The Case for a National Industrial Strategy to Counter China’s Technological Rise

April 13, 2020
  • China has long posed a stark techno-economic challenge in the advanced industries that are most critical to America’s economic wellbeing and national security. To overcome that threat, policymakers must break free of conventional economic thinking.
  • Trade and foreign policy measures are necessary, but not enough. America needs a robust domestic strategy, too—and it cannot be limited to generic policies to expand “factor inputs” like science, education, and infrastructure.
  • America needs a national strategy that fortifies traded-sector tech industries that are “too critical to fail,” such as advanced machinery, aerospace, biopharma, electrical equipment, semiconductors and computing, software, transportation and more.
  • To develop and implement a national industrial strategy, the federal government will need to significantly strengthen its institutional capabilities to conduct thorough sectoral analysis.
  • Congress should act in four areas: support for R&D targeted to key technologies, tax incentives for key building blocks of advanced production, financing for domestic production scaleup, and adding a competitiveness screen for regulation.
  • All these programs should be aligned with U.S. allies wherever possible.
  • Without a robust industrial strategy to bolster its advanced industries, America will likely experience a steady erosion in its competitive position—akin to the UK’s path in the 1960s and 70s—and a concurrent rise in populist fervor.