No. of Recommendations: 2
Seems to have worked for China, right? That's one of our major complaints about their economy - that they engage in industrial policy by providing state-run advantages to domestic producers, which give them a lasting (nigh permanent) advantage in certain industries?
And what fueled that? Their export surpluses fund it.
In other words, we're paying for it. It's unlikely that simply targeting a few strategically important goods for government intervention will work, though. Many (most?) of these goods require an ecosystem of manufacturing, transportation, energy, and labor resources that is difficult to stand up for just the handful of goods that we deem really important. Which is why tariffs are so unlikely to be a useful tool in this regard - either you set them high enough and broad enough that they end up causing massive disruptions, or they don't work.Actually this applies to subsidies as well. Unless you're willing to write checks for
Rare earth and silicon mining
Rare earth processing
Semiconductor fab
Semiconductor packaging/test
...and more things, then you're not hitting the end-to-end flow in making advanced SOCs. The CHIPs act was only 1 of those things.
As an example, you asked whether I wanted the U.S. to get nearly all of its PPE. The answer is, "maybe" - because it depends on what the alternative is. While there would be certainly some advantages to the U.S. producing all of its own PPE, the degree of government intervention and inefficiency necessary to get to the point where that happened as an ordinary part of the market might be vastly worse than the downsides to the status quo. Similarly, a narrower intervention - say, a whopping big tariff on just imported PPE - might also not be worth the cost; it might prompt domestic production of PPE, but if all PPE all the time in the U.S. is a lot more expensive.That's the strategic trade off: How much are we willing to pay as an extra holding/development cost for the security of having Thing X or Y around in sufficient quantities to ride out a shock? There are plenty of examples of this already:
-Strategic petroleum reserve
-National Defense Stockpile
-Strategic National Stockpile
The National Defense Stockpile is currently in sorry shape:
https://www.gatestoneinstitute.org/18789/us-strate...The National Defense Stockpile was established during World War II to ensure that the US military had critical materials necessary for its national defense, including titanium, tungsten, aluminum, and cobalt, especially in the event of a supply chain disruption. The stockpile is managed by the Defense Logistics Agency. According to Defense News:
"The stockpile was valued at nearly $42 billion in today's dollars at its peak during the beginning of the Cold War in 1952. That value has plummeted to $888 million as of last year following decades of congressionally authorized sell-offs to private sector customers. Lawmakers anticipate the stockpile will become insolvent by FY25."You might ask, "That's fine and all to have a stockpile. But why couldn't we just buy this stuff from somebody else?" Reasonable question, until you consider that the SPR is something we can refill ourselves easily (we pump plenty of oil nowadays). But it would be one thing if say, Mexico was the supplier for medicines and Brazil was the source for titanium, etc. Instead we import the stuff we need from the very outfit we're the most likely to be pointing guns at sometime in the near future.
Sun Tzu would generally frown on handing over your weaknesses to your enemies, don't you think?
There are trade-offs to trying to sever our reliance on China.We shouldn't sever all trade with China. Let them make non-critical stuff. We, however, need the ability to source certain critical items domestically. One nice thing about being the United States and the system we have is that loads of folks sit around trying to how to make stuff in new fangled ways. We can now 3-D print parts for rockets, and that means we can make loads more things with additive manufacturing techniques more flexibly than we could in years' past.
But none of it means anything if those 3D printers don't have the raw material to print stuff with. Similarly the next time the Chinese screw up and let a superbug out of the lab it wouldn't do to run out of PPE again.
