While China is upgrading its factories and work force to the jobs of the future, it doesn’t make sense for the United States to shelter relatively low-tech industries. After the Trump administration put tariffs on apparel and footwear, imports of those products from China fell sharply, according to a study by importers released last month. But the tariffs probably hurt American consumers more than they hurt China, which was happily handing off those low-wage industries to the likes of Vietnam and India.
To its credit, the Biden administration is also focused on high-wage, high-growth sectors that are vital to national security, as signified by the CHIPS and Science Act. “Unlike oil, which can be bought from many countries, our production of computing power depends fundamentally on a series of choke points: tools, chemicals and software that often are produced by a handful of companies — and sometimes only by one,” Chris Miller writes in a new book, “Chip War: The Fight for the World’s Most Critical Technology.”
But even Miller doesn’t argue that national security dictates a buy-American strategy in the chip sector. In an email to me, he wrote: “For advanced manufacturing capabilities like chip making, it is common to source components from dozens of different countries. So ‘buy American’ is often simply impossible.” He added: “The efficiencies produced by international supply chains have been critical in driving technological progress. There’s plenty of reason to question excessive reliance on trade with geopolitical rivals, but when it comes to allies like Japan or Europe, I don’t see any justification for buy-American provisions.”
To be sure, there are no buy-American provisions in the CHIPS and Science Act in recognition of the global nature of leading-edge semiconductor technology. Biden’s rhetoric is hotter than his actual policies. The Inflation Reduction Act relies on carrots in the form of tax breaks rather than sticks to encourage domestic sourcing. The bipartisan infrastructure law has a waiver procedure that allows many foreign companies to supply U.S. customers. Still, Biden has kept in place Donald Trump’s tariffs on China, and now Biden is promising to be more aggressive in enforcing the 1933 law than his predecessors were.
Robert Atkinson, who advocates investment in U.S. technology as president of the Information Technology & Innovation Foundation, told me that buy-American provisions are like a shotgun, not the rifle the United States needs. A study by his organization concluded that insisting on American sourcing for tech products such as high-speed internet service to homes would raise prices by 20 to 25 percent. “Are you willing to pay for that?” he asked. “You will have less deployment. It’s this blunderbuss approach that I think is wrongheaded.”
Both Miller and Atkinson advocate friendshoring of critical parts, which is switching to suppliers based in nations that are reliable allies. That’s economically efficient, since it’s been known since the time of Adam Smith and David Ricardo that everyone wins when countries specialize in what they’re best at rather than erect protectionist barriers and try to do everything alone. Henry George, the great 19th-century economist, wrote, “What protection teaches us is to do to ourselves in time of peace what enemies seek to do to us in time of war.”
Friendshoring is also a diplomatic winner. I interviewed Mary Ng, Canada’s minister of international trade, export promotion, small business and economic development. She said she was in the room when Biden met with her prime minister, Justin Trudeau, last month in Mexico City. “We understand what the American president is trying to do on jobs,” she said. “We have to keep doing the work to remind the Americans that we share values and that working together allows us to be more competitive, versus others that may not share those values.”