US industrial policy is making America’s allies angry

US industrial policy is making America’s allies angry

Plus: Nicaragua’s opposition comes up empty in elections, Bolsonaro supporters stay on the streets, and Tik Tok is collecting user data

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Today’s briefing is a ~4.6 min read:

  • 🏭 US industrial policy is angering America’s allies.
  • ➕ Plus: Nicaragua’s opposition comes up empty, Bolsonaro supporters stay on the streets, and TikTok’s collection of user data.

The US is losing faith in free trade

In brief:

  • Consecutive US Presidents have now embraced a more protectionist approach to global trade policy.
  • European and Asian allies worry that US subsidies for manufacturers of semiconductor chips and cars will weaken their own domestic industries.

US policymakers are embracing interventionist industrial policy, perhaps at the expense of free trade with its allies.

Capitol control

There’s still plenty of vote counting to do (and some run-offs to run) before the outcome of the 2022 US midterm elections is clear.

  • Whichever party ultimately claims each chamber of Congress will do so with far slimmer margins than many analysts expected.

But no matter the result, the election will do little to shake the emerging consensus among both parties that the neoliberal economic order – free trade and free markets – is no longer serving US interests.

Why now?

Experts believe the popularity of free-trade sceptics Bernie Sanders and Donald Trump in the 2016 Presidential Election helped drive the bipartisan embrace of protectionism.

Donald Trump, who once described himself as the ‘Tariff Man‘ (arguably the world’s most boring superhero idea), used a wide range of import controls to reshape US trade policy.

  • For all their disagreements, President Biden’s ‘polite protectionism‘ approach to trade has been much the same as his predecessor.

In fact, Biden’s current National Security Advisor, Jake Sullivan, had pushed for a reimagined trade policy in a 2020 Foreign Policy op-ed:

“A better approach to trade, then, should […] involve a laser focus on whatimproves wages and creates high-paying jobs in the United States, rather than making the world safe for corporate investment. And it should connect foreign trade policy to domestic investments in workers and communities.” 

Following through

Congress has taken the hint, passing several major pieces of legislation to strengthen American industries that policymakers consider vital to national security.

  • But the intervention has upset some US allies.

1. 🇪🇺 The EU 

European leaders are particularly frustrated with the Inflation Reduction Act (IRA), a $370B climate bill that offers subsidies to consumers who purchase American-made electric vehicles.

  • By contrast, French electric car buyers are eligible for a tax rebate regardless of where the vehicle was manufactured.

French President Emmanuel Macron threatened to retaliate during a recent meeting with German Chancellor Olaf Scholz:

“We need a ‘Buy European Act’ like the Americans, we need to reserve [state subsidies] for our European manufacturers […] You have China that is protecting its industry, the US that is protecting its industry, and Europe that is an open house.”

2. 🇰🇷 South Korea 

South Korean officials are contending with two challenges to local industry: the IRA, and the CHIPS and Science Act (which incentivises semiconductor chip manufacturers to move to the United States).

  • South Korea’s Samsung and SK Hynix currently control ~70% of global memory chip manufacturing, but are losing talent to foreign competitors.

In response, President Yoon Suk-yeol has proposed an ambitious workforce training measure and subsidies for chip manufacturers.

New world order?

The United States promoted free markets as an engine of global growth in the decades after World War II.

  • Former US President Richard Nixon’s 1972 visit to Beijing promised to welcome China into the global economic community, and had been celebrated across the political spectrum.

But in an era of intense global economic competition, American policymakers are singing a different tune – and America’s allies and adversaries are starting to sing along.


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The Americas

🇧🇷 Brazil

Tens of thousands of Jair Bolsonaro supporters are calling for military intervention to keep the outgoing President in power.

  • Protesters gathered outside military bases around the country, complaining of fraud and calling for the military to oversee new elections.
  • While Bolsonaro has privately accepted his defeat and agreed to a peaceful transfer of power, he has done little to publicly assuage his most ardent supporters.

🇨🇦 Canada

Canadian Prime Minister Justin Trudeau has accused China of attempting to interfere in Canada’s elections.

  • According to Canadian media outlet Global News, China funded a “clandestine network” of Beijing-approved candidates in the 2019 federal elections.
  • China has responded to the accusations by urging Canada to refrain from “making remarks that hurt China-Canada relations.”

🇳🇮 Nicaragua

The ruling Sandinista National Liberation Front won all of Nicaragua’s 153 municipalities in last weekend’s election.

  • Don’t be too impressed: President Daniel Ortega outlawed all major opposition parties ahead of the election.
  • Ortega’s suppression of opposition has kicked into high gear since anti-government protests hit the country in 2018.

🇵🇪 Peru

The embattled Castillo Administration has dared opposition forces in Peru’s Congress to call a confidence vote against… itself?!

  • President Castillo is going big to avoid going home: if Congress calls the vote and he loses, his entire cabinet will have to resign.
  • However, if Congress fails to pass a no-confidence vote twice, Castillo will be granted the power to shut Congress down and call for fresh legislative elections.

🌎 Regional

Barbados’ Prime Minister Mia Amor Mottley announced the creation of a South-South agreement to boost the pharmaceutical sectors in Latin America, the Caribbean, and Africa.

  • The goal is to develop and manufacture 60% of all essential pharmaceuticals used in the three regions within the three regions by 2040.
  • WHO Director-General Dr Tedros Adhanom Ghebreyesus welcomed the initiative, saying “manufacturing capacity for medicines, diagnostics vaccines and other tools is concentrated in too few countries.”

TikTok boom

The news: TikTok employees in several of the company’s offices around the world will be able to access European users’ private data beginning on 2 December.

  • According to Elaine Fox, the company’s head of privacy in Europe, the data reviews will help ensure high-quality platform performance.

The intrigue: TikTok’s parent company, ByteDance, has been accused of harbouring close ties to the Chinese government, leading critics to wonder how users’ data is being used.

But policymakers in Europe and the US aren’t convinced. 

What’s next: Momentum is building, especially among conservatives in the US, to ban the platform.

Kevin Roose, host of the New York Times tech podcast “Hard Fork,” told The Atlantic’s Derek Thompson:

“[Lawmakers] are really just looking for one smoking gun, one point of proof that the Chinese government is using TikTok to either push propaganda or influence elections or influence the minds of America’s teens.”

Have they found what they’re looking for?


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