“Because of the decisions we’ve made over the past few years, jobs are coming back, pride is coming back,” said US President Joe Biden in his recent State of the Union address.
Biden made the statement bolstered by aggressive industrial policies by the US government over the past two years, reflected in the passage of three billion-dollar stimulus bills.
A law (Bipartisan Infrastructure Investment and Jobs Act) to promote infrastructure over the next 5 years with an investment of 110,000 million dollars. Another (Chips and Science Act) with $52,000 million for domestic semiconductor development and technology research. In addition, the Inflation Reduction Act will invest $369,000 million in US industries for the energy transition towards decarbonization and the fight against climate change.
This industrial policy of the federal government – investments in millions and interventions in strategic sectors to attract jobs back to the USA – aims to restrict China in the context of geopolitical competition in critical value chains and to move away from the narrative of free trade. which has lost its dominance in Washington since the previous administration.
Democrats and Republicans are engaged in a political struggle of symbolic differentiation. Before their constituents, however, most Democrats and Republicans agree on bringing jobs back to the United States and reindustrializing the country.
“For too many decades we have imported projects and exported jobs. “Thanks to what you all have done, we are now exporting American goods and creating American jobs,” Biden defended his new industrial policy.
This has drawn criticism from its European allies and others like Japan, pointing out that the subsidies and exemptions the United States gives to its industrialists lead to unfair competition and violate free trade.
As Derek Thompson summed it up in The Atlantic magazine: “The era of free trade in the United States is over. Industrial policy is the new fad. After decades of trade with China and falling manufacturing jobs, the US is espousing a new economic theory: build more and build everything here.
In practice, beyond the ideological level, the question must be asked which position is best for Latin America in the face of these policies.
In this context, the original concept of offshoring (the accommodating of a company’s services or processes in a location with cheaper costs) was expanded to the concept of near shoring (the accommodating close to the headquarters) and then to friend shoring (the Accommodation there) transferred to a closely friendly country), this second with a clear nuance explained by geopolitical competition.
First, there are at least two areas of opportunity for Latin America:
– One of them derives from this friends-shoring policy, where the region can benefit from these investment movements that seem to only increase in the future. Countries like Mexico, Colombia, Chile and Costa Rica are in a privileged position to do this.
– Secondly, the countries of the region, far from dogma, need to think about the implementation of their own industrial policy. New development opportunities are emerging in the context of the decarbonization of the global economy and the energy transition, digitalization and the use of artificial intelligence, as well as geopolitical competition.
As the USA shows, these do not arise solely on the market and must be accompanied by a government policy that promotes sectors defined as strategic.
The aim is to search for strategic niches. And our decisions must be wise because our investment margins are not comparable to those in the developed world.
Our biggest handicap in this area is ideological. Contrary to the Asian pragmatism that is now being adopted in the US and even in Europe, in Latin America we tend to get bogged down and serve the extreme dogmas between free market and pure statism. Being a racially mixed region, it’s odd that being eclectic costs us so much. But we should learn better, and quickly.
We need to recognize at the regional level that in this context of transformation and competition there is a window to reinvent our development as a region.
Carlos Alvarado Quesada He is a former President of Costa Rica, a professor at Tufts University’s Fletcher School, and a Richard von Weizsäcker Fellow at the Bosch Foundation.
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