Summary of the Article: US Industrial Policy & Strategic Competition
this article discusses the evolving industrial policy of the United States, especially under the Trump administration, and the challenges and necessities for long-term success in strategic competition with other nations (specifically China). Here’s a breakdown of the key points:
1. Recent US Industrial Policy Actions:
Rare Earths: A successful example is the initiative too bolster domestic rare earth production, offering a price floor and incentives that have already attracted meaningful private investment ($1.6 billion from jpmorgan Chase, Goldman Sachs, and MP Materials). This is seen as a promising start, but scaling up production is the key test.
AI Chips to China: A more questionable deal allows Nvidia and AMD to export certain AI chips to China in exchange for 15% of revenues. The lack of clarity on how these funds will be used and potential national security implications raise concerns.
Intel Equity Stake: The US government is taking a 10% equity stake in Intel using previously awarded grants. While possibly beneficial for taxpayers, it could disadvantage Intel compared to competitors receiving customary grants.
2. Two Interpretations of these Actions:
Transactional Policymaking: Reflects Trump’s deal-making style. Emerging Industrial Policy: Could signal a broader, sustained effort to support strategic sectors.The article cautions that an ad hoc approach risks failure.
3.Challenges to Long-Term Success:
political Instability: US elections pose a risk of reversing policy initiatives. Effective industrial policy needs to be decades-long.
Limited Resources: US public resources are finite and must be prioritized.
Ancillary Requirements: Strategic industries need more than just direct funding – they require supporting investments in infrastructure (power, water, data centers), research, and workforce progress.
Coordination: States can’t fund these supporting requirements alone; federal and private sector involvement is crucial.
4. Recommendations for Policymakers:
Strategic Prioritization: Focus on industries where capital markets cannot provide sufficient support.
Optimal Support Mechanisms: Carefully choose the most effective and cost-efficient form of support (tax benefits, grants, loans, guarantees, etc.).
Insulation from Political Interference: Establish an investment vehicle (like a sovereign fund) with rules to protect decisions from political pressure.
Strengthen Underlying Advantages:
Lower taxes on foreign capital from trusted sources.
Comprehensive immigration reform to attract skilled workers.
Leverage private Capital: Focus on creating conditions that attract both domestic and international private investment.
the article argues that the US has the potential to lead in emerging technologies, but requires a disciplined, long-term, and strategically focused industrial policy that effectively mobilizes private capital and addresses the broader ecosystem needs of key industries.
