Since the United States does not make advanced chips or the equipment to make advanced chips, its new technology policy can be implemented only with the cooperation of foreign governments and firms.Ĭontemporary industry subsidies and export controls thus raise new issues for global institutions and national governments. The US$280 billion CHIPS and Science Act to support domestic technology industry in America (with US$76 billion earmarked for domestic computer chip support) is a striking example of the increased generosity of governments in the United States, China, and the European Union in subsidising industry.Īs developed through to March 2023, the US policy includes not only lavish government support for computer chip production in the United States, but also a ban on the sale to China of advanced chips and of machinery to make advanced chips, together with subsidy awards to US and foreign companies that agree not to initiate or expand production in China. The Biden administration’s new policy towards technology competition with China includes some very significant industry policy innovations. Pottinger argued in 2021 that US business must take “bolder steps to stem the flow of US capital into China’s so-called military-civil fusion enterprises and to frustrate Beijing’s aspiration for leadership in, and even monopoly control of, high-tech industries - starting with semiconductor manufacturing.” Foreshadowing a sequence of steps that culminated in the Biden administration’s sweeping restrictions on exporting chips to China in October 2022, Pottinger urged that “Washington should seek to eliminate any potential Chinese advantage in semiconductors” by subsidising new chip foundries in the United States and by “applying sharper restrictions on the export of US-made equipment used to manufacture semiconductors - not just for cutting-edge chips but also for those that are a couple of generations older”. In the United States, the same viewpoint was most clearly and forcefully represented by Matthew Pottinger, a White House national security official in the Trump administration. Once dominated by business interests and economic bureaucrats, large areas of industry policy are now shifting into the realm of national security. This is evident in Treasury, the Foreign Investment Review Board, the Department of Foreign Affairs and Trade, and in the enhanced importance of the Office of National Intelligence and the Department of Home Affairs, as well as in the changing focus of the Five Eyes intelligence-sharing group of which Australia is a member. The policymaking apparatus in Canberra has been rearranged in recent years to bring a national security lens to bear on what were customarily economic policy decisions. Australia’s Director-General of the Office of National Intelligence, Andrew Shearer, noted in March 2022 that technology is “the centre of gravity in this new geopolitical contest, and we’re going to see increased manoeuvring between the great powers in particular for pre-eminence in critical technology”.įor Shearer, that means “an end of compartmentalising economic engagement with China and Australia’s long-standing security ties with the United States”. Subsidies are now sometimes complemented by policies designed to deny technological innovations to competitor economies. China, the United States, and the European Union have in recent years vastly increased government subsidies to industry, frequently supporting the development of advanced technologies important in peace and war. There was a time when government spending to support particular industries was widely deplored as a wasteful interference in free markets.
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