HVilified, industrial policy is now making a comeback. In the United States, it underpins two recent pieces of legislation, the Chips and Science Act and the Inflation Reduction Act (IRA), and Trade Representative Katherine Tai has just devoted a long interview to it at Foreign Policy. In Europe, the Commission, which once refused to talk regarding it, has just published a green industrial program (Green Deal Industrial Plan, February 2023) and the associated industrial strategy (Net Zero Industry Act, March 2023). As for China, it has never stopped practicing it, with in particular the “Made in China 2025” program launched in 2015 to transform the country from the status of factory of the world to that of a major economic power.
There is no shortage of reasons to break with the neutrality that has long prevailed regarding the nature of what a country produces. The first relates to resilience: the health crisis has made all governments aware of the vulnerabilities involved in overconfidence in the ability of the global market to supply everything at all times. They have failed in their first duty by being unable to meet the mask needs and do not want to be taken back.
The second reason is social and political: in 2016, the election of Trump underlined the consequences of an indifference to the social consequences of globalization. The traditional response of economists – redistribute the gains from international trade to compensate the losers of trade openness – has generally not been implemented and when it has, cash transfers have not solved anything. It’s no coincidence that Biden emphasizes that his policy is regarding creating good, middle-class jobs.
Protectionist policy
The third reason is geopolitical: China’s move upmarket and the dominant positions it has acquired in certain critical sectors have drawn the attention of American and European officials to the risks of technological dependence. In a context where war has once once more become a real possibility, the range of sectors considered strategic continues to expand.
Finally, the last reason relates to the climate transition. China now produces three-quarters of solar panels and batteries and two-thirds of electric vehicles. Seeing the establishment of Chinese supremacy over the products that will make up the industry of tomorrow would obviously be unacceptable for the United States or Europe, which consider the achievement of carbon neutrality as the vector of industrial transformation.
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