Sharper: Industrial Policy

Lawmakers in Washington have increasingly pushed for legislation to address key industry vulnerabilities and better position the United States as a leader in critical technologies. The mass diffusion of technology as an enabler of political, economic, and military power necessitates a comprehensive framework for a new American industrial policy. CNAS experts are sharpening the conversation around what a U.S. national industrial policy strategy should look like and its implications for the future global technology competition. Continue reading this edition of Sharper to explore their analysis, commentary, and recommendations.

Features

Reboot: Framework for a New American Industrial Policy

A new CNAS report outlines the need for a change in the relationship between American industry and the U.S. government. As economic competitiveness and security become increasingly intertwined, the report offers pragmatic recommendations for the United States to better promote U.S. leadership across critical technology areas. This paper presents an initial framework for what a U.S. national industrial policy strategy should look like: informed by historic examples, rooted in its democratic identity, and responsive to emerging dynamics. “The goal of this vision should be to secure the United States’ standing as the world’s premier technology power so that it can empower its citizens, compete economically, and secure its geostrategic interests without having to compromise its values or sovereignty,” write authors Martijn Rasser, Megan Lamberth, Hannah Kelley, and Ryan Johnson.

CHIPS and Science Act Signed Into Law

Following the signing of the CHIPS and Science Act, intended to boost American semiconductor research, development, and production while ensuring U.S. leadership in key industries, experts from the Center for a New American Security analyze key provisions of the new law, and weigh in on the potential implications for U.S. industrial policy and strategic competition in the tech sector going forward.

Regenerate: Biotechnology and U.S. Industrial Policy

Amid a global pandemic, unprecedented technological change, and an ongoing climate crisis, the United States needs industrial policy that promotes its bioeconomy. In a new report, CNAS Technology and National Security Adjunct Fellow Ryan Fedasiuk holds that in the absence of a comprehensive strategy, the U.S. bioeconomy risks being at a relative disadvantage compared to competitors such as China. Fedasiuk argues that such industrial policies must be “enshrined in democratic values and focused on improving access to four key drivers of bioeconomic growth: equipment, personnel, information, and capital.”

Events

Conversation with Michael Brown, Director of the Defense Innovation Unit

Critical and emerging technologies will define the way the United States conducts warfare in the 21st century. These technologies are critical to America's ability to deter, deny, and defeat adversaries who are also seeking to cultivate these technologies for their own security and geopolitical objectives. To compete effectively, the United States should rethink how it acquires leading edge technologies from the commercial sector. The Pentagon's Defense Innovation Unit (DIU) is a leader in these efforts. On June 22, CNAS hosted a virtual event with DIU Director Michael Brown. Brown discussed the DIU's recent accomplishments and provided his own insight into what the U.S. government should do to navigate the global technology competition moving forward.

Securing America’s Critical Supply Chains

America's supply chains are unacceptably brittle. Restoring balance to this system requires greater resilience through reducing dependence on potential adversaries, improving geographic diversity, and devising an approach to building a mix of domestic capabilities and sourcing from reliable partners. This complex, expensive, and far-reaching undertaking will require a new conceptual framework that is fit for the current geopolitical context. On June 28, CNAS hosted a virtual event on securing America’s supply chains. The event kicked off with a conversation between Representative Chrissy Houlahan and CNAS Associate Fellow Megan Lamberth, as well as a panel discussion moderated by Associate Fellow Alexandra Seymour and featuring Govini CEO Tara Murphy Dougherty, White House Senior Economist Dr. Susan Helper, and Exiger President of Government Solutions Carrie Wibben.

Cybersecurity Threats and Information Sharing

Cybersecurity has become a national security priority. As cybersecurity threats increase in number and sophistication, attention has shifted to the private sector, which currently owns most of America's critical infrastructure. High-profile breaches such as Colonial Pipeline and SolarWinds have elevated discussions about how to enhance collaboration across the public and private sectors. One key aspect of this conversation is improving information sharing practices, which can better manage risks and bolster the nation's security. On July 28, CNAS hosted a timely virtual discussion on cybersecurity threats and information sharing with Anne Neuberger, Deputy National Security Advisor for Cyber and Emerging Technology at the National Security Council, moderated by Daniel Silverberg, Technology and National Security Adjunct Senior Fellow at CNAS.

Commentaries

Help U.S. Companies Compete Against China on Technology Standards

"The Chinese government has made leadership in international technology standards setting a key priority and it is working to give their firms an unfair leg up," write Martijn Rasser and Robert D. Atkinson in RealClearPolicy. "While the U.S. government needs to defend the current voluntary, industry-led standards process in the face of this unfair competition, they also need to play a more active helping role. To do that Congress should modify the research and experimentation tax credit to allow international standard setting costs to qualify as expenditures for purpose of the credit. This will help U.S. firms better afford standards setting activities, helping them win over China."

How Congress Can Ensure CHIPS Act Funding Advances National Security Interests

"The complex global distribution of the semiconductor value chain and the precipitous decline of semiconductor manufacturing capacity in the United States means that the United States is extremely vulnerable to supply shocks, as the recent shortages arising from pandemic and extreme weather events amply demonstrate," write Emily Kilcrease and Sarah Stewart in Lawfare. "While geopolitical tensions have not yet been a driving factor in the supply chain disruptions, China’s intensifying ambition to indigenize its semiconductor sector and the extreme concentration of leading-edge chip production in Taiwan present significant security vulnerabilities. That’s where funding for domestic semiconductor manufacturing comes into play. Increased domestic production of chips is one important part of an overall strategy to mitigate these vulnerabilities."

Where the U.S. Chips Fall: Fault Lines and Big Breaks in the Global Semiconductor Industry

"Modern life hinges on reliable access to semiconductor chips. Recent shortages have shaken critical supply chains, highlighting how precarious the global semiconductor industry is and how reliant the international community is on chips for their economic and national security," argues Hannah Kelley in Georgetown Journal of International Affairs. "Semiconductor chips are integral to every facet of contemporary life. COVID-19 related shortages have rocked critical supply chains. The international community’s chip reliance has raised economic and national security concerns. Congress should take immediate action to mitigate the current shortage, enacting policies to improve supply chain resiliency and bolster the U.S. economy, but Washington must also address the greatest threat to the global chip industry and the free and open emerging technology market of tomorrow—an authoritarian China’s pursuit of technological dominance."

To Keep Up, We Must Startup

"Supporting U.S. innovation has become a key national security priority, as demonstrated by year-over-year increases in technology research and development (R&D) spending and the Senate's passage yesterday of the CHIPS and Science Act of 2022," observes Alexandra Seymour in RealClearPolicy. "Yet for all the hype around technology acceleration and protection, the U.S. faces a paradox: The funding source that matters most is drying up. Venture capital (VC) funding is the backbone of many companies, particularly those in early stages. Over the course of a decade, investors poured $1.3 trillion into promising startups, enabling many companies to achieve billion-dollar valuations. In 2021 alone, VCs supported over 14,400 companies across the United States in 414 Congressional Districts. This also makes them a major source of employment, as evidenced by the 8x larger growth rate in jobs for VC-backed companies compared to non-VC-backed companies between 1990 and 2020."

In the News

Featuring commentary from Martijn Rasser, Emily Kilcrease, and Ryan Fedasiuk.