Made in China 2025 and the Future of American Industry

This was originally published on February 12, 2019. See the full report here.

Washington, D.C. — U.S. Senator Marco Rubio (R-FL), Chairman of the Senate Committee on Small Business and Entrepreneurship, today released a report titled “Made in China 2025 and the Future of American Industry.” The report outlines the challenges posed by China’s whole-of-state industrial planning for America’s prosperity and productivity, including the jobs and wages of American workers and small businesses. It also lays out policy recommendations to strengthen the American economy against its rivals by increasing high-value, high-labor production in the United States. The report is the first product of the Project for Strong Labor Markets and National Development from Rubio’s committee staff.

Rubio released the following video message outlining the report. A broadcast-quality version can be found here.

“Changes in the 21st-century economy have upended the working lives of millions of Americans. Americans understand that something has gone wrong, and the failure of Washington to respond is one of the underlying currents in our nation’s disunity. Something needs to change.

“The Senate Small Business Committee’s report on “Made in China 2025 and the Future of American Industry” is the beginning of that conversation. Our report highlights the challenges posed by China’s blatant industrial espionage and coercion — actions that threaten our economic framework and our national prosperity. The report will also offer policy recommendations to strengthen the American system against its rivals. Markets and trade are tools for good, and they are essential for overcoming the challenges we face, but they respond to policy incentives and restrictions.

“The role of government is to align our economic policies with the right national priorities. Right now, we have the wrong priorities. Our most important priority should be creating dignified work through investment and through innovation. That will require the hard work of forming a new consensus, but we can build an America that is better for the future generations to come, as Americans have always done.”

Excerpts from “Made in China 2025 and the Future of American Industry” are below. A full copy of the report can be found here.

• “In a world of state competition for valuable industries, a domestic policy of neutrality is itself a selection of priority. ‘Not choosing’ is a choice, however it is made. The relevant policy consideration, then, is not whether states should organize their economies, but how they should be organized. Total neutrality among interacting economic systems is impossible, but relative material decline is not.”
• “Manufacturing provides better and more stable employment for American workers than financial services. Physical capital development makes for more prosperous towns and communities than does digital capital. Knowing how to make a specialized product is a less replicable skill than marketing the product for sale. Research and development expenditures deliver greater benefits to the public than private cost alone justifies. Offshoring jobs to save on labor costs doesn’t often create equivalent jobs for the workers displaced by it. Worker skills are not easily transferable across industries. Geographic proximity to productive assets like factories increases the prosperity of supplying and local small businesses.”
• “A common defense of expanded trade with China has, and continues to be, a claim of value chain position: in theory, the production of cheap and mass-market consumer goods in China would produce an increase in the standard of living for American consumers and allow the U.S. to increase high-value exports to China. But what happens if China makes these high-value products instead? This is the future envisioned by the “Made in China 2025” plan (hereafter referred to in this report as “MIC2025”) first promoted by the Chinese government in 2015.”
• “Markets respond to the priorities set for them through policy choices. The critical question is which policy choices are in the interests of the American people. This Project believes MIC2025, and the opportunity for policy response it demands, are worth studying to better understand the answer.”
• “Just as U.S. policymakers have proved willing to use American leverage to enforce international trade law and norms, the U.S. Congress should consider actions to leverage the American economy to increase domestic productivity.”
• “Highly-leveraged investments in technological discovery offer unknown outcomes, but distributions to shareholders are quantifiable. The existence of non-productive alternatives to capital investment, as a result, makes the product of the firm’s American workers less valuable while at the same time increasing profits, making possible a world of higher asset prices, lower investment in the economy, and lower worker pay.”
• “Ensuring the productive use of capital for American domestic production entails an agenda of economic restructuring. Creating new ecosystems of innovators and promoting the dynamism of new businesses entails one of rejuvenation. Uniquely positioned among government agencies in this regard is the U.S. Small Business Administration, which operates a number of programs to service new and small businesses.”
• “Though MIC2025 is a foreign actor’s plan for the domination of critical commercial sectors at the expense of American industries, the U.S. should not miss the opportunity its prominence provides. Claiming, as the plan does, that ‘without strong manufacturing, there is no national prosperity,’ should be a wake-up call for American political economy as much as a cause for scrutiny.”