Until about a decade ago, the United States was the world leader in solar energy. Federal tax credits and state renewable electricity standards helped fuel the boom.
Then, China decided to boost its own solar industry. State-controlled banks lent Chinese solar companies tens of billions of dollars at low interest rates. Chinese firms now produce three-quarters of the world’s solar panels.
China’s success in solar power has inspired China’s new high-tech industrial policy — a $300 billion plan to boost China’s position in other cutting-edge industries, called “Made in China 2025.”
Besides subsidizing these industries, China is also telling foreign (usually American) companies seeking to sell in China that they must make their gadgets in China. As a practical matter this often means American firms must disclose and share their technology with Chinese firms.
“We have a tremendous intellectual property theft situation going on,” said Trump, just before upping the ante and threatening China with $100 billion of tariffs.
China’s theft of intellectual property is troublesome, but the larger issue of China’s industrial policy is not. The United States has an industrial policy, too. We just don’t do it well — and Trump is intent on doing it far worse.
The United States government used to incubate new technologies through the Defense Department, allocating billions of dollars to research and development that spilled over into commercial uses.
Out of this came the internet, new materials technologies, and solar cells that helped propel the United States into space — and, not incidentally, seeded the commercial solar industry.
Trump’s original budget would have slashed funding of the National Science Foundation and related research by nearly 30 percent. Fortunately, Congress didn’t go along.
Meanwhile, federal, state and local governments in the United States spend more than $2 trillion a year on goods and services. Due to “buy American” laws, about 60 percent of the content they purchase must be made in America.
As Steven Greenhouse points out in the latest issue of The American Prospect, a few state and local governments are taking a page out of China’s book — luring foreign firms to the United States to make high-tech products that are good for the environment and good for American workers.
America has always had an industrial policy. The real question is whether it’s forward-looking (the internet, solar, zero-emissions buses) or backward-looking (coal).
Trump wants a backward-looking industrial policy. That’s not surprising, given that everything else he and his administration are doing is designed to take us backward.