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Business News/ Opinion / Views/  America’s effort to address competitive gaps with China

America’s effort to address competitive gaps with China

US lawmakers have sought to make several commendable moves but their plan still comes up short

Photo: ReutersPremium
Photo: Reuters

The House of Representatives in the US recently passed the America Competes Act, 2022. Buried in 3,000 pages of tariff exemptions on golf clubs and regulations on fisheries lies America’s grand strategy for economic competitiveness in the 21st century. From funding basic scientific research to checking Chinese coercion, no stone was left unturned by this sweeping legislation.

Given its sizeable investments in its scientific and innovation ecosystem over the last few decades, China now looms disturbingly close in the US scientific community’s rear-view mirror. The rising superpower has built an innovation powerhouse that has begun to vie with the US for dominance in artificial intelligence, quantum computing, 5G and green technologies. Determined to prevent China from overtaking the US on innovation, the America Competes Act proposes pouring billions of dollars into basic research in material sciences, chemical engineering, advanced computing, microelectronics, etc. In the aftermath of the global semiconductor supply crunch, US lawmakers earmarked $52 billion for the making of these chips at home.

The bill’s more liberal immigration provisions should cheer foreign students and researchers, especially those specializing in science, technology, engineering and math (‘Stem’ subjects). Washington will clear the way for startup founders and foreign entrepreneurial talent to work and live in the US. Doctoral students focused on Stem research will be exempted from country-specific visa caps that have long haunted Indian students who sought to make America their home. These are welcome reforms.

Few things seem to drive contemporary US policymaking like the fear of exposed supply chains. With America Competes, the US has squarely targeted its dependence on China for critical goods. It plans to establish a Supply Chain Resilience and Crisis Response Office, charged with monitoring US dependencies in critical industries and incentivising US firms to redraw their supply chains.

More controversially, America Competes creates a committee tasked with identifying and securing key sectors that are crucial to US national security. Should US firms looking to invest in foreign countries of concern like China jeopardize those interests, this new panel can review and block such outbound investment. As these policies are debated in the US Senate, these restrictions will likely see a battle between Democrats, Republicans and others who view its scope as too broad.

The bill also underscores a determination to root out malign Chinese influence in the US scientific and financial establishment. It calls for a sweeping review of China’s presence in the US financial systems and specifically targets entities suspected of engaging in corporate espionage, stealing US intellectual property, and having close ties with the Chinese military. The Biden administration has made it clear that Washington will no longer turn a blind eye to Beijing’s often imperceptible but widespread presence in key US institutions.

For all its domestic focus, the bill also envisions a foreign-policy strategy. Even as it downplays institutions like the World Trade Organization, Washington has outlined a strategy of engagement with old economic configurations like the Asia Pacific Forum for Economic Cooperation, allies in Europe and groupings like the Quad. For example, the bill urges the Biden administration to sign up to the Supply Chain Resilience Initiative that was designed and underwritten by India, Japan and Australia. It also envisions some diplomatic innovations to expand US influence at China’s expense. Given revelations that Beijing has acquired sway over the domestic politics of treaty allies like Australia, the US will station “China Watchers" in crucial diplomatic missions to report on that creeping influence. It also plans economic-defence response teams to support countries at the receiving end of Chinese economic coercion. Given China’s use of economic pressure on nations like Australia and Canada, this is a welcome feature.

For all its strengths, America Competes is held back by one factor: institutional innovation. While America’s ‘innovation hardware’ (universities, scientific labs and talent pools) remains broadly unrivalled, its ‘innovation software’ in the form of new institutions is relatively weak. While the bill funnels much-needed funds into scientific research, for example, it does this via the overly-bureaucratic National Science Foundation (NSF). Its leaner and more applied research-focused Directorate of Science and Technology (DST) has seen its funding slashed. In an age where applied breakthroughs are crucial to competitiveness, the DST had modelled itself on Darpa, a defence-research agency that propelled America to industrial supremacy by designing technologies like the internet and GPS. Between backing an innovative disruptor and an established but increasingly outmoded NSF, Washington has chosen the safety and stagnation of the latter.

America’s economic diplomacy suffers a similar problem. Even as major trade accords in Asia are rewriting the rules of the game, it seems determined to squander its status as a major trading power by staying away from them. More than a year after he took office, Biden’s signature plan, the Indo-Pacific Economic Framework, is still little more than a confusing agglomeration of buzzwords.

Even as America Competes pushes the world’s most powerful country in the right direction, it will need to give the country’s innovation software a much-needed upgrade for America to truly compete with rivals in the 21st century.

Harsh V. Pant & Shashank Mattoo are, respectively, professor of international relations, King’s College London; and research associate at Observer Research Foundation, New Delhi.

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Published: 15 Feb 2022, 11:01 PM IST
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