Opinion: How the US’ exceptional industrial policy is killing globalisation

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Industrial policy is commonly defined as government actions to shape the economy by targeting specific industries, firms, or economic activities through tax incentives, subsidies, protective regulations, and support for research and development.

China was a latecomer on the scene. Taking a cue from East Asian countries that had transformed their economies through industrial policies, Beijing put something of its own in place in 1986.

China’s industrial policy is similar to that of Japan, South Korea, and the European Union, although more expansive. As a result, the United States has withstood challenges before the World Trade Organization.

In contrast, US industrial policy is the same. What differentiates it from packaging is its purpose first and foremost. A typical industrial policy is an inward focus aimed at developing national capacity. However, American industrial policy, as well as investing in American workers and science, has an important additional goal: suppressing competitors, especially those perceived to be narrowing the gap with the US.

The Reagan administration’s “regulated trade,” outlawing it, was intended to suppress Japan’s automobile and semiconductor industries. The exercise was highly successful and contributed to Japan’s three lost decades.

Washington’s semiconductor industry policy today is designed to either cripple China’s competition or ensure the United States remains, National Security Adviser Jake Sullivan said, “as far ahead as possible.”

American industrial policy distinguishes itself in another important aspect: approach. The Biden administration maintains that its industrial policy is based on national security considerations, and that there is no room for negotiation on such issues.

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Why Washington has linked its industrial policy to national security is easy to explain. Thus, US industrial policy involves measures outside of conventional industrial policy.

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On top of an already burgeoning arsenal of commerce, Swift’s global payment system and dollarWashington now uses industrial policy as a tool to achieve its geopolitical goals—not like a clumsy sportsman dismissing an opponent to win a race.

While conventional industrial policy operates behind borders, US industrial policy extends its reach beyond US territory to the detriment of foreign governments and companies. Foreign companies found to have violated US sanctions face heavy fines, while foreign nationals who fall foul of US law face prison terms.

Far from traditional industrial policy, the US is asking allies and like-minded economies to align with its competitors. The Biden administration has established “. Chip 4It wants to form a “critical mineral buyers’ circle” with alliances with South Korea, Japan and Taiwan, and with the European Union and the Group of 7.

The EU is barking up the wrong tree by blaming China for its trade deficit.

He pressured Japan and the Netherlands Under the Chips and Science Act, it would bar recipients of funding from expanding capacity there to implement semiconductor export restrictions on China. Moreover, the US is pushing “friend-shoring” to isolate China.
In addition, US industrial policy may have violated international trade rules. There is China. They filed a lawsuit. US chip export bans with WTO. Some have threatened to take WTO action against the US over the EU’s anti-inflation law. Subsidy plan Excludes electric vehicles made outside of North America.
U.S. President Joe Biden tours the site of a new factory for a Taiwanese semiconductor manufacturing company on Dec. 6, 2022, in Phoenix. The Biden administration has formed a “CHIP 4” alliance with South Korea, Japan and Taiwan. Photo: AP

Similar to Japan’s concerns about implementing inflation-reducing legislation, the Biden administration has struck a deal with Tokyo on minerals critical to electric vehicle batteries, billed as a form of free trade agreement. But such narrow sectors “do not count as a free trade area,” said Inoue Manak, a trade policy expert at the Council on Foreign Relations.

Washington’s industrial policy has serious consequences for the world. It is creating new trade barriers. At worst, market distortions threaten to disrupt existing global supply chains, leading to greater inefficiencies and a loss of economic output.

Some of the effects of US industrial policy are evident in the semiconductor sector, where raw materials, products, manufacturing machinery, or technology cannot be freely traded or sold. As Morris Chang, founder of Taiwan Semiconductor Manufacturing Company (TSMC), put it, “globalization is dead in the chip sector.”

President Joe Biden has emphasized the importance of US global leadership on several occasions. However, on industrial policy at least the world would be better off without him.

Zhou Xiaoming was a senior fellow at the Beijing Center for China and Globalization and Deputy Permanent Representative of China to the United Nations in Geneva.



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