How to better rebuild American science


The US Congress agrees that America must compete with China. Two recent bills – the House of Representatives’ America Competes Act and the US Senate’s Innovation and Competition Act – both target China’s growing scientific clout by increasing federal funding for research, semi- -drivers and an assortment of other programs worth over $200 billion.

However, the two chambers seem unified on little else. The House, which passed its bill on Feb. 4, wants to spend more on climate-related programs and to bring essential supply chains home. The Senate wants to spend more on artificial intelligence and quantum computing. The House bill is also more restrictive on trade.

Which approach makes the most sense?

Likely one that amplifies existing US strengths in basic research and key areas like semiconductors rather than trying to create new supply chains or further restrict trade. In other words, a strategy that truly invests in national competitiveness, rather than focusing on bludgeoning China or trying to completely insulate the US economy from it. This latter approach was attempted under the previous administration and failed to stimulate manufacturing in the United States. On this point, the Senate bill scores better.

The United States wants to counter China’s influence in the world by providing everything from infrastructure to vaccines and green energy. The WSJ’s Stu Woo explains how the plan, dubbed Build Back Better World, aims to compete with China’s Belt and Road initiative. Photo composition: Daniel Orton

Investing large sums in supply chain resilience — the House bill calls for $45 billion — can sometimes be less productive than proponents assume. China’s dominance in the lithium and rare earth processing industries could cause headaches for the United States. But if the demand for electric vehicles and renewable energy increases as massively as many predict, it will create huge incentives for new investment in processing and mining, both in China and outside. . Lithium carbonate prices have risen several hundred percent in the past year alone.

Moreover, spending billions of tax dollars now to build national mining or processing operations risks creating stranded assets if new technologies – research funded, perhaps, by one of these two law – make them obsolete. It’s one thing to subsidize cutting-edge industries like advanced microchips where expansion brings ancillary benefits like more top-notch engineering talent and additional R&D. It is quite another to spend large sums of government money on mature mining or chemical industries.

On the question of how to spend research money, some of the harsh rhetoric on Capitol Hill seems over the top. While there is certainly room to bolster areas like quantum computing where a sustained Chinese lead could have dire security implications, the idea that spending more money on researching energy or climate technologies is somehow “indulgent for China” is silly. If American researchers end up creating, for example, new batteries or solar technologies that would make China’s current dominance in these areas obsolete, it would be a devastating blow for Beijing, which has spent years and huge sums of money. money to subsidize the expansion of these industries.

Finally, piggybacking new trade restrictions on a science bill is likely counterproductive, especially in times of high inflation. Unilateral trade tariffs instituted against China under former President Donald Trump have failed to reduce the United States’ persistent overall trade deficit, but they have been very successful in raising costs for American businesses and hurting the economy. growth. A December 2019 Federal Reserve analysis by industry, for example, found that tariffs in 2018 and early 2019 reduced employment in U.S. manufacturing sectors exposed to China trade by about 0.8%, before even considering the impact of China’s retaliatory tariffs. The Senate bill would reinstate a Trump-era tariff exclusion process to reduce some of that burden. The House bill, on the other hand, would repeal a separate import duty exemption for shipments under $800 for non-market economies like China and Vietnam. That may sound fair in principle, but it adds up to higher costs at a time when businesses and consumers are struggling with inflation.

US government funding for research as a percentage of gross domestic product has stagnated for decades, and other countries have not stood still. A repair that makes economic sense. Getting bogged down in new trade restrictions, especially those not directly related to human rights issues like Xinjiang, is not.

Write to Nathaniel Taplin at nathaniel.taplin@wsj.com

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