During the pandemic, globalization has also been blamed for putting the United States in a position of overdependence on foreign supplies as varied as medical equipment and semiconductors.
This has led many politicians - Democrats and Republicans - to a subject that was also for a long time a dirty term: industrial policy. They are looking for a bigger role for the US government in shaping what is manufactured where. The idea has been championed by Presidents Donald Trump and Biden and members of Congress, from conservatives like Marco Rubio and Josh Hawley to progressives like Alexandria Ocasio-Cortez and Elizabeth Warren.
But this enthoUsiasm of spending billions of dollars on certain industries may not work in today's globalized economy. If it's about focusing on clearly defined and agreed-upon goals - including some that may involve sacrificing some economic efficiency for national security or pandemic preparedness - then industrial policy fully national can actually backfire on us.
Instead, success will require what we think is a hybrid industrial policy . This would incorporate some of the good aspects of globalization, preserve competition, and coordinate policy with like-minded countries to achieve common goals.
Some examples suggest the opportunities - and the potential pitfalls.
Equipment for prpersonal protection and semiconductors
The main argument for a US industrial policy in both PPE and semiconductors is the risk that foreign supply sources are too geographically concentrated.
For PPE, when the coronavirus hit, the lack of hospital gowns and masks in the world - leave the United States alone - has set off alarm bells among policymakers. There was additional global supply, but it was mostly blocked in China.
To address this, the Defense Ministry spent almost $ 1.2 billion . Dozens of American companies now manufacture N-95 respirators,surgical masks, hospital gowns and gloves, and even some of the essential raw materials the supply chain needed to keep production safe in the United States.
For semiconductors, just over a year ago no one seemed to care about the United States 'dependence on high-end chips made in Taiwan and South Korea. But with the global shortage, we are all doing it now, the automakers in particular.
The two countries are geopolitical hotspots and are out of step. shelter from droughts, typhoons and other natural disasters that can disrupt supplies. Congress is using the situation to advance bipartisan legislation for But the The goal should not be national self-sufficiency at all costs. When the pandemic recedes, there will be less demand for some of these products, and prices will drop.
For PPE, this means that Budget-conscious hospitals will look to purchase cheaper, non-US-produced options. American businesses will want continued subsidies or protection against imports. In fact, a group of small businesses have already organized themselves into the American Mask Manufacturer 's Association for complain that home made masks foreigners are "thrown" into the market amAmerican, and they can search tariffs to stop imports. But tariffs would increase costs for an already extremely expensive healthcare system.
The aim of industrial policy should be to preserve the right amount of national capacity to be ready for the next health emergency with the equally important goal of keeping medical costs low. Targeted government subsidies, along with regulations that require medical distributors, states and hospital systems to hold more emergency stocks than they had before the pandemic, would be better industrial policy than restrictions. brutal trade and blank checks.
For semiconductors, thes Congressional efforts to move capacity to the United States through grants pose additional challenges. The potential good news is that most of the aid can be one-time payments that provide a level playing field for leading manufacturers - not just US companies but also some overseas, like T.S.M.C. from Taiwan. and the South Korean Samsung. Yet, there is no guarantee that foreign companies would start manufacturing their advanced products on American soil. In fact, they are less likely to do so if Washington continues to adopt unilateral export control policies that may limit where US-made semiconductors can be sold - i.e. not. in China.
And there are also downsides to bringing back production. The United States is not immune to geographically concentrated risks, such asThe February arctic storm in Texas revealed this when a temporary power failure closed a group of semiconductor factories. And if the costs of US-made chips are too high for automakers, sustaining these product lines may require more than one-off payments to companies.
A better“ Made in America ”
For both economic and security, more
This implies that, if theThe goal is to
Without such coordination, even like-minded countries could find themselves in bidding wars by granting increasingly large grants to attract semiconductor manufacturers on their shores. This could lead to excess industry capacity, trade disputes and tariffs that close markets.
This is not a fancy scenario. The United States and the European Union have long fought for counterproductive agricultural subsidies, and both sides haverecently solved a long and costly battle over subsidies to Boeing and Airbus which included tariffs on completely independent products, such as wine and cheese.
In addition, at the same time the United States is working with the other major economies to eliminate tax havens and impose a global minimum tax on multinational corporations , governments should not compete to return tax revenues to these companies in any other way.
The Biden administration seems willing to try this coordinated approach. At the Group of 7 summit in June, the administrationaccepted a proposal highlighting both P.P.E. and semiconductors which aspired to achieve" open, agreed to try to avoid a semiconductor " s race subsidies and the risk of crowding out private investments that would themselves contribute to our security and resilience. "
Cooperating on the details will prove difficult. A hybrid industrial policy is extremely difficult to achieve, but it is also the most likely to work. He acceptsfor security reasons some costs to move part of the production from where it is currently located abroad but without requiring self-sufficiency and a complete dismantling of international production chains that give Americans access to the best products at reasonable prices. He accepts that some coordination with the allies is necessary, but seeks to avoid controlled trade or government-protected cartels that reduce competition. In short, it is based on a solid economic strategy in the service of national security.
Chad P. Bown is a senior fellow at the Peterson Institute for International Economics. Douglas A. Irwin is Professor of Economics at Dartmouth.
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