Tess Hollis: You sent me that Stuttgart scenario last night and I literally couldn't finish it before bed.
Felix Ortiz: Yeah, it just sits there, right? Like — a woman opens her laptop, her chip order is frozen, and the reason is a geopolitical standoff between the U.S. and Beijing that she has nothing to do with. She didn't sign up to hold that.
Tess Hollis: And that's not a freak accident. That's the design.
Felix Ortiz: That's — yeah, that's what we're actually here to sit with. Because the story we tell about how the world works goes back to 1648, the Peace of Westphalia — states, borders, your territory is yours, my territory is mine, we agree not to mess with each other's insides. Clean. Logical. And for a world where the main problem was which religion you had to practice in which duchy, it was genuinely elegant.
Tess Hollis: But semiconductor fab clusters didn't exist in 1648. The atmosphere didn't become a shared crisis in 1648.
Felix Ortiz: And here's the part that I can't quite — the UNFCCC exists because we needed somewhere to try to negotiate climate. But you cannot sanction the atmosphere. There's no bilateral deal you cut with an ocean current. So we took a political institution designed for a bordered world and pointed it at a system that has never heard of a border.
Tess Hollis: So the Stuttgart manager and the atmosphere are actually the same problem.
Felix Ortiz: That's — yeah, I think that's the thing. One is a supply chain, one is physics, but states keep reaching for the same 1648 lever for both.
Tess Hollis: And the instinct when you see that — when you see states reaching for the wrong tool — the instinct is: okay, build a better institution. Give the WTO more teeth, make the UNFCCC binding. That's the surface fix.
Felix Ortiz: Right, yeah — like, just upgrade the multilateral software, the hardware's fine.
Tess Hollis: But the WTO and the UNFCCC are built on top of sovereign states. The member states can defect the moment the rules cost them something. That's not a bug someone forgot to patch — it's structural.
Felix Ortiz: Oh — wait. So you're saying the institution inherits the mismatch from the unit underneath it? Because it's still states all the way down.
Tess Hollis: Exactly that. And then layer on the post-WWII thing — wartime demand pressure locked in fossil-fuel-dependent energy systems across North America and Europe. That wasn't a choice anyone revisited. It just... calcified. And now no single state controls those dependencies.
Felix Ortiz: So the energy architecture that made the twentieth century run is itself a legacy of a crisis, and it's still underneath everything — the Westphalian state is sitting on top of an energy system it didn't design and can't fully govern. That's — I mean, that's actually a worse problem than I had in my head.
Tess Hollis: Which is the part nobody wants to say out loud. Tinkering with the rules — adding institutions, adjusting trade agreements — that's rearranging furniture. The ship itself is the wrong shape for the water it's in.
Felix Ortiz: And the Peace of Westphalia made total sense in 1648 — borders, sovereignty, non-interference — but it was solving for which religion runs which duchy, not for atmospheric physics or chip fab supply chains. So what does it mean that we're still — wait, are we actually still using it as the unit? Like genuinely?
Tess Hollis: Yes, genuinely still using it — but here's the part that breaks that open. States aren't just trapped by interdependence. They're trying to weaponize it. Export controls, sanctions, investment screening. The whole move is: I'll turn our shared system into a pressure point.
Felix Ortiz: Right, and — okay, Trump's April 2 tariff announcement is the clearest live case of this. Framed completely as a sovereignty move, reclaim control, put America first. But what it actually did was crack the financial and regulatory alignment that makes American sanctions work in the first place. The weapon ate its own ammunition.
Tess Hollis: Wait — so the sanctions lose coercive power because the tariffs signal you'll blow up the shared system anyway?
Felix Ortiz: Yeah — because the threat only works if the other side believes you're embedded and they need access to your system. Once you start actually dismantling the embedding, the threat deflates. It's — I mean, it's almost like a hostage situation where you shoot the hostage to prove you're serious.
Tess Hollis: The semiconductor export controls on China do the same thing, though. U.S. restricts the chip technology transfer — but the global chip supply chain is the system that makes the restriction matter. Weaken that chain and you've also weakened the leverage.
Felix Ortiz: And the NBER data shows — China's share of U.S. goods imports dropped from 21.6% in 2017 to 16.5% in 2022. Which sounds like decoupling working. Except it didn't eliminate the structural interdependence, it just — wait, actually it relocated it. To Vietnam, to Mexico. Same web, different nodes.
Tess Hollis: Relocation isn't elimination. The dependency is still there, you just made it harder to see.
Felix Ortiz: Which is — okay, so every aggressive use of interdependence as a weapon is also just quietly degrading the system the state still needs. You're not exiting. You're eroding your own ground while standing on it. And the EU's version of this — the digital sovereignty push, the chip ambitions — honestly that's the part I think breaks the whole frame wide open.
Tess Hollis: Yeah — and the sovereignty-sustainability tension inside that EU story makes it sharper still. We'll get there.
Felix Ortiz: The EU case is where the rhetoric just — it outruns the physics so fast it's almost embarrassing. They're asserting bloc-level control over chip infrastructure, digital sovereignty, the whole frame. And at the same time the research is right there saying semiconductor manufacturing cannot be done end-to-end by any single state or bloc. Materials, equipment, fabrication, packaging — it's necessarily distributed. Both of those things are official EU positions, basically.
Tess Hollis: Two premises. Neither one is wrong. And they cannot both be the basis for policy at the same time.
Felix Ortiz: Right — so which one gives way?
Tess Hollis: That's the thing they haven't resolved. And the security-first shift makes it worse — because the techno-nationalism move, the subsidies, the domestic chip manufacturing push, all of that assumes autarky is achievable if you just spend enough. It's aspirational dressed up as policy.
Felix Ortiz: And there's a cost that doesn't show up in the sovereignty accounting — wait, actually this is the part that got me. If you reshore, if you rebuild that fab capacity domestically, you don't escape the ecological harms. You just — you relocate where they happen. The supply chain opacity that made those harms invisible? Reshoring doesn't fix that. It might actually deepen it because now the accountability is yours and you still don't want to look.
Tess Hollis: The sovereignty-sustainability tension. Yeah. Opacity was hiding the labor and environmental harms across jurisdictions. Pull it home and the harms move with it — or get replicated.
Felix Ortiz: So the state that is loudest about sovereignty is the one most exposed to how impossible it actually is.
Tess Hollis: And most exposed to the costs it can't see — because the opacity it complained about was also what let it off the hook.
Felix Ortiz: Okay — so the Brookings managed interdependence frame, sovereignty as setting the terms of your dependencies rather than eliminating them — does that actually thread this needle, or is that just what giving up sounds like when it wears a suit?
Tess Hollis: It's a good question and I don't think it threads the needle. 'Setting the terms of your dependencies' — that's the Brookings framing — but you just stepped around the actual question. If your chips still come from a globally distributed supply chain you didn't design, what terms are you setting exactly?
Felix Ortiz: No, I — yeah, I think you're right, and I keep wanting to defend it because it sounds intentional, which is — wait, that's maybe exactly the problem. It sounds like agency. And then the AI sovereignty paradox makes it worse, because now you've got model training that crosses every border by default, data flows that don't pause at jurisdictions, cybersecurity risks that diffuse downstream regardless of which state tried to regulate at the source. Unilateral control there isn't just hard — it's structurally insufficient. The Brookings reframe is already behind.
Tess Hollis: So the reframe is chasing the paradox and the paradox keeps opening new domains.
Felix Ortiz: And the Westphalian state can't be abandoned — no one is actually proposing that — but it also can't solve this. So maybe the honest landing is: we don't discover the new order on purpose. We find out what it was after something breaks and shows us what it was holding together.
Tess Hollis: That's — yeah. That's an uneasy place to stop. But I think it's the true one.
Felix Ortiz: Thanks for not letting me paper over it.
