How Biden's Unheralded National Industrial Strategy is Recasting U.S. Foreign Policy
How Biden's Unheralded National Industrial Strategy is Recasting U.S. Foreign Policy
An effort to strengthen national competitiveness and give America an edge in the world
President Biden heads to Ohio tomorrow to deliver a speech at the future site of two microchip manufacturing plants, an effort to sell a leading policy accomplishment of this summer: the CHIPS and Science Act of 2022, passed with bipartisan support last month. Among other things, this legislation provides federal money and tax credits to encourage the construction of microprocessor manufacturing facilities in the United States - and Ohio is another state with critical contests in the midterm elections two months away.
Biden’s speech will largely be viewed through a domestic economic and political lens – but it’s important to recognize how his administration’s emerging industrial policy links up to U.S. foreign policy and will shape how America competes in the world in the years and decades to come. A main goal of this bill is to decrease America’s dependence on overseas supply chains, and it also offers investments and incentives to give the country’s science and technology capacities a boost at a time when the issue of which countries have an edge in these arenas has become a central question in geopolitics.
Expect Biden to say many of the same things he did this summer in signing the bill into law: that America barely produces 10 percent of these chips today versus 40 percent 30 years ago, and that the Chinese Communist Party lobbied against this bill. He should build on these comments and widen the focus a bit more, reminding his Ohio audience and the country at large of the important steps his administration has taken to re-wire America’s economy and make it more competitive in the world.
Three main components of Biden’s national industrial policy
1. Massive public investments and incentives for technology and clean energy, including new infrastructure
Since President Biden took office, Congress has passed three pieces of legislation that amount to a program of massive public investment in technology, carbon-free energy, and new infrastructure:
The Infrastructure Investment and Jobs Act of November 2021,
The CHIPS and Science Act of early August 2022, and
The Inflation Reduction Act (IRA) of later that month.
Electric vehicle infrastructure, nuclear power, and semiconductor manufacturing are just a few of the industries that will receive injections of public investment and incentives to boost production under these laws.
The IRA alone includes some $350 billion in federal loans and guarantees for carbon-free energy development. These investments also come on top of restrictions on high-tech exports to Russia and China as well as promised permitting reforms that will make it easier to build new carbon-free energy infrastructure. Taken together, these moves buttress the emerging political narrative that America needs to be strong at home to be strong in the world – a narrative that the Biden administration has intimated but hasn’t quite made explicit yet.
2. “Friend shoring”: steadier and more consistent diplomatic and economic engagement with like-minded countries around the world.
“Friend shoring,” as U.S. Treasury Secretary Janet Yellin puts it, is the effort by a group of countries to synchronize policies to encourage manufacturing and supply chain security within that coalition. The idea here is to prevent countries like China and Russia from gaining advantage or leverage due to their positions in particular markets and industries such as rare earth elements mining, telecommunications equipment, and microchip manufacturing.
So far, the Biden administration’s effort to tie the United States and its allies closer together economically has proven largely successful. Its quiet successes have included a G20 agreement to establish a global minimum corporate tax, an end to tariff wars with the European Union, and a new agreement with the EU on steel and aluminum production. Cooperation with America’s allies in Europe and the Pacific on sanctions against Russia offered a demonstration of the potential power of closer diplomatic and economic alignment among like-minded countries. Right now, moreover, the United States is actively pursuing greater cooperation with semiconductor manufacturers and close partners Japan, South Korea, and Taiwan, a grouping that’s been dubbed the “Chip 4.”
These important steps had been overshadowed to some extent by Biden’s first-year foreign policy stumbles – the calamitous withdrawal from Afghanistan and a spat with France over a canceled Australian submarine deal – and then by the war in Ukraine and tensions with China in Biden’s second year in office. But the steps the Biden administration has taken over its first year and a half in office have helped boost America’s longer-term economic prospects.
3. A more balanced defense of the global commons.
Ukraine and Taiwan are the most conspicuous cases where the United States has announced its intent to defend the global commons by supporting like-minded partners and allies. American support for Ukraine’s military has proven indispensable in allowing Kyiv to blunt the Russian military’s advance over the past six months. Furthermore, Taiwan’s semiconductor industry makes the island nation vital to the global economy – and makes protecting Taiwan’s sovereignty a critical U.S. national interest for material as well as diplomatic and political reasons. In the Middle East, the United States likewise still works to preserve the security of regional partners and secure crucial global shipping lanes ranging from the Suez Canal to the Strait of Hormuz.
In mounting a balanced defense of U.S. partners in a way that integrates America’s unique capabilities so that others can more efficiently share the burden, the Biden administration has effectively ignored the extremist fringe voices on the left and right who have advocated an American retreat from the world under banners of “restraint” or “America First.” The Biden administration has effectively rejected those views and offered a new template for U.S. global economic engagement.
Taken together, then these three components constitute core elements of a new national industrial policy that matters a great deal for America’s overall foreign policy. Biden and his team should make the time to build a more comprehensive narrative than the one we’re likely to hear in Ohio this week. Some main potential themes include:
America’s economy has bounced back from the forced shutdown during the pandemic.
America still has no economic peer in the world – it is still number one, at a time when China, Russia, and Europe are suffering big strains.
America is still facing some big challenges at home, including recent inflation due to supply chain strains and soaring demand. But the steps we’re taking to invest in our competitiveness and give America’s workers and companies an edge will keep America as the unrivaled leader in the global economy.
America is linking this revival at home to help create a new economic concert of power that spans both the Atlantic and Pacific oceans and includes America’s closest partners and allies in Asia, Europe, the Middle East, Africa and the Western Hemisphere. This new style of U.S. engagement with like-minded, forward-looking people of the world is part of a shared project to compete effectively with the likes of China.
Biden’s smart visit in July to speak directly to Ohio’s workers sent the right message, and his return to the state offers him another chance to make the case for what he’s done to boost America’s economic ability to compete. It’s important keep in mind this bigger picture of what he’s achieved and measure it up against the policies and programs his political opponents have proposed to help America’s workers but more often than not failed to achieve.
This new national industrial policy plugged into to a subtly different type of U.S. foreign policy also sets the Biden administration apart from his political and ideological competitors at home, in both the conservative and progressive foreign policy camps. It positions Biden in ways that are closer to a liberal nationalist mindset, which we’ll explore in more depth tomorrow.
Overall, then, Biden’s approach represents an important domestic policy and political success that is steadily unfolding - but also one that has big implications for America’s role in the world and its unique position in the global economy.