Nobody is better at research and innovation than the U.S., but it could lose its lead if attacks continue against immigration and universities.
Making the U.S. more competitive with China is a big talking point for President Joe Biden as he promotes his economic agenda. After watching China seemingly go from strength to strength for two decades, it’s natural to wonder in which industries we might actually have a chance at winning. The answer is: More than you might think, as long as the U.S. adopts a smart strategy and takes care to maintain its core advantages. In the 2000s, large segments of U.S. industry packed up and went overseas, drawn by the unbeatable “China price.” China’s low-cost advantages included not just labor, but subsidized capital, cheap land, cheap coal power and lax environmental regulations. Now, in the 2020s, the competitive landscape is much different. Decades of rapidly rising wages, limits on coal supplies, and efforts to clean up air and water have forced up Chinese costs until China is no longer automatically the cheaper place to manufacture things anymore. Mexico or Vietnam are more likely to get the factories of manufacturers who care chiefly about cost. That doesn’t mean China isn’t a fearsome competitor, only that the type of competition has shifted. Whereas once China did low-value assembly work, now it’s pushing into high-tech industries, such as semiconductors,5G wireless equipment, drones, high-speed trains and cell phones. So while the battle for jobs is now over, the fight for market share and technological supremacy is just beginning. China’s government is going all-in on industrial policy in order to make sure its companies, which enjoy a substantial amount of state support, dominate as many high-value sectors as possible. But the U.S. has plenty of tricks left up its sleeve. Our victory in the vaccine race was resounding, thanks in large part to the almost magical mRNA technology. Former President Donald Trump’s export controls also exposed various supply-chain weaknesses in key Chinese industrial champions like Huawei Technologies Co.
