Industrial Policy In Focus 


In his State of the Union address last week, President Joe Biden declared his intent for the United States to lead the world in manufacturing and to restructure the supply chain to “[begin] in America.” He credited the bipartisan 2022 CHIPS and Science Act as the first significant step toward that goal, by providing an infusion of some $280 billion in new funding for research, development, and manufacturing of semiconductors in domestic markets. President Biden is by no means the first in either major party to highlight this area of growing policy interest; for years experts have debated the size and relevance of many potential vulnerabilities — especially semiconductor production, over 90 percent of which is based in China and Taiwan — to the supply chain. In recent years, especially after the massive supply chain shocks of the COVID-19 pandemic, analysts have been especially concerned with vulnerabilities related to dual-use or defense-critical technologies which are necessary for the normal functioning of the U.S. military; however, some commentators also see manufacturing policy as including even the industrial stance of private sector firms.

Although the CHIPS and Science Act, and most of the recent political rhetoric on this issue, has focused on expanding U.S.-based industry for the sake of job growth, many policy analysts have theorized on the need for “nearshoring” or “friendshoring” as an approach to manufacturing and supply chain security. These approaches, instead of insisting on the repatriation of all offshored jobs back to the United States, acknowledge the cost, time, and logistics constraints that firms face and instead attempt to minimize supply chain exposure in high-risk regions such as China by attempting to return manufacturing capacity to U.S. allies and partners in an effort to secure it from potential economic shock.

Questions and Background

  • Is a strong manufacturing sector a core strategic interest, or should the United States focus on directly identifiable national security concerns as it makes economic policy? 
  • What economic and political tools are acceptable in crafting an industrial policy? How far should the United States go in strengthening its manufacturing capacity?
  • Is the CHIPS and Science Act an effective policy for U.S. grand strategy?

The China Speech a President Should Give
John Hillen. National Review. February 16, 2023.

Is Industrial Policy Making a Comeback?
Anshu Siripurapu and Noah Berman. Council on Foreign Relations. November 18, 2022.

Should the U.S. Government Subsidize Domestic Chip Production?
Scott Lincicome. Cato Institute. February 27, 2022.   

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