Opinion | How the US’ exceptional industrial policy is killing globalisation
- Unlike conventional industrial policy, Washington’s version is not only focused on domestic industry and science, but also on suppressing competition
- Notably, Washington’s Inflation Reduction Act and Chips and Science Act have raised hackles even among US allies
Time can make a huge difference. This is certainly true of the US’ stance on industrial policy. Just a few years ago, “industrial policy” was a derogatory term that Washington reserved almost exclusively for China as if it had forgotten that it was a pioneer of the practice.
In the 1980s, the Reagan administration set annual ceilings for Japan’s car exports to the US, and forced Tokyo to accept rules that limited Japanese chip exports while extracting improved US access to the Japanese market.
With the US emerging victorious from the Cold War, Washington saw a reduced need for industrial policy. Meanwhile, it frowned on the countries that adopted the practice, blasting China’s industrial policy as “non-market”.
Industrial policy is commonly defined as measures taken by a government to shape the economy by targeting specific industries, firms or economic activities through tax incentives, subsidies, protective regulations and research and development support.
China was a latecomer on the scene. Taking its cue from the East Asian countries that transformed their economies through industrial policy, Beijing put in place something of its own in 1986.
