National Power Industry Series

The U.S. education and workforce development system is ill-suited to winning the economic power industry war with China. It’s time for systemic reforms to produce students and workers with skills and capabilities that national power industries need.

China now produces nearly one-quarter of global output in the 10 advanced industries that make up ITIF’s Hamilton Index, outpacing all other nations. America and the West must recognize that China’s gains are coming at the expense of their techno-economic and national power.

To avoid losing the techno-economic trade war with China, U.S. policymakers must rewrite the social contract at the heart of America’s 50-year-old system of financial capitalism by rebalancing the incentives to drive long-term investments in U.S. national power industries.

Countries in the Global South are key markets for Chinese and U.S.-allied national power industries, which require scale economies to flourish. U.S. policymakers should stop viewing them as a “backyard” and recognize that they are a key battlefield in an industrial war.

Boosting U.S. competitiveness in national power industries is necessary, but not sufficient to avoid losing to China. America also must take measures to slow the PRC’s progress toward global dominance. This report provides more than 100 actionable recommendations for the administration and Congress. Western allies should take many of the same steps.

A select group of advanced, globally traded industries serves as the bedrock of U.S. technological leadership, economic power, and national security. Policymakers need to closely monitor the relative strength and vulnerability of its production capabilities.

Over the last decade, U.S. trade performance has deteriorated significantly in advanced industries. That is a major problem because these industries have high fixed costs and require substantial investments in R&D, so they depend on large customer bases to achieve scale economies and remain globally competitive.

Maintaining R&D leadership in advanced industries is critical to U.S. economic competitiveness and national power. But on a size- and wage-adjusted basis, China is rapidly gaining ground. Congress needs to boost corporate R&D incentives to prevent America from falling behind.

The United States is at serious risk of becoming dependent on China for a wide array of key technologies and products, which would significantly shift the global balance of techno-economic power. Only fundamental policy change can potentially keep the United States from defeat.

China is on the march to dominate advanced industries that underpin national power in the 21st century. To protect U.S. economic strength and national security, policymakers must jettison old techno-economic and trade policy doctrines and adopt a new national power industry strategy.