To counter China’s economic influence, rebuild the American Heartland – Brookings Institution


With the $1.9 trillion American Rescue Plan Act signed into law, the Biden administration’s attention has turned to a massive jobs, infrastructure, and clean energy plan. Meanwhile, some members of Congress want to advance bills on topics such as immigration, voting rights, and gun control.

But that’s not all. On March 10, The Washington Post reported that momentum is building for another priority: a bill aimed at “countering China’s economic influence” with an array of investments to restore U.S. technology leadership, rebuild its supply chains, and improve industrial competitiveness. Although coming at a moment of spiking outcries regarding the treatment of Asian Americans at home, the new legislative discussion—and this commentary—speaks solely to the debate regarding China’s rising economic and geopolitical sway.

On first glance, a China-response bill—with its focus on international geopolitics and a faraway superpower—might seem like a shift away from President Joe Biden’s professed urgency about helping working families here in America. However, the emerging bill is emphatically not a shift of focus. Rather, it represents a serious effort to renew America’s economy by investing in the nation’s high-value, good-paying industrial economy, and so provide better livelihoods in more communities around the country.

China, after all, lies at the center of the U.S. advanced-industry competitiveness challenge, which has influenced so much of the nation’s pre-pandemic economic drift and division.

Between 1990 and 2007, surging Chinese import competition played a large role in “hollowing out” the U.S. economy both nationally and locally, as low-cost imports undercut American producers and drove massive declines in decent-paying U.S. manufacturing jobs, especially in the heartland.

Since then, the initial China “shock” has evolved into an ongoing crisis exacerbated by a broader ebbing of U.S. advanced-industry competitiveness. China, for its part, has positioned itself as America’s main economic rival through an array of tactics, including unfair and illegal trade practices, intellectual property theft, manipulative terms of market access, and lavish subsidies for Chinese enterprises.

READ  Mars mission: Why humans are at risk of DYING from going to Mars - ’It's a real problem'

At the same time, U.S. industrial slippage has been exacerbated by broader U.S. disinvestment, offshoring, and decline. Federal R&D expenditures—necessary for technology leadership—have slumped to levels lower as a share of the gross domestic product (GDP) than prior to the Soviet Union’s launch of the Sputnik satellite in 1957.

Fig1

In the meantime, the U.S. has been running all-time-high trade deficits. The nation’s trade gap on electronic products hit $212 billion in 2019, while exporting only $18 billion in high-tech manufactured goods to China.

Such trends have been devastating for the nation’s economy and communities. Over the last 15 years, the share of U.S. employment in advanced industries has flatlined, meaning there are now relatively fewer of these good-paying, often accessible jobs.

What’s more, the presence of these critical industries—ranging from aerospace and chemicals to pharmaceuticals, software, and scientific research—has been dwindling in most American regions, contributing to stark regional imbalances. Fifty-eight of the nation’s 100 largest metropolitan areas have seen zero or negative employment growth in their advanced-industry sectors in the last decade, with most of those metro areas in the industrial Midwest and South. Since 1990, 71 of those metro areas have seen their concentration of advanced industries slip.

Map

The result of this has been the slide of whole swaths of country into stagnation, with grave implications for the nation’s economic, social, and political health. At the economic end of the equation, such unhealthy trends are wasting talent, thinning regional supply chains, and depressing communities. In social terms, the current geographic imbalance contributes to inequality because it deprives millions of workers who live in the “wrong” places from quality advanced-sector employment in the “right” places. It also remains likely that the drift of these “left-behind” places has exacerbated the nation’s political divides.

READ  How the COVID-19 crisis exposes widespread climate change hypocrisy - CBC.ca

All of which is why a response to China matters so much. Reclaiming shared prosperity—especially in the heartland—will require restoring the nation’s technological advantages in order to reduce U.S. weakness in the global economic competitions that are now harming so many communities.

For that reason, a variety of often bipartisan measures have either already been drafted or are being developed to complement legislation aimed at expanding federal R&D. For example, numerous Republican senators have co-sponsored bills with Democrats on a range of measures related to China, including shoring up U.S. supply chains, expanding production of semiconductors, and asserting U.S. leadership on 5G technology.

Central to the emerging package is a bipartisan bill that Sens. Chuck Schumer (D.-N.Y.) and Todd Young (R-Ind.) have introduced along with Reps. Ro Khanna (D-Calif.) and Mike Gallagher (R-Wis.) entitled the Endless Frontier Act. The bill proposes expanding the National Science Foundation into a renamed National Science and Technology Foundation and giving it $100 billion over five years to invest in technology research and testing. The bill also includes $10 billion to create 10 regional tech hubs that would position regions across the country to become global centers for the research, development, and commercialization of key emerging technologies.

Aimed at spreading tech growth into the heartland, these hubs pick up on ideas Robert D. Atkinson, Jacob Whiton, and I (as well as our colleagues Jonathan Gruber and Simon Johnson) have advanced on restoring the dynamism of up-and-coming inland metro areas. In that vein, the Endless Frontier Act, its tech hubs, and related measures represent an important recognition that rebuilding America’s strength abroad requires the nation to rebuild itself at home.

With that said, the emerging response to China isn’t perfect. For one, care needs to be taken to shape the many swirling potential topics—including R&D, 5G security, domestic semiconductor manufacturing, fair trade, and human rights—into a  cohesive “mission.” Otherwise, the sheer number of these topics could turn any potential bill into a grab bag of disconnected reactions. Likewise, some leaders in the heartland worry that the national security framework of the bill could tilt the focus away from creating regional hubs and offsetting the “hollowing out” of the economy. On this front, the goal of speeding up the development of highly sophisticated emergent technologies could make it difficult for many noncoastal metro areas to benefit, since new investment funds could wind up flowing to the same coastal universities that are already dominant. For that reason, it is important for heartland lawmakers to insist on the regional focus of tech hub development.

READ  Nuclear Technology Helps Develop New Barley Variety in Kuwait - Modern Diplomacy

Finally, it is critical that the any tech hubs program be both intentional and holistic in efforts to foster the emergence of prosperous new advanced-industry centers in America. If the goal is to create such new centers of inclusive growth, it will take more than injecting billions of dollars’ worth of R&D into selected universities. Lawmakers should therefore consider drawing into the Endless Frontier Act additional ideas from last year’s Innovation Centers Acceleration Act—an excellent parallel act sponsored by Sens. Chris Coons (D-Del.) and Dick Durbin (D-Ill.), as well as Reps. Joseph Morelle (D-N.Y.) and Terri Sewell (D-Ala.). Most notably, instigating the takeoff of advanced industries in heartland metro areas would be well served by adding in more provisions for complementing R&D with racial inclusion, workforce development, affordable housing, and high-quality placemaking.

In any event, the need to counter China’s rising global power now stands as an urgent prod to revitalize America’s drifting, uneven economy. Hopefully, the fear of falling behind will provide enough motivation to spur that work even in a hyper-partisan time.



READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here