The US negotiators include officials from the commerce department and National Security Council. One person familiar with the talks said commerce secretary Gina Raimondo and Rahm Emanuel, the US ambassador to Japan, were being deployed in a “bad cop, very bad cop” approach.One Japanese official said Tokyo and Japanese companies were worried that as the US election nears, it has become “the hardest it has been under this administration” to read US intentions.Japan is worried Chinese retaliation could include export bans on key minerals, forcing some Japanese commercial customers to find alternative suppliers of products containing the minerals.The Japanese official said there growing fears in recent months that China would retaliate if Tokyo conceded too much to the US, with particular concern over Beijing restricting critical mineral exports.Prices of key minerals are already high and several Japanese companies have voiced concern to the Ministry of Economy, Trade and Industry that further price rises would make Japanese products less competitive, said people close to the situation.“Clients need guaranteed supplies and those guarantees are now becoming very difficult,” said an executive at a Japanese trading house that specialises in these minerals.One person familiar with the negotiations said that while it was “not easy” to generate an agreement, the US had to be careful not to take actions that would cause the Japanese and Dutch to abandon the trilateral mechanism created during the Trump administration and has helped harmonise export controls.“If the US intends to replicate this dialogue as a model, it had better come up with a more sustainable approach than straight strong-arming,” the person said. “The Biden team is clearly feeling the time crunch and is willing to let this dialogue suffer in favour of an eleventh-hour win.”The White House and commerce department did not comment. The Japanese embassy in Washington was unavailable to comment.China said it “firmly opposes the abuse of export controls” and urged “relevant countries” to abide by international economic and trade rules. “We will closely follow the developments on this front and firmly defend Chinese companies’ lawful rights and interests,” said Liu Pengyu, the Chinese embassy spokesperson in Washington. Video: The race for semiconductor supremacy | FT Film
