n a blink of an eye, it has been almost a year since US President Biden signed the Chip and Science Act and the Inflation Reduction Act. Last August, the Biden administration introduced a large number of incentive measures, including high subsidies, to promote the construction, production, and application of chips, electric vehicles, and other green technology industries in the United States. Over the past 10 years, the topic of “return to shore” and “reindustrialization” in manufacturing has been accompanied by domestic and foreign politics in the United States. From the Obama administration’s introduction of the “Manufacturing Promotion Act” after the 2008 financial crisis, to the Trump administration’s use of a soft and hard strategy to pressure enterprises, and to the Biden administration’s signing of multiple large-scale industrial policy legislation, The “re industrialization” of the United States has gone through the “Obama 1.0 version”, “Trump 2.0 version”, and “Biden 3.0 version”. As the 2024 election approaches, whether the future victorious US president will implement a new industrial strategy will become a new focus. However, achieving “re industrialization” in the United States is not an easy task.
From “Obama Version 1.0” to “Trump Version 2.0” and then to “Biden Version 3.0”
Good morning, yesterday we received painful news that the United States lost 533000 jobs in November alone, the worst monthly unemployment rate in 30 years. This once again reminds us that the country is facing serious economic challenges. These problems make it difficult for many Americans to fall asleep, but they are not the first to occur. This was in early December 2008, The voice conveyed by Obama, who had just won the election, through the Democratic Party’s weekly broadcast. This paved the way for him to draft and introduce the Manufacturing in the United States Promotion Act and promote the “reindustrialization” of the United States after taking office.
After the end of World War II, the manufacturing industry took a path of “industrialization – Deindustrialization – reindustrialization” in the economic development of the United States. After World War II, with its Absolute advantage in automobile, steel, aircraft and other fields, the United States became the world’s manufacturing hegemon, which directly led to its position as the world’s largest trade surplus country for nearly 20 years. Affected by the global oil crisis, excessive reliance on the financial industry and other factors, Manufacturing in the United States accelerated its outward migration in the late 1960s and early 1970s. With the once glorious steel and automotive industries facing increasing international competition, the United States has gradually become a trade deficit country. In 2018 and 2019, several major accidents at Boeing were also seen as a sign of the decline of Manufacturing in the United States. In 2019, Manufacturing in the United States employment accounted for only 8.4% of total employment. At present, the United States remains the world’s largest trade deficit country.
From 2009 to 2012, the Obama administration has successively launched a number of policy measures such as “Buy American”, “Manufacturing Industry Promotion Act”, and “Five Year Export Multiplication Plan” to help Manufacturing in the United States revive. With the assistance of automobile manufacturing companies, Obama maintained the automobile manufacturing industry and employment in the industrial regions of the Midwest, and also ensured his re-election in the 2012 election. However, in the view of the economic community in the United States, the highlights of the Obama administration were relatively limited to the automotive industry, the oil dominated mining industry, primary metal products, and computer and electronic product manufacturing, while the vast majority of other productive industries did not return to pre financial crisis levels. The reasons behind this are complex, such as outdated infrastructure in the United States, limited fiscal spending, and rising labor costs.
The promise of “reindustrialization”, the slogan of “Made in USA” and the slogan of “Hire Americans, Use American Goods” helped Trump win the 2016 election. Many voters who used to support the Democratic Party in the “Rust Belt” also voted for him. The Biden administration’s “re industrialization” measures over the past two years are considered to have no essential difference from the previous government by the outside world.Wang Ruibin, Deputy Director of the Institute of World Economy and Development of the China Institute of International Studies, said in an interview with the Global Times that from “Obama 1.0” to “Trump 2.0” and then to “Biden 3.0” of “reindustrialization”, it can be seen that the US political circles have basically reached consensus, and the government has also provided legislative support and capital investment. Therefore, what the United States has shown to the outside world is that the recent governments attach great importance to the revitalization and development of Manufacturing in the United States. He believes that the “re industrialization” of the United States mainly involves developing mid to high-end industries, such as high-end manufacturing and chip industries. Wang Ruibin stated that it is important to be clear and mindful that although there may be “path struggles” and “strategy struggles” between the two parties on this issue, fundamentally speaking, their strategic goals are consistent – to make the United States strong, consolidate and maintain its international competitiveness.
The US’ return to shore ‘operation and’ nearshore outsourcing ‘did not have much effect
“Whether Obama or Trump and Biden, their ‘reindustrialization’ policy can be said to be inherited, but the measures are inconsistent, and there are also differences in key inputs.” According to Wang Ruibin, when Obama was elected President of the United States in 2008, it was during the Subprime mortgage crisis in the United States. At that time, Obama proposed a new plan to revitalize the US economy and announced tax reform plans to stimulate corporate investment, stating that they would exempt companies from taxes by $200 billion within two years to encourage them to purchase equipment and expand investment. It can be said that the most important measure during the Obama period was to boost Manufacturing in the United States, which was in serious decline at that time – especially to vigorously promote the development of advanced manufacturing in the United States, such as investing huge funds in research and development of emerging technologies such as high-end materials used in composite materials, biomaterials, and advanced sensors used in manufacturing and digital manufacturing. According to Wang Ruibin, the number of employees in Manufacturing in the United States has risen from 11 million in 2009 to more than 13 million at present. American public opinion believes that the relevant policies of the Obama era have laid a certain foundation for successors.
“Just as Trump shouted the slogan ‘Make America Great Again’, he also made some measures for’re industry ‘after he was elected President of the United States. For the development of the manufacturing industry, Trump intends to reduce the highest federal corporate income tax rate, and at the same time proposes to levy a 10% tax on the overseas profits of American enterprises at a time, so as to realize the purpose of bringing the manufacturing industry flowing overseas back to the United States.” In Wang Ruibin’s view, In fact, this is just a continuation of the US “re industrialization” policy after the 2008 financial crisis, but the approach is different from Obama’s. Trump used a two handed strategy of “carrot and stick” to pressure companies, promising more policy incentives on the one hand, and on the other hand, imposing a “tightening curse” on companies, and even using intimidation to suppress job opportunities and investment outflows. Trump has criticized automakers such as General Motors for outsourcing work to lower paying neighboring countries, threatening to impose a “huge border tax” on their cars manufactured in Mexico. Under pressure, some companies have cancelled plans to build factories in Mexico.
After Biden took office in January 2021, the US government’s “re industrialization” measures were carried out against the backdrop of intensified competition and game among major powers, with stronger purpose and pertinence. For example, he regarded China as a competitor in the chip industry and new energy fields. Biden also signed an executive order last year to launch the National Biotechnology and Biomanufacturing Initiative to reduce the United States’ dependence on foreign countries and ensure its ability to convert all inventions into products.
In February of this year, American political, business, and academic leaders attending a meeting of the Brookings Institution, a think tank, stated that in recent years, the “onshore” actions taken by the United States to bring manufacturing jobs back from China to the United States have been largely ineffective, and the related “offshore outsourcing” actions to shift production from American competitors to Mexico and Canada have not yet produced dividends. A report on the Asian supply chain released by the association states that although the White House imposed a 25% tariff on some Chinese products four years ago, the quantity and value of US China trade have only undergone slight changes.
Even allies are worried about selfish subsidy policies
More than two months later, Assistant to the President for National Security Affairs Sullivan delivered a speech titled “Revitalizing American Economic Leadership” at the Brookings Institution. He stated that “under the leadership of President Biden, the United States is implementing a modern industrial and innovation strategy” to promote diversified and resilient global supply chains. Sullivan said that in the past few decades, there have been cracks in the industrial base of the United States. “A changing global economy has left many American workers and their communities behind. A financial crisis has shocked the middle class.”.
In his speech, Sullivan also mentioned the “four fundamental challenges” faced by the United States when President Biden took office, one of which was that the US industrial base had been hollowed out. Therefore, the first thing to do is to create a new foundation domestically using modern American industrial strategies. The ultimate goal is to establish a strong, resilient, and leading industrial foundation that allows the United States and its like-minded partners – whether old or emerging economies – to invest in and rely on.
According to an analysis of an article published on the website of National Interest magazine in the United States, “Sullivan’s speech is a strong negation of the free market economy policy of the United States over the past 40 years, but will the United States soon usher in a ‘big bang’ moment?” Even the Wall Street Journal on June 8th joked, “Sullivan’s job is usually focused on dealing with threats from abroad, but now he is pointing his finger at internal threats The article also analyzes that “Biden economics” believes that the quality of economic growth is more important than the quantity, and that the government should implement industrial policies without continuing laissez faire, and relevant trade policies should prioritize the interests of American workers.But the self-interest of the United States has clearly caused displeasure in many countries. Shortly after the signing of the Inflation Reduction Act by the United States, the head of EU affairs at the Belgian Enterprise Confederation stated, “We are both concerned and shocked. These subsidies from the United States are protectionism and the Americans have stabbed us in the back.” When Biden recently attributed the boom in building electric vehicles and battery factories in the United States to last year’s bill, other countries are constantly complaining, Because the most generous subsidies in the bill are only provided to cars assembled in North America. The Wall Street Journal also quoted German Finance Minister Lindner as saying, “The United States also implements highly protectionist economic policies towards partner countries with the same values.
The industrial foundation has been hollowed out, and “re industrialization” faces many difficulties
The “re industrialization” of the United States faces many practical challenges. Director of Eurointelligence, a well-known European think tank The Financial Times columnist Wolfgang Munshaw recently wrote: “Industries that have already left will not easily reappear. The Western strategy of reindustrialization is unlikely to work.” He quoted an old saying from the manufacturing industry: “Once an industry leaves, it will never come back. That is why Germans who attach importance to industry have been trying to fight against ‘Deindustrialization’. According to the World Bank, industry accounts for 17% to 18% of the economic added value in Britain and the United States. In Germany and Japan, the proportion is 27% to 29%. In China, the proportion is close to 40%. The United States and Britain abandoned industry decades ago, but the Biden government now hopes that It returns with the preferred tool being the Inflation Reduction Act, which includes a $370 billion green subsidy plan. I am concerned that the United States has underestimated the difficulty of implementing this task
In Monshaw’s view, the National Security Assistant to the US President, Sullivan, is the brainpower behind the proposal to introduce this bill. The most important strategic economic policy shift in the United States in decades is one of the hallmarks of the current era, both to address the hollowing out of the US industrial base and to target China. In politics, it is rare to achieve two policy goals with one policy tool. Usually, one goal cannot be achieved, “said Meng Shao
However, Mengshao believes that the diagnosis made by Sullivan in his speech is correct – “the industrial foundation of the United States has been hollowed out. Meng Shao wrote: “This is a reckless act. The US government has ignored the social and economic costs of Deindustrialization in the past. As I said before, the decline of industry is the root of populism’s success in recent years. The core support for Trump stems from the rust belt in the Midwest. If Britain and the United States maintain respect for industry as Germany and Japan do, the politics of Britain and the United States may be different.”
In addition to policy support, the development of industry also requires infrastructure support. Before the epidemic, Global Times reporters visited places such as Greenville in the Mississippi Delta of the United States and found that the phenomenon of industrial hollowing out is very serious in this vast inland area. Greenville officials told reporters that the delta region did not properly cope with two shocks. One was the layoff of plantations caused by Mechanised agriculture, and the other was the outward migration of industries since the 1980s. Local textile and other industries were transferred to Mexico and the Asia Pacific region, where production costs were relatively low.
It is understood that 80% of the residents of Greenville are of African descent. Officials have complained to Global Times reporters that in the past few decades, this place has become a “forgotten corner” by American politicians, with only job opportunities limited to service industries such as hotels, restaurants, and supermarkets. Wages are low and stability is poor. Local families’ annual income is less than half of the average level in the United States, and their children’s education level is relatively backward. Due to the limited financial resources and outdated infrastructure of local governments, it is difficult to attract foreign investment, which makes them lose hope for development and fall into a vicious cycle.
Some American media believe that for the United States, if faced with a shortage of industrial workers, immigration is necessary, and universities need to cultivate a large number of well-trained engineers. After all, developing industry requires a financial environment different from the City of London or Wall Street in New York. Mike Sherlock, a columnist on the global economic research website MishTalk, has sparked a heated discussion among many American readers after forwarding Munshaw’s article. Someone left a comment saying, “Nowadays, the instinct of the United States is to pursue financialization, which brings about huge debts
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