31 May 2023 -

Lowy Institute analysis: chips, subsidies, security, and great power competition


Motives in the tech competition between the United States and China pose increasingly difficult policy issues for other economies, according to a detailed new report by Australia’s Lowy Institute.

“Rising subsidies in the big world economies and the entanglement of national security and commercial motives pose difficult policy issues for countries such as Australia, which cannot match the subsidies provided by the great powers. US–China competition over advanced semiconductors is an awkward instance of such entanglement of national security and commerce, of subsidies and export denials.,” says Dr John Edwards, Lowy Institute Senior Fellow.

Key findings of his report include:

  • Government subsidies to industry in leading economies are large and growing, with potentially deep, wide-ranging, and unpredictable consequences for the world.
  • It is not clear what rules, if any, will apply in this new era of industry competition, nor whether the measures will be effective in denying frontier technology to rival economies.
  • The impacts of industry subsidies and export controls, including for countries such as Australia, hang on their implementation — beneficial in so far as they speed tech innovation, but detrimental if they split the global economy into competing blocs.

“While a problem for taxpayers in Europe, the United States, and China, it is no problem for Australia and countries like it if great powers spend a lot on supporting advanced technologies. The rest of the world benefits from the products of the new technologies and may also be able to acquire the technologies for use in their own products,” writes Edwards.

He concludes, “The benefits of enhanced technology competition for the rest of the world can only be realised if the products of the new technologies are freely traded. If they are inaccessible to the rest of the world, the country possessing the monopoly may be able to advance its industries at the expense of other countries’ industries.”

Go here to read the whole article.

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