On Wednesday in Tokyo, in what the grayer heads around the table may have appreciated as a historic role reversal, US Vice President Kamala Harris brought together senior executives from Japan’s semiconductor industry to discuss the implications. of the $280 billion increase in chips and science in the United States. Law.
The tax ‘plan-splaining’ doesn’t get much more poignant: 40 years on Japan as number one was a bestseller and 30 years since Sunrise was a blockbuster, here is market forces America sitting down with Japan Inc to tell the whole story about targeted industrial policy.
A day earlier, US Trade Ambassador Katherine Tai also painted a picture of changing times. The United States, she told the FT, was now actively coordinating trade policy and domestic investment programs, in deliberate contrast to its traditional and single-minded focus on maximum liberalisation.
So could this shift – the rise of industrial policy from the curse word to Washington’s new mantra of strategic competition – be the ultimate symptom of American Japaneseization?
The setting of Wednesday’s meeting makes this a very enticing thesis. Harris was holding talks about US ambitions for turbocharged semiconductors just a few hundred yards from Japan’s Ministry of Economy, Trade and Industry. It was the successor to the Ministry of International Trade and Industry, or Miti, that wrote the history of Japan Inc and oversaw the combination of industrial and trade policies that seemed to make Japan so unstoppable in the 1970s and 1980. Its Roundtable participants came from companies that, in their heyday, had been favored by a government that saw them as essential to the national interest.
Japan Inc’s was a narrative propelled by real policies and a willingness by Japan itself and the outside world to believe in their effectiveness. The Japanese government has really directed resources to particular industries, including semiconductors, in pursuit of greater international competitiveness. For those (especially the United States) far outmatched by this strategy, the idea of a state-corporate conspiratorial complex (with its convenient terminology “Japan Inc”) was an easy concept to grasp, praise or castigate. As critical as the roles of liberalized global trade and Japan’s core business skills may have been, Miti and industrial policy took center stage.
Throughout Japan Inc’s periods of success and decline, the United States’ position seemed clear. As enviable as the trophies held by Japan were, it was anathema to speak positively of a Japan Inc-style industrial policy as an option for the United States. To do so, in theory, would be to admit a range of desirable outcomes that market forces alone might never achieve, let alone guarantee.
Such an admission, however, now seems implicit — not just in the flea act itself, but in the bipartisan support it attracted. The prevailing narrative in Washington about China is alarmed by its growing industrial power. But while creating an open industrial policy for America may be driven by pragmatism, unleashing pragmatism arguably requires at least some form of ideological change. Perhaps belatedly, the magnitude of the perceived Chinese threat has caused the United States to decide that it cannot afford the laissez-faire approach to private sector decision-making when it affects the national interest.
That’s why japanification is probably not the right word here. Whatever the rhetorical taboos around industrial policy may have been, the reality is that Washington has been running versions of it for years – most visibly as part of the military-industrial complex.
When concerns about critical technologies escalated, it provided a mechanism to direct investment in ways markets themselves might not have. Despite all its “business is war” slogans in the 1980s, Japan’s overwhelming desire was to outperform its great rival in terms of growth and market share. Its industrial policy reflected this, the United States understood it as such and did not, despite books like the 1991 classic The coming war with Japanfeel the need to create their own industrial policy to compensate for this.
The situation for semiconductors in the 2020s is very different. The perceived threat from China is not corporate outperformance but, in the longer term, the opening of a technology gap that is difficult to bridge. The immediate rival on chips may be Taiwan, but the new US industrial policy is designed around fears of a bigger enemy.