Nine strategies for retaking global leadership in industry and innovation

Myth-Busting Silicon Valley
Silicon Valley’s Public Garages
American Compass Releases Conservative Economic Agenda for 118th Congress

After decades of looking away as America’s supply chains migrated overseas, policymakers are finally facing the reality that dependence on foreign producers has weakened the nation’s resilience, its security, and its economy. When factories leave, not only the jobs but also the suppliers, the customers, the expertise, and the innovation go too. When a crisis strikes, vital supplies are unavailable. When productivity growth and innovation are needed, they are nowhere to be found.

This symposium gathers experts in many fields; working in think tanks, universities, and industry; starting from points across the political spectrum; to delineate and describe the levers available to policymakers in pursuit of reshoring supply chains and to offer concrete policy proposals for using each lever. Some proposals emphasize investments that the United States can make to improve its competitiveness—in people, in infrastructure, and in research. Others consider how better laws could attract or even force firms toward domestic production. Still others advocate reform for institutions themselves, from the federal government to the WTO.

1. Research & Development

Willy Shih, Harvard Business School

The United States should use pre-competitive research consortia to bridge the gap between basic research and commercial competition. This model proved critical to establishing American leadership in the past, in fields from airplane engines to semiconductors. Policymakers should focus especially on the demand side, priming initiatives like biomanufacturing and grid modernization that will generate stable domestic demand for key domestic manufacturing capabilities.

2. Tax Incentives

Rob Atkinson, Information Technology & Innovation Foundation

The United States should reduce the effective tax rate for companies when they invest in research and development, capital equipment, and workforce training. An American Innovation and Competitiveness Tax Credit would reduce a firm’s tax bill by 30% of spending in those areas (above 50% of base-period levels), rewarding investment and closing the nation’s gap with the majority of OECD countries that offer an R&D credit more generous than America’s and the many that offer an investment credit too.

3. Domestic Sourcing

Michael Lind, University of Texas

Rather than encourage reshoring, policymakers should in some cases simply mandate it, by establishing Local Content Requirements that require some or all of a final good’s inputs to be manufactured domestically. While this approach appears blunter than reforms to cajole or incent or create an environment friendly to reshoring, it more directly and reliably achieves its stated purpose and allows policymakers to select and target particular supply chains of economic or strategic importance.

4. Workforce Investment

Sam Hammond, Niskanen Center

The United States has lost not only its supply chains, but also the skilled workforce and embedded industry expertise to support them. Its lack of active labor market policies compounds the problem, as workers cast out of disrupted jobs get little support in connecting to new ones. Policymakers should reform Trade Adjustment Assistance, a woefully outdated and underinclusive program, to instead provide training to people unemployed for any reason and help them navigate the path back to productive work.

5. Regulatory Reform

Oren Cass, American Compass

Environmental laws enacted 50 years ago have ratcheted continually tighter and specifically target efforts at expanding domestic industrial capacity. Policymakers should remove the excessive hurdles to construction and expansion imposed by the Clean Air Act and the National Environmental Policy Act, by allowing construction of new facilities on the same terms as existing ones, and creating streamlined permitting processes comparable to those employed in countries like Germany and Canada.

6. Agency Structure

Ganesh Sitaraman, Vanderbilt Law School

Policymakers are hampered in the development of supply-chain strategy and policy by the dispersion of responsibility and authority across a byzantine tangle of agencies. The United States should consolidate the Department of Commerce, U.S. Trade Representative, Small Business Administration, export promotion agencies, and economic sanctions authority into a Department of Economic Resilience with divisions for trade, export promotion, economic security, industrial policy, and statistics.

7. Terms of Trade

Thomas Duesterberg, Hudson Institute

Three principles too long absent from American trade policy must return to the fore: Reciprocity, Security, and Democracy. The World Trade Organization’s rules and procedures no longer uphold those principles, but its requirement of unanimous agreement has precluded reform. The United States should insist upon institutional reform of the WTO that creates a pathway to revising its rules, or else move beyond the WTO’s structure to reassert its own interests.

8. Infrastructure Financing

Terrence Keeley, BlackRock

Manufacturing and supply-chain professionals rank “investment in U.S. infrastructure” as their top priority, but underinvestment persists. The United States should create a national development bank to attract private capital into infrastructure projects, closing the funding gap and improving project outcomes. Such banks, already standard features in most national and regional economies, can operate with little to no taxpayer capital while leveraging public guarantees into enormous private-sector commitments.

9. Antitrust Enforcement

Matt Stoller, American Economic Liberties Project

Consolidation among hospital Group Purchasing Organizations (GPOs) provides a case study for how excessive concentration and market power discourages domestic production, suppresses price signals, and helps state-backed Chinese firms dominate supply chains. Sector-specific analysis of industrial organization can point toward opportunities for prohibiting anticompetitive practices and recreating both horizontal and vertical fragmentation to allow domestic producers back into the game.

Recommended Reading
Myth-Busting Silicon Valley

American Compass’s Wells King argues that Silicon Valley’s founder myth has things backward, misunderstanding the source of the regime’s power and flattering its worst instincts.

Silicon Valley’s Public Garages

The indispensable and effective role of public policy in building the digital age

American Compass Releases Conservative Economic Agenda for 118th Congress

Today, American Compass is releasing New Direction: Conservative Principles & Policies for the 118th Congress, an agenda for economic renewal, focused on the interests of worker, their families and communities, and the nation.