Summary of the Article: US Industrial Policy & Strategic competition
This article discusses the evolving US approach to industrial policy, especially in the context of strategic competition with other nations (likely China, though not explicitly stated). Here’s a breakdown of the key points:
1. Recent US Industrial Policy Efforts:
rare Earths: A important $1.6 billion investment is being made to build a domestic supply chain for rare earth elements, crucial for many technologies. This is seen as a promising start, but scaling up production and creating a sustainable market are key challenges.
AI Chip Exports to China: Allowing Nvidia and AMD to export certain AI chips to China in exchange for 15% of revenue is a controversial move.The lack of clarity on how these funds will be used raises concerns about national security implications.
Intel Investment: The US government is taking a 10% equity stake in Intel using previously awarded grants. This is an unusual move that could offer future returns but possibly disadvantages Intel compared to competitors receiving customary grants.
2. Two Interpretations of These Actions:
Transactional Policymaking: Reflects Trump’s negotiating style,focused on immediate gains.
Emerging Industrial Policy: Could signal a more sustained, long-term effort to support strategic sectors. The article suggests both interpretations are possible.3. Challenges to Long-Term Success:
Political Instability: US elections pose a risk of policy reversals, hindering long-term commitment.
Limited Resources: Spreading funding too thinly across too many priorities could dilute effectiveness.
Ancillary Requirements: Strategic industries need more than just direct funding - they require supporting investments in infrastructure (power, water, data centers), research, and workforce progress.
Systematic Approach Needed: An ad hoc approach risks failing to achieve the necessary scale and consistency.
4.Recommendations for Policymakers:
Rigorous Evaluation: Before investing, ask:
Does the industry need support beyond what capital markets can provide?
What form of support is most effective and cost-efficient?
Should the state directly intervene or offer incentives?
Investment Vehicle: Establish a sovereign fund with rules to insulate decisions from political interference. Strengthen Underlying Advantages:
Lower taxes on foreign capital from trusted sources.
Implement complete immigration reform to attract skilled workers.
Focus on Supporting Infrastructure: Incentivize private sector involvement in funding essential infrastructure alongside government investment.
the article argues that the US is tentatively moving towards a more active industrial policy, but faces significant challenges in ensuring its long-term success. A strategic, systematic, and consistently funded approach is crucial for maintaining US competitiveness in key technologies and industries.
