What is the use of industrial policy?
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Industrial policy is back in fashion in rich countries. As a good example of its revival in American politics, Watch the discussion A few weeks ago, my colleague Rana Foroohar had a conversation with Brian Deese, the director of President Joe Biden’s National Economic Council.
Motivations are often complex, sometimes conflicting, and can be confused. Industrial policy, at least when it is considered to mean improving domestic manufacturing capacity, can target any of the following: maintaining technological leadership; increasing factory jobs to help left-behind personnel and places; overcoming productivity stagnation; ensuring adequate supply in emergencies Medical and other critical supplies; or concentrating the supply chain within one person’s jurisdiction for geopolitical reasons.
Therefore, here are three amendments to any overly indiscreet industrial policy approach, focusing on discussing a wide range of semiconductor cases.The industry has been severely hit by the shortage, which has a great impact on the entire industrial product. car to TV monitor.
How bad is the situation?Here are some recent figures about semiconductors White House report Regarding the resilience of the U.S. supply chain.
First of all, don’t take the past times as the norm. Deese emphasized the decline in the United States’ share of global semiconductor production. According to the White House report, in 1990 American companies produced 37% of the global supply; today it is 12%. But the report also shows that they dominate the global chip design market-almost exactly in the case of several important chip types such as computer central processing units. Compared with contract manufacturers, the United States also has a higher share of the global production of integrated manufacturers that design their own chips.
But how much is “enough”? The United States accounts for 24% of the global economy, According to figures from the International Monetary Fund, And its trend indicates that this share will fall to 22% in the next five years. Industrial policy advocates should ask why the US share of global chip production should exceed this (as in other countries). If market dominance is productivity and technological advantage, it may make sense to seek an over-proportional share in the design of state-of-the-art chip manufacturing or chip manufacturing equipment, and to obtain economies of scale from large-scale export sales. But in some cases, if not all, this is more or less the case in the United States.
Second, consider the composition of the trade balance. If your goal is to produce more semiconductors (or anything else) domestically, whether for domestic supply or export, what else would you like to import more or export less? Industrial policies will not change the overall trade balance, which is determined by macroeconomic factors. Facts have proved that it is difficult for the United States to reduce its trade deficit. As for the European Union, especially Germany, it has been difficult for them to increase their already large surpluses.
Therefore, greater self-sufficiency-reduced imports-will be offset by reduced exports or increased imports of other things. There is no natural reason why the new combination should be better than the old one in terms of productivity, safety, or laggards. You must make a comprehensive policy.
Third, self-sufficiency and resilience are not the same thing. The current shortage of chips has little to do with the fact that the supply chain is cross-border.Chad Bowen Explanation:
“Car manufacturers overreacted to the initial shock of Covid-19 and cut chip orders in early 2020. When car companies realized their mistakes, chip manufacturers had the ability to supply the suddenly booming work-from-home product market. Perfect The storm will only get worse: Arctic weather in Texas, drought in Taiwan, and earthquakes and fires in Japan have all slowed production.”
Coupled with the direct damage of the coronavirus itself: Outbreak in Taiwan Threatened to further delay chip shipments.
These problems are not inherent in cross-border supply chains, and may even prevent more serious problems (imagine if all the chips in the world were made in Texas during the freeze period).
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The cross-border nature of the supply chain is indeed important in a way that Donald Trump tried to hinder Huawei’s 5G dominance through export controls on U.S.-made semiconductors and chip manufacturing equipment, and his imposing tariffs on chip imports as part of a wider Trade war. As Bowen explained, this has led to the accumulation of chips and forced global customers to turn to non-US chip and chip manufacturing tool suppliers, exacerbating the shortage of consumers and the loss of sales to fund the technological development of US manufacturers.
All in all, attempts to repatriate the supply chain may threaten domestic resilience and technological leadership, rather than contribute to it.
Many policymakers know this, at least in theory. As Diss said:
“Resilience does not mean closing oneself away from the rest of the world. It is vital to build partnerships with our allies to promote more stable access to key inputs while improving environmental sustainability and workers’ rights. ”
In practice, the jury has ended. Bown suggested shifting the focus from export control to joint supervision between geopolitical partners so that the market remains open, competitive and diversified, and committed to establishing standards that help ensure cybersecurity. Here, Deese’s remarks have also been responded to, he mentioned “shaping the market.”
The good news is that the recent EU-US summit has strengthened the determination to do this. The bad news is that in many political debates, the task still seems to be seen as ensuring that one’s own country or region produces as much of its own production as possible.
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